Blaine: Show Me How Conversion Would Be Better
State Employees CU CEO Jim Blaine isn't sure why conversion consultant Alan Theriault and Coalition for Credit Union Charter Options Executive Director Lee Bettis have "accused" him of masterminding the opposition to Plano, Texas-based Community CU's proposed conversion to mutual charter.
But he'd love to hear more about how converting to a mutual bank is a good thing for credit union members.
"I'd like to invite Alan (Theriault) and Lee (Bettis) to come to North Carolina and explain all this conversion stuff to me," he said. "I'm serious. We could be their next convert. If this is a good thing for Community CU and its members, tell me about it. It could be a good thing for my members. If they can show me that, why, I'll take it to my board."
Known for his tongue-in-cheek approach to getting his point across, Blaine said he wanted to make it clear that he really is just trying to understand how conversions work. "I went to Texas [to attend Community CU's annual meeting] because I honestly wanted to hear the reasons why a credit union would want to convert," he said. Blaine was not allowed into the meeting because it was open only to members of the credit union. "I'm sure this was not a haphazard decision, but I'm also sure this is not a clear-cut decision."
For the record, Blaine said he has had nothing to do with the creation of Coalition for Member Trust's website and that he had never met Mark Arnold, one of the founding members of the coalition. "But I want to thank Alan and Lee for pointing him out to me. I wasn't behind this coalition, but I'm a member now," Blaine said. "I would never have known about these guys if it weren't for Alan and Lee."
One of the most frequently cited reasons for converting from a credit union to a bank is the need to raise capital, and Blaine said he believes a recent private ruling the $12.5-billion SECU obtained by the IRS addresses that issue and eliminates it as a reason for converting.
"In a demo in 2001, we issued alternative capital to a member and got acknowledgement from NCUA," he related. "But many resist issuing alternative capital because they fear they'll lose their tax-exempt status. Well, on May 2, we received a ruling from the IRS that such alternative capital represents equity and is not considered stock. This proves that credit unions can issue alternative capital without endangering the tax exemption. Suddenly, the capital issue [with regard to CU conversions] is off the table."