Is it possible bankers see more potential in the credit union movement than CUs do? That's what Bob Dorsa believes.
Dorsa, the president of the American Credit Union Mortgage Association based here, said the constant call by bank lobbying groups for a tax on CUs may be nothing more than a gambit to distract attention from the fact many banks pay little in taxes.
The former president of the National Association of Credit Union Service Organizations (NACUSO) has 31 years of experience in the movement, including development of CUSOs through the 1980s and 1990s. Prior to founding the two trade organizations, Dorsa spent his first 10 years in the movement as a senior executive at several large CUs, both in New York and California.
Dorsa added he believes CUs have a great system, but "I just don't think we get a lot out of it. We could be doing a whole lot more with sub-prime housing lending. I still hold hope credit unions can do what they were set up to do."
CUJ: During the hearings by Rep. Bill Thomas in November, he essentially challenged credit unions to prove the exemption still is deserved: What do you say in response?
Dorsa: Yes, we still are deserving. The very fact we still try to charge the lowest possible rates on loans, and pay the highest rates on deposits, those are issues that fit in with the charter of the credit union system. There are pressures-such as asset liability management-that make things more difficult. We still have volunteer boards; no high-paying corporate types overseeing the operations of credit unions.
The volunteer structure and number of volunteers, not being fee-crazy like other financial institutions, all of those things fit with the founding principles of the credit union system. If all of those things are the same, then the exemption still applies. We can't remove the tax-exempt status without making a lot of other changes.
CUJ: What is the value of credit unions to a community and the nation? Can CUs prove they earn the tax exemption by giving back more to their communities and the country than would be obtained through taxation?
Dorsa: I think the value is exemplified by the way credit unions balance the scales. They really are a great alternative to banks. Credit unions have the capability to provide services any other financial institution can offer, and we do so with a higher degree of morality, better service and at a lower cost. Hopefully, we'll never have to experience what things are like without credit unions, but we still can do more. There needs to be more volunteer efforts for communities. But then again, credit unions do many things, and we do it more from the heart than for public relations value.
I don't think taxing credit unions will make a hill of beans in the federal deficit. It has become more of a philosophical battle with banks. We've been fighting about this for so long, neither side wants to give in, but some may have forgotten why we started. Some of the big money center banks don't pay a lot in taxes, so perhaps this is a way of deflecting interest away from them and shining the light on somebody else.
CUJ: What data do you feel CUs must do a better job of capturing in order to defend the tax exemption?
Dorsa: I'm really prejudiced to the real estate lending area, but I believe when we deny or fail to recognize the need of someone who is not "A" paper and send them out to the cold, cruel world of banking, we are missing out. We need to help certain types of borrowers get into a home ownership situation. Many lenders are concerned about non-traditional mortgage products such as interest-only loans or negative-amortization loans. These are plans lenders use to get the payment down to an affordable level for home buyers. NCUA recommended we use caution with these non-traditional products, but some take it too far and send people away. This is just teeing them up for predatory lenders.
We can't pick and choose who we help. We handle the easy transactions, but we should roll up our sleeves and help the difficult members, also. Countrywide and Ameriquest run commercials all the time on television that make claims that sound like those of a credit union. Serving the underserved is a slogan, but we need to expand demographically the kind of people we help-not just the kind of people who pad the bottom line.
CUJ: Are you surprised this issue seemingly not only never dies, but grows stronger? Will it ever go away?
Dorsa: I'm not surprised; because I've lived with it for the 30 years I've been in the credit union system. It's like that bad penny that never goes away. I think banks and other competitors see great potential in our business model-in some cases, they see more potential than we do. This potential keeps shining the light on this tax exemption issue.
I hope we continue to earn the exemption. If not, necessity is the mother of invention, and we'll deal with the new business model that comes. Credit unions in Australia and Canada are taxed, and other systems in the world have been down this road. They have changed, but have not been eliminated. If the tax exemption changes, I don't see that as the end of the American credit union system.