Banker's
Attack
Banker
Attacks Still Growing
I have written many articles, over the past 14
years, relating to banker attacks on credit unions. In
that time, I have never seen the audacity, propaganda,
and downright greed by the banking associations that
I have seen this year. If the banking industries spent
as much time servicing their customers as they do attacking
credit unions, consumers would be much happier keeping
their accounts at banks rather than finding better alternatives
such as credit unions.
The American Bankers Association actually has a whole
section called Operation Credit Unions in their website.
This section has been established to eliminate credit unions.
Of course they are much more subtle about what they mean.
Their interpretation of the credit union tax exemption
is inaccurate yet they still try to pawn it off as the
only reason for our tax exemption. The Banking Associations
state that the tax exemption is based on a limited field
of membership with limited basic services offered to the
consumer. This is patently false. Credit unions are tax
exempt because of our structure and only because
of our structure. We are democratically owned and operated by
those who deposit their funds with one vote, one member.
The membership elects a volunteer board of directors, who
run the credit union operation for the membership.
When
credit unions received their tax exemption in 1937, life
was much different. The services were much different
and Congress did not know how to develop credit unions.
It was decided that because the United States was an
industrial nation, at that time, it would be easier to
form credit unions through businesses. However, credit
unions were also formed through communities as well as
associations. Since 1937, everyone and everything has
changed. The Banking Industry provides a number of services
that were not even established in the 1930’s. The same goes for credit
unions. All organizations must evolve to meet the needs
of its consumers. Technology has brought about many changes;
however, the credit unions structure of “one vote,
one member” has not changed. While credit unions
have grown in assets (even though credit unions only hold
4% of the financial assets of the U.S.) and many now serve
multiple communities and offer numerous products our philosophy
is the same. We are still democratically controlled and
operated by our memberships.
The
Banking Community has called these credit unions the “new
breed”. Camden Fine, president of the Independent
Community Bankers of America stated, “They really
have an unbridled field of membership…and they want
more bank-like powers – like unrestricted commercial
lending powers, a wider range of both asset and liability
product offerings, and entry into the securities and trust
business – but not the obligations of regulation
and taxation. For what it is worth, credit unions are regulated
in almost the exact same method as the banking industry.
If a credit unions offers a certain service or product,
whatever regulation that applies, we must also adhere to
it. Again, the same rhetoric – service and field
of members equals taxation.
In
the same article written by Mr. Fine he states, “We
have no problem with the credit unions that adhere to the
single common bond and provide services for which they
were originally created.” Most credit unions, even
the very small ones, do not have a single common bond and
we all provide services greater than what was available
in 1937! Please, Mr. Banker, we should not evolve with
our memberships? As we all know, if we only were allowed
to offer the services available to credit unions in 1937,
we would all be out of business.
Credit unions are the checks and balances for the banking
industry. Without credit unions, banks could and would
charge whatever they like for services; pay little if no
interest on savings; and raise their loan rates to very
high levels. Ultimately, the banking industry would have
free reign without competition from credit unions. The
consumers of the United States would lose and the bankers
would get richer.
Another example of the skewed way bankers think is their
top five-priority list for 2004. The American Bankers Association
calls it the Super Priorities. They are:
- Defend
the Gramm-Leach-Biley Act, which is the Federal Privacy
Act. To ensure that more restrictive state privacy laws
such as SB 1 are eliminated.
- FDIC
Issues – Promoting comprehensive
legislative reforms without increasing insurance premium
costs.
- Credit
Unions – Opposing credit
union efforts to expand unfairly and supporting taxation
of expansionist credit unions; at the same time, supporting
efforts to make banks more competitive; including tax
incentives for banks.
- Fighting
Terrorism.
- Accounting
and Corporate Governance.
I find it most appalling that fighting terrorism and ensuring
that their accounting standards are less important than
fighting credit unions! Furthermore, while they want credit
unions to limit their fields of membership; offer limited
services; and taxing us they want more tax incentives for
banks with expanded services! How self-centered is that
statement. The banking industry is trying to reduce their
tax liability. I say more power to them but do not be hypocritical
and demand credit unions be taxed while the banking industry
reduces their tax through the Subchapter S Corporate structure.
Finally, if credit unions have such a great tax advantage;
service advantage; and membership advantage then I say
to the banking industry please convert to a credit union.
To do so, you must do the following:
- Give
every customer one vote to elect your board of directors – democratically
controlled;
- Do
not pay your board of directors – volunteer
driven;
- Eliminate
Stock Ownership – each customer
owns one share of stock of your bank;
- Eliminate
your option for capital growth – credit
unions can only raise capital through net earnings
not stock offerings like banks;
- Eliminate
excessive executive pay through incentives and stock
options; credit unions do not have stock options;
- Passing
your profits on to your customers in the form of lower
fees; better interest rates on savings; and lower loan
rates.
So far no bank has taken me up on the offer. If you have
comments and/or questions, I can be reached at dtrapani@spcu.org and or course at (650) 588-6140. I would love to hear from
you!
Deborah A. Trapani
President/CEO
What
the Banks are Saying???
BANKERS DISTORT THE FACTS ABOUT CREDIT UNIONS
March 9, 2004
Editor:
The
latest round of whining and belligerency erupting from
the banking world continues to show downright misunderstanding
of credit unions, at best, and out-and-out distortion of
the facts, at worst.
Let’s
clarify those facts. FDIC-insured financial institutions
hold $9.1 trillion in total assets. Total assets for
credit unions (all of them): $610 billion. The average
size of a bank in this country is just under $1 billion
in assets. The average credit union: $65 million. Over
one-half of credit unions have less than $10 million
in assets. The percentage of banks that small: 1.4 percent.
The
banks repeatedly and loudly carp that credit union
competition is driving them into oblivion. Yet, the FDIC
reported just last month that the banking industry in
2003 posted record profits (again). According to the
FDIC’s “Quarterly
Banking Profile,” in 2003 insured banks and thrifts
earned a record $120.6 billion, easily surpassing the
previous record total of $105.1 billion set in 2002.
Return
on assets for the nation’s banks (which the
FDIC has said for years is the “basic yardstick
of bank profitability”) reached a record level
in 2003 of 1.40 percent (continuing a strong showing
over the past five years, averaging 1.25 percent).
Credit unions, by contrast, posted ROA of 1.00 percent
last year, and averaged .99 percent ROA over the
past five years.
And,
as The Economist reported earlier this year (Jan. 24
issue), American banks’ total
profits made up a third of all corporate profits
in the nation!
Given
all of this – what possible
threat could credit unions pose to the nation’s
banks?
These days, the banking industry has taken to
fronting its campaign against credit unions with
so-called “community
banks.” By that moniker, the banking industry
hopes to entice all of us (but especially those
on Capitol Hill) with the notion that the nation’s
banking industry is typified by small-time operations
on the Main Streets of America.
Baloney.
That may be true for a small number of America’s
banks (who truly play an important role in
supporting their communities), but for the vast majority
it’s just
not the case.
Take,
for example, the latest antagonist to raise his voice
from among the bankers, Mr. A. S. Abbate of Interchange
Bank in Saddle Brook, N.J. Writing in the March
5 issue of the Banker (“It's Time for
Banks to Wise Up To Credit Union Groups'
Tactics,” pg.
10), Mr. Abbate takes it upon himself to
speak up for America’s “community
banks.”
Is
his institution one of these? Let’s go to the
facts again.
Interchange
Bank controls about $1.4 billion of balance sheet assets,
about average for an American bank. But consider this:
If Mr. Abbate’s
bank were a credit union, it would be larger than
99.926 percent of the credit unions now operating in
this country.
Further,
Interchange Bank seems to be performing just fine, despite
the “cutthroat competition” posed by
credit unions in New Jersey, or nationwide.
ROA for Interchange Bank was 1.39 percent in 2003. What’s
more, over the last five years, Interchange
Bank posted average ROA of 1.36 percent
(never dipping below 1.25 percent).
And,
in the interests of full disclosure, Mr. Abbate should come clean – his
bank’s growth has not,
in any way, been stymied by credit unions. It is true that
over the past 10 years, credit
union assets in New Jersey have about doubled (which is about the same as
the national credit union growth rate).
But
Mr. Abbate’s Interchange
Bank has seen his bank’s
assets more than triple in the
same period.
Look,
we have said it before and we will say it again here:
If bankers like Mr. Abbate really think that credit
unions have such a sweet deal, let
those banks switch charters and become
credit unions. All they would have
to do is open their boards of directors
to democratic elections in which depositor
receives one vote. And, by the way, the majority
of those directors would serve as volunteers
(unpaid). The bank-now- credit union would
have to operate under much more stringent
rules – for example, limiting
their commercial loans to 12.25
percent of total assets, and more onerous capital regulations.
By
the way, the Small Business Administration reported last
month that credit from banks to small businesses has
been drying up in recent years and that “Small
businesses have increasingly turned to
non-bank sources of financing to satisfy their credit needs.” Among
others, that would include
credit unions.
There’s
more: The bank CEOs would have to take substantial pay
cuts, and miss out on stock options. But, what the heck,
they would finally be in a position to run a financial
institution that is “competing
for customers on a playing field increasingly
tilted toward their advantage.”
Oh,
and they would have to
start calling their customers “members.”
Because,
their “members” (and
not their stockholders,
nor their family members,
nor themselves) would
now own the institution.
And, chances are, those “members” would
now be willing to stand
up and defend their
credit union in letters
to Congress (in fact,
we figure three in
every four members
would be willing do
to that).
Just
because, they now belong to
a credit union.
To
date, no bank has ever changed
its charter to a
credit union, because
such a change would
limit the way and level that banks could make
money. We never expect a bank to ever make such
a change.
But
we do expect the banks to face the facts, stop the distortions – and
get off our backs.
Sincerely,
Dick Ensweiler
Chairman, Credit Union National Association
Washington, DC
In
response to the article referred to below, “FIRREA
at 15: How Bailout of Thrifts Remade Industry,” the
President and CEO of our California Credit Union League,
wrote an article to the editor of the American Banker in
an attempt to shed light on the bank vs. credit union reality.
American
Banker
Friday, August 13, 2004
To the Editor:
Your
commemoration of the anniversary of the Financial Institutions
Reform, Recovery, and Enforcement Act ["FIRREA
at 15: How Bailout of Thrifts Remade Industry," Aug.
9] naturally brought to mind the $160 billion of
taxpayer money needed to bail out the for-profit
banking industry - a bill Americans continue to
pay 15 years later.
A
few years before banks and thrifts required a taxpayer
bailout, credit unions needed to recapitalize their federal
deposit insurance fund. Rather than go to taxpayers for
a handout, credit unions agreed to put 1% of their insured
shares into the National Credit Union Share Insurance
Fund.
Today
bankers are complaining more than ever to any legislator
within earshot about the credit union exemption from
federal income tax - an exemption that they estimate
to be worth between $1 billion and $2 billion a year.
Using the high estimate of $2 billion, it would take
80 years for the credit union tax exemption to equal
the value of the $160 billion FIRREA bailout - and that's
not including the value of other tax benefits that banks
enjoy, such as Subchapter S, the New Market Tax Credit
Program, and trust-preferred securities.
It's
pretty clear which sector of the financial services
industry is dining at the public trough.
David
L. Chatfield President and CEO California Credit Union
League
Why
85 Million Americans Benefit from Credit Unions
Let’s
set the record straight with the real facts about credit
unions.
Contrary
to the bankers’ way of thinking — and
speaking — credit unions
are different. Motivated by greed, bankers continue to
spew false claims
and fallacies about not-for-profit credit unions, which
are an essential
financial alternative for 85 million Americans.
This
document uses facts to explain the unique role credit
unions play in the financial marketplace and how all
consumers benefit from their
existence. It exposes the motivation behind the bankers’ intense
opposition and never-ending desire to tax credit unions.
It
also quotes leading policymakers who say what they
really think about
credit unions. The document illustrates why small businesses
have
discovered credit unions as a resource for capital, and
why the bankers’
call to tax credit unions rings with hypocrisy.
Fact is, bankers care only about one bottom line — theirs.
And the facts
show their arguments against credit unions are
baseless.
Download
the entire document (2MB) here.*
*Requires
Adobe Acrobat to view.
Your
Help is Needed...
...in
fighting banker attacks and educating elected officials
at the state
and federal level on the importance of maintaining
the credit union
tax exemption.
As
part of the ongoing effort to defend the credit union
tax exemption, a
petition encouraging policy makers to continue their
support for the credit
union tax exemption is being circulated to credit unions
throughout the
United States.
We
are asking all California and Nevada credit unions to
participate in the petition drive by educating their
staff about the drive and gathering their
members’ signatures on the petition. The petitions
will be circulated from
September through the end of December and delivered to
elected officials at
the state and federal level in early 2005. The petition
will be distributed in
this week’s League Pack and is also available online
at
www.ccul.org/petitionletter.cfm.
Additionally,
we are asking all credit unions to place the petition
banner ad made available on the website on the front
page of their credit union’s website. This banner
will allow members to access the petition on
the League’s website with one click.
Please participate in this important project by doing
the following:
- Insert
your credit union name and branch location(s) on the
petition
- Copy
and distribute the petition to all of your branches
- Inform
your staff about the fight to preserve credit unions'
tax exempt status and the petition drive
- Place
copies of the petition at every teller station and
encourage your members to sign
- Return
completed petitions to the League through December
31st for distribution to elected officials in early
2005
It
is critical that all credit union members understand
the Credit Union Difference and the serious threats
we are facing. Thank you for your participation in
this important project.
