Banker Strategy Obvious: Fight Taken To The States

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The strategy is clear. The bankers are convinced they will receive little sympathy from Congress on their concerns over credit unions so they are taking their case to the states.

Despite the growing federal budget deficit, the Republican-controlled Congress has made it clear it will have no appetite for proposals to raise taxes, especially broad-based initiatives, such as a credit union tax. Consequently, there is very little threat to the federal tax exemption.

But the states, most of them also battling rising budget deficits, pose greater prospects for the bankers. And independent incidents, such as the Iowa credit union buying a bank or Utah credit unions embarking on multi-million- dollar business loans, have sparked the bankers in those states to go on the offensive. Discussions with several banking lobbyists in recent weeks bear this out. While the banks in Iowa, Utah and elsewhere cloak their tax proposals in fiscal arguments, they make no bones that their enmity for credit unions and the credit union growth to equal competitive status in many states is their main motive.

In Washington, the expanding warfare is manifesting itself as opposition by the banks to the credit unions' regulatory relief initiative, which has grown to be one of the biggest legislative efforts by credit unions, ever.

Both the credit union lobbyists and the bankers confess to a lack of communication between the parties. It's a wonder that the two parties, cooperative on many issues in the past (bankruptcy reform), do not meet more often to discuss their differences and seek some kind of accommodation. The result could be a widening rift between the two powerful lobbies. And no one will benefit from that.

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