BANKTHINK

Stop New Forms of Credit Union Mission Creep

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Credit unions are an aggressive bunch. As if their heavy-handed push to expand into prohibited business lending wasn't enough, it now seems they are adding on another power grab to increase their ability to raise supplemental capital and support investors.

In fact, a bill will soon be introduced in the House Financial Services Committee that would alter the credit unions' long-standing statutory capital-raising restrictions — a new tactic by the credit unions! 

Never mind that both of these areas are intentionally restricted by law to ensure credit unions use their generous tax-subsidy to help people of modest means. This credit union tactic makes me think back to something my mother always told me: "there are givers in this world and then there are takers." And from my Main Street view, credit unions are taking more than they are giving back. That's just not right.

Credit unions used to be about giving back. They were originally created by Congress more than 75 years ago to serve people of modest means with a common bond, such as factory workers, and as such were exempted from paying taxes. Allowing credit unions the power to bring in investor capital will, in effect, make them identical to any other for-profit corporation that issues debt and stock—except that they will keep their tax-free status. This will severely dilute the mutual ownership and create conflicts between their mutual owners and their investors, making a mockery out of the idea that credit unions only look out for what is good for their members.

Raising supplemental capital allows credit unions to expand like any for-profit entity and stray far from their mission, which is to serve people of modest means. These same credit unions also want to raise the statutory cap to do business lending—which is based on the amount of their capital. Investor capital will give multi-billion-dollar, tax-exempt credit unions the opportunity to stray further into riskier commercial lending ventures — something never intended when they were given tax-exempt status.

As a community banker, I'm all about giving back. My bank pays taxes to support the community while creating jobs and providing loans to the local residents of Little Valley, N.Y., who want to buy a home, send their child to college or open up a small business right here on Main Street. Our community bank's taxes helps support Little Valley’s fire department, schools and municipal offices. There's no doubt that our community bank gives back to the town of Little Valley. It's just the community banking way. That's why I am fed up by the efforts of tax-exempt, nonprofit credit unions to do away with their rules and raise capital from investors.

ICBA and more than 7,000 community banks across the country oppose further, unfair "mission creep" of the credit union industry. If they want to take more than their fair share, they need to give a little. And giving in the form of taxes, or converting to a mutual bank charter, would be a good place to start.

Sal Marranca is chairman of Independent Community Bankers of America and president and CEO of Cattaraugus County Bank, Little Valley, N.Y.

 Read a related BankThink piece: "Transfer Day Assumed Credit Unions Are Virtuous"

 

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