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WASHINGTON-While the credit union-bank battle over taxation got major national exposure making the front cover of the Wall Street Journal for what is probably the first time in history, a number of misconceptions that have been spread by the banks were in the story. While CUNA said these should be refuted, there are some key positives to the coverage. In fact, the trade association sent a memo out to the state league communicators on how to spin the article in a positive light and take advantage of the exposure. Within less than one day after the story ran, CUNA Vice President of Communications and Media Outreach Pat Keefe said at least one league was already receiving calls from the local media to look into the story. Reporter Bernard Wysocki, Jr. referred to American Bankers Association Chairman Harris Simmons, president, CEO and chairman of Zions Bank, as “the banker credit union executives love to hate.” He notes that Simmons has brought the tax fight to a new level and that he is trying to reign in larger credit unions. The article also quotes CUNA President and CEO Dan Mica calling the tax-exemption a “life-and-death issue.” He added that the skirmish “could break out into open nuclear warfare.” While the article cites both sides of the argument, it includes some common banker-spread misconceptions about credit unions as well. Wysocki writes that credit unions are “traditionally sleepy local institutions” that have “quietly become a major threat to banks” before citing that credit unions equal just 7% of U.S. bank assets. He states that banks are now questioning the credit union tax-exemption while this is something that has occurred regularly since their inception. Wysocki wrote that credit unions are member-owned nonprofits that have traditionally served “people of `modest means.’ That is why Congress granted them the tax-exemption during the Great Depression.” As NCUA Chairman JoAnn Johnson indicated in her speech during CUNA’s Governmental Affairs Conference, the term “modest means” did not come about until the Credit Union Membership Access Act in 1998 and the agency is just now working to define it. The article also said that credit unions do not pay either federal or local taxes, which is not true. Many state chartered credit unions do pay property tax, sales tax, and other state and local taxes. Wysocki also highlighted that credit union real estate loans jumped to $191 billion in 2004 from about $80 billion in 1999. Banks’ real estate loans at the same points in time jumped from $1.4 trillion to $2.3 trillion, according to FDIC statistics. On the flip side, the article does quote some positive points made by credit union representatives. Utah League of Credit Unions President and CEO Scott Simpson asked rhetorically for the article, “Would banks be offering totally free checking or 9% Visa cards without credit-union competition? Absolutely not.” It pointed to Zions’ ever-increasing profits, stating, “If credit unions have cramped Zions’s style, it’s hard to see on the bottom line. The bank earned $480.1 million in 2005, up 18% from a year earlier. Its stock has risen 38% in two years.” Wysocki’s report quoted Mica, stating, “We’re doing a phenomenal job. We could do a better job.” CUNA’s Keefe said of the WSJ coverage, “We see it as more of an opportunity than anything else.” Mark Wolff, CUNA’s senior vice president of communications, pointed out that he worked out an interview with Mica and Wysocki that lasted 90 minutes. “We felt that we had conveyed the points we wanted to make.There’s a point where you don’t know what’s going to come out of it,” he said. Wolff added that CUNA was aware that the reporter had actually traveled to Utah to interview Simmons about industrial loan companies but apparently Simmons also talked a lot about his problems with credit unions. Wysocki even includes several paragraphs of personal information on Simmons, including how his father founded a bank and he likes to play the marimba. CUNA Chairman Juri Valdov, president and CEO of Northwest Federal Credit Union, is planning to submit a letter to the editor, according to the trade association. Wolff said he expects there will be others from the credit union community as well. Aside from the nationwide exposure to the tax battle, there are small nuggets that can be gleaned from the story as well, Keefe said. Many entrepreneurs subscribe to WSJ and might see that credit unions are up and coming in the business lending market. Fed up with being turned down by the local bank, they might try their credit union, he pointed out. “The door has been opened by the Wall Street Journal. Now, it’s just a matter of people walking through that,” Keefe concluded. -

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