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WASHINGTON-In response to anti-credit union comments by the Federal Deposit Insurance Corp. Vice Chair, NAFCU President and CEO Fred Becker has written Senate Banking Committee Chairman Richard Shelby (R-Ala.) contradicting his claims. In written testimony to the committee, but not oral comments at the recent hearing, FDIC Vice Chair John Reich noted credit unions’ tax exemption and lack of Community Reinvestment Act responsibilities. “These advantages make for an uneven playing field, a condition that Congress should re-examine and seek to resolve,” Reich stated. Becker fired back, “Despite Mr. Reich’s claim that “credit unions . operate with a number of advantages over banks and thrifts” an objective review clearly demonstrates that credit unions do not have a competitive advantage over other participants in the financial services industry.” He cited that credit unions have maintained their 1.4% hold on domestic financial assets over the last 25 years; Treasury’s 2001 study that found business lending to be a “niche market” for credit unions; and record profits by the banks in recent years. “While large banks are fueling the banking boom, small banks are also posting large profits,” Becker commented. “Last year, banks with assets of $100 million or less experienced average asset growth of 6.7 percent. The average return on assets for the same banks was 1.06 percent. By comparison, credit unions with $100 million or less in assets, experienced asset growth of only 3.1 percent; and their average return on assets was only 0.64 percent.” He also pointed out the increasing number of banks electing Subchapter S status and the passage of the American Job Creation Act of 2004, which raised eligible banks’ number of shareholders from 75 to 100 and counts family members as one shareholder. “While Mr. Reich cites the credit union exemption from federal income tax as an “advantage” enjoyed by credit unions over banks, this exemption was authorized by Congress because of the not-for-profit, cooperative structure of credit unions.” Becker added. “Furthermore, the “burdens” on credit unions, including restricted fields of membership, strict rules on credit union investments; and, severe limitations on how capital can be accumulated, far exceed those that exist with respect to banks. “Regarding the credit union exemption from the Community Reinvestment Act (CRA), it is important to recognize that CRA was imposed on banks and thrifts as a means of remedying a particular wrong that many banks and thrifts were engaging in: red-lining. Congress exempted credit unions from already routinely serving the same low-income individuals that were being red-lined by other financial institutions. What’s more, it seems incongruous that as Mr. Reich suggests new CRA requirements for credit unions, he also supports relaxing CRA requirements for other depository institutions.” [email protected]

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