Correcting Record On Comments From Conversion Discussion

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WEST PALM BEACH, Fla. - In the Dec. 4 issue, The Credit Union Journal misquoted remarks made by Peter Duffy of Sandler O'Neil during a discussion on credit union charter conversions hosted by the American Enterprise Institute. The text of the question posed by Credit Union Journal Washington Bureau Chief Ed Roberts and Duffy's response appears below in their correct form. Readers can view a complete video of the discussion group, along with related presentations, at www.aei.org/events/eventID.1418. The Credit Union Journal apologizes for the error.

Roberts: I think the issue that hasn't been discussed here is the insider enrichment, and that's what sticks in the craw of everybody in the credit union movement. Because it's my analysis that every single one of these institutions that have converted first from a mutual to a stock form have ended up with a controlling interest of the equity in the hands of a small cadre of insiders, that is directors and managers. Millions of dollars of the former credit union's equity ends up in the hands of a dozen people. This has been proven. If you want to go through the SEC documents you can see this happening.

Duffy: Just briefly. Actually an institution that converts simply for greed is truly doing the wrong thing, not only because in many cases the payout isn't what it's reported to be, but they're not really living up to what their job is. Here's the deal. It has been pitched. There's no doubt about it that there are people in the industry that are pitching the greed card. I can tell you I've been deeply involved with more than a handful of credit unions who are truly concerned about their ability to compete and we've gone all the way to the board vote on charter decision and we have never brought the conversion model in that shows the capital and stock is raised. Never, and it's in the minutes and you can look it up. It's for the business. Now, it is done, but there are those of us out here who look at it as a last resort.

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