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| CRBJ Home > October 2006 | |||||
CU opposition to bank conversions ironicKurt Bauer
That is ironic be-cause a mutual savings institution has a member-owned governance structure that is almost identical to a credit union's. In other words, most customers would see about as many changes in their banking relationship with a converted financial institution as the customers of CUNA Credit Union saw when it changed its name to Great Wisconsin, perhaps even less. In fact, when credit union-to-bank conversions have occurred in the past, the vast majority of customers have not noticed any difference in rates or level of service. The only real difference is that the institution now has greater latitude in the products and services it can offer. But what is even more ironic is that mutual savings institutions pay state and federal corporate income taxes and abide by the federal Community Reinvestment Act (CRA), which requires banks to serve the credit needs of everyone in their market. By contrast, even the largest and most profit-driven credit union pays no corporate income taxes and has zero CRA requirements. That is no doubt why the NCRC study found "that banks make a higher portion of their home loans with fewer loan denials than credit unions to traditionally underserved populations." Given the NCRC's findings, which have been reinforced by similar independent research, mutual savings institutions have a better record of fulfilling the social mission given to credit unions than many large credit unions do themselves. So from a broader public policy perspective, credit union-to-mutual savings bank conversions are clearly a huge benefit to taxpayers and people with lower incomes. Conversion is also the socially responsible way for aggressive credit unions to expand into commercial lending and other services not traditionally offered by credit unions. But conversion opponents point to industry-funded studies that charge the real agenda behind credit union conversions is that it is the first step to eventually becoming stock-owned. My response is, who cares? What's wrong with giving former credit union "members" the option to become liquid owners of their financial institution by giving them the opportunity to purchase stock? It may not be the right strategy for every credit union that converts its charter, but it should be an option. Yet it is unfair to say that becoming a stock corporation is the true motive behind all credit union conversions. Most credit unions convert in order to expand, while still maintaining their basic member-owned governance structure. Not all credit unions will or should convert to a mutual savings charter. But, without a doubt, conversion is the responsible growth solution for institutions that are already credit unions in name only. Converting has largely no impact on credit union customers and is a benefit to taxpayers and low-income populations. Kurt Bauer is president and CEO of the Wisconsin Bankers Association. madison.com ©2009 Capital Newspapers. All rights reserved. |
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