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One Question: Just Who Are The Underserved?

WASHINGTON-Just who are these ubiquitous "underserved" and "people of modest means" that everyone is up in arms about?

Strangely enough, for all the talk about the importance of reaching out to these people, it seems no one really knows who they are.

"There is a surprising number of people who consider themselves to be of modest means," CUNA's Richard Gose said during a break-out session at the trade association's Governmental Affairs Conference. "Once you factor in the things they are trying to accomplish-paying off student loans, sending their children to college-many people consider themselves to be of modest means."

Indeed, CUNA Economist Mike Schenk pointed out that while the average income of credit union members is slightly higher than the national average, a good portion of members likely think of themselves as being of modest means.

"There is no good, solid definition of 'underserved,'" former NCUA Board Chair Dennis Dollar told The Credit Union Journal. "If you're going to ask credit unions to document something, then you need to give them something to document."

Filene Research Institute Executive Director Bob Hoel agreed, noting that even someone making a "good" salary can feel as if his means are "modest" when put up against the cost of buying a home (particularly in some parts of the country, like California), the cost of taking care of children's teeth and college education.

NCUA Chairman JoAnn Johnson noted the relatively recent infusion of "modest means" into the credit union lexicon, while U.S. Rep. Maxine Waters (D-CA) used the phrase "people of average means" interchangeably with "modest means"-a phraseology that could put a lot more people, including people who are already members being served by credit unions, into the mix.

Muddying the picture of just who credit unions are serving is the fact that some of the wealthier members CUs serve are also among the segment of the population most likely to have multiple financial service provider relationships. "They tend to be casual users of credit unions and are not as likely to consider the credit union their primary financial institution," Schenk said.

Beyond the difficulty of defining just who is "underserved" and "of modest means," there is the issue of measuring and documenting what credit unions are doing to serve them.

"A lot of what credit unions do simply isn't measurable or documentable," Dollar observed.

He and a number of other credit union faithful at CUNA's GAC expressed the concern about the corollary to "what gets measured gets done," which is, if someone is required to measure some sort of effort and there is an aspect of that effort that can't be measured, that aspect will disappear.

"If you tell them, 'you must do this' because it can be measured and documented, then all those other great things credit unions do, and do because they're just the right thing to do, that can't be measured just won't get done any more," said one credit unionist. "In the rush to offer up documentable proof of what we are doing, some credit unions will find the things they have been doing are great but cannot be measured, and if they have to make a choice between doing something that will make the numbers look good and things that simply are good, guess what they're going to do."

Retargeting The Ire-At The Bank Trade Groups

WASHINGTON-As he has in the past, CUNA President Dan Mica said he would try to tone down the anti-banker rhetoric in deference to those credit unions that have said they have good relationships with the banks in their regions and want to keep it that way. So, Mica targeted his ire at the bank trade associations, instead.

"Trade associations, I think, have some responsibility and fiduciary duty to their members to try to think straight, to try to end this war that the ABA president is trying to foist on credit unions," Mica said as he stalked the GAC stage. "My plea is for you to go to your colleagues at the banks that you work with and ask them to tell their trade association to end the madness, because it seems like the tail is wagging the dog here."

Not only would this help credit unions, but it could banks, as well, he suggested, noting the amount of time, money and resources the ABA has expended on attacking credit unions.

"Do you know they had people sneak around and take pictures of credit union people driving nice cars," Mica asked. "They are trying to get the idea that big credit unions are greedy in the minds of Congress. They are trying to drive home the message that big is greedy. Now, think of the size of banks, which are reaching the trillions in assets. Do they really want to put the idea that big is greedy into the minds of Congress?"

Mica continued by suggesting that credit unions try to reach out to saner heads in the banking industry. "To the rational banks out there-and there must be some out there-credit unions are not a threat to banks," he said. "Credit unions don't want this war. I'm not speaking from a position of weakness, but consumers don't want this war, Congress doesn't want this war, and we don't either."

But that doesn't mean credit unions should be quiet about it when they speak with their lawmakers.

Mica said what CUNA often hears from legislators is that when credit unions visit them, they are so quiet and don't ever really tell lawmakers what they want-which is, after all, one of the primary goals of meeting with politicians.

"Don't be timid. Be forceful. I don't want you to be rude, but tell them what you want," Mica exhorted. "Tell them you want them to tell the banks to knock it off. 'Don't come in here and whine about credit unions anymore.'"

Moreover, for as important as the Credit Union Regulatory Improvement Act and Prompt Corrective Action reform are to the movement, the status of the tax exemption is everything. "That is life and death for us and marginal for [banks]," he added.

Used To Sing, Now Buys Bling

WASHINGTON-When Marie Osmond celebrates a 10th anniversary she does it right: with a piece of jewelry and a trip to Washington.

Osmond surprised the GAC audience by popping in to thank the credit union movement for teaming up with Children's Miracle Network-a partnership that is now in its 10th year.

Osmond proceeded to show off a bracelet she had bought to mark the anniversary, noting that she always marks special occasions with jewelry. Her earrings, she quipped, were bought in honor of picking up her drycleaning.

The former television star and co-host of "Donnie and Marie" and mother of eight children (nine if you include her husband, she joked) did more than just buy herself some bling and fly to Washington to thank credit unions for their significant contributions to Children's Miracle Network-she also had a gift, of sorts, for credit unions, as well.

"I sent a letter to members of Congress telling them about the millions of miracles that have been made possible through the support of credit unions," she announced. "Credit unions have raised $50 million for Children's Miracle Network over the last 10 years."

Osmond invited First Technology CU CEO Tom Sargent onto the stage to illustrate her point that nearly everyone will one day benefit from the care provided at CMN-sponsored hospitals. Sargent's granddaughter recently spent a week in one of those hospitals. Proudly displaying photos of the infant, Sargent said he was happy to report that his granddaughter is now healthy and doing well, thanks to CMN.

Trying To Develop An 'Underserved' Measuring Stick

WASHINGTON-NCUA Chairs often like to use GAC as an opportunity to review regulatory changes from the past year and the financial status of credit unions, but what credit unionists at GAC most wanted from NCUA Chair JoAnn Johnson was a preview of the data collection survey the agency is embarking on to measure CU's service to their members.

Johnson noted that the term "modest means" is a relatively recent addition to the legislative language pertaining to credit unions and was careful to point out that service to members of modest means is not the entire mission of CUs but rather a portion of it.

Even so, she said, in light of the November hearing on the CU tax exemption and the movement's service to people of modest means in the House Ways & Means Committee, Johnson said it was important to work toward providing Congress with measurable, documentable, tangible evidence of credit unions serving the underserved.

"Chairman [Bill] Thomas used HMDA data, in an effective, if incomplete, job to paint a negative picture," Johnson related. "There is no one measuring stick that tells the full story."

Johnson said the perception on Capitol Hill, in the aftermath of those hearings, is that credit unions have something to prove, which is why NCUA is putting together this survey of 481 randomly selected credit unions to help the agency put together a fuller view of what credit unions are doing to serve the underserved.

The NCUA chairman hastened to add that this new undertaking is not an indication that the agency is heading towards imposing Community Reinvestment Act or CRA-like requirements on credit unions, but said the regulator-and credit unions themselves-cannot afford to leave the questions raised by the House Ways & Means Committee unanswered.

Johnson also discussed the credit union-to-bank conversion issue.

"The banks have succeeded in diverting attention away from the real issue at stake: consumer protection," Johnson observed. "Mired in all the rhetoric about how to fold a piece of paper is that this was about transparency."

Credit union members, she said, certainly have the right to vote in favor of converting to a bank charter, but she wants to make sure that when they do so, they are making a well-informed choice.

She related the story of a credit union member in Texas whose credit union recently converted to a bank. This member found out about the conversion toward the end of the process and wrote in to NCUA to say, "I'm glad that all those Congressmen in Washington had a good time talking about bureaucrats and folding paper, but back here in Texas, I lost my credit union."

A Right And A Left From The Right And The Left

WASHINGTON-With a dollop of partisan wit, two lobbyists on different sides of the political aisle were unanimous in their assessment that CUs should expect to see very little get done in this final year of the 109th Congress.

"It's a short year, so there will be only modest legislative accomplishments in the 100 legislative days on the calendar," said Republican lobbyist Mark Isakowitz, president of Fierce, Isakowitz & Blalock. "They're spending the first quarter on stuff that was left over from last year, and come August, they will turn their focus to the election, so there isn't a lot of time compared to last year."

His Democratic counterpart, Jeff Trammell, President of Trammell & Co., agreed, suggesting that this year is a "set-up" year for next year.

Both lobbyists also observed that this year is one of transition.

"The pace of turnover in Congress is even faster than it used to be," Trammel advised. "You cannot rest on your laurels."

Moreover, credit unions should not be complacent about their tax exemption.

"This year will largely focus on budget fights," Trammel noted. "We have an out-of-control federal deficit, and the White House has proposed cutting 100 programs, and they will be on the Hill fighting to keep their programs and looking for anyone to make up the revenue to pay for them."

Where Trammell and Isakawitz parted company, of course, was on whether Democrats might manage to wrest the majority from the Republicans. Noting the fast pace of turnover in Congress, Trammell suggested this could be the year for Democrats, but Isakowtiz said it would be extremely difficult for the Dems to win back the majority as they would have to win every race that is truly competitive.

But Isakowitz did agree with Trammel that between the recent election of Ohio Republican John Boehner to the House Majority Leader post and the upcoming Congressional election, this is a time of transition.

The good news, he said, is that transition can be a good thing for those special interests that really do have a movement behind them, and credit unions are one of the few special interests that do.

Banks Vs. Credit Unions, Statistically Speaking

WASHINGTON-Cold, hard facts and statistics are key to winning the hearts and minds of politicians, so CUNA has put together an array of data for credit unions to use to do just that.

"On the one hand, bankers are telling policymakers we're too big, but what they don't tell them is that the average credit union is $80 million in assets, while the average bank has $1.2 billion," noted CUNA Economist Mike Schenk at the trade association's Governmental Affairs Conference. "The typical credit union has $12 million in assets, while the typical banks has $100 million assets."

And the hypocrisy doesn't end there, Schenk suggested.

"They say we're growing too fast, but we have had about 6% of the market for over a decade," he offered. "Bank growth actually totals more than the total number of assets in the entire movement."

To counter the banker argument that credit unions have "overreached" beyond their traditional role, Schenk flashed a graph on the screen with just two statistics: the percentage of credit unions that are democratically owned and run (100%) versus the percentage of banks that are democratically owned and run (0%). "Banks have spent millions of dollars to get their message about credit unions to Congress," he noted. "This graph cost me nothing."

But the most telling numbers of all are those comparing how much tax revenue would be gained if the CU exemption were revoked versus how much credit unions save not only their members but non-members, too.

"What we haven't had in the past was a total dollar amount for what we save consumers," he related. After assessing the lower and fewer fees charged by CUs compared to those charged by banks, the higher dividends paid on savings and the lower rates charged on loans, CUNA estimates members save about $2 billion in lower fees, $2 billion in higher dividends and $2.3 billion in lower loan rates, for a total benefit of $6.3 billion. "That is roughly four to five times greater than the value of the tax exemption," Schenk pointed out. "We leverage the tax exemption to provide even greater benefits to our members."

Non-members benefit from the tax exemption, as well, because of the competition CUs provide for banks. Due to this "moderation of bad bank behavior," as Schenk put it, non-members save about $4.2 billion in higher rates on savings, $2.5 billion in lower rates on loans and another $1.7 billion in lower fees.

CUNA also surveyed 255 banks and 255 credit unions-the five largest of each institution type in every state-to determine what type of services they were offering. These institutions represent about 60% of the total financial services marketplace.

From regular savings and certificate accounts to unsecured loans and car loans to wire services, cashier's checks, money orders and free checking, in almost every case, Schenk said, credit unions were more likely to offer these products, "and credit union pricing was not only more favorable but a lot more favorable," Schenk concluded. "Are credit unions delivering benefits to their members? You bet they are."

Close To The Heart Of A Man Who Knows Hearts

WASHINGTON-Senate Majority Leader Bill Frist (R-TN) added his powerful voice to those lawmakers on the record supporting the credit union tax exemption.

"The tax code is seven times longer than the Bible," Frist told the GAC audience. "I absolutely support the credit union tax exemption."

Such a stance, he said, is in keeping with his general belief that America is an overtaxed nation, at which point Frist vowed to "bury the death tax once and for all."

Frist, who is also a heart and lung transplant surgeon, talked about another issue near and dear to his heart: access to health care records. His plan, he said, is to create a secure, privacy-protected online archive of medical records. "You can go online for just about everything, except to find out when your child's last tetanus shot was," Frist related.

The Tennessee Republican also discussed the creation of "SMART" grants that encourage and reward college students to major in math or science or in a language considered to be vital to American interests.

Noting his surgical background, Frist said that in surgery, a doctor must be ready and willing to take action when he sees a problem, and that he would like to see this surgical approach applied in the Senate.

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