Washington, D.C. is the town where ketchup has been counted as a vegetable in school kids' lunches and where plans to spend $10 billion we don't have are replaced with another to spend $5 billion we don't have-and then counted as a savings of $5 billion. So even though President Bush (son of "Read My Lips") and Democratic candidate John Kerry (favors the Patriot Act, although also opposed) have both pledged their support for the credit union tax exemption, the fact three bank trade associations are joining to bring their influence and PAC muscle to Congress to lobby for repeal of the credit union tax exemption is something to be taken seriously.
But you would be mistaken if you believe the real target of any of this is Congress. It isn't. It's you, the nation's credit unions. As has been noted in this space before, the banking industry long ago gave up efforts calling for taxation of all credit unions in favor of a slicker, divide-and-conquer strategy calling for taxation of "mega" credit unions, whatever those are. The 1,000 largest credit unions in the U.S. hold about 80% of CUs' total assets. That leaves about 8,500 "smaller" credit unions targeted to be culled from the herd. The bankers don't need all 8,500 to agree with them; in fact, they need just one. As soon as one credit union manager or board says that maybe there is something to what the bankers are saying, the banks will have their first hole in the dike.
The issue now, as always, is that the influence of credit unions on fees and pricing in the financial services marketplace is far disproportionate to their asset size. A market without credit unions? For banks it would be praise the Lord and pass the fees. And pass them again.
Of course, the bankers' "bounty" of $1,000 for a photo of a credit union overreaching its FOM is ridiculous. But when has that ever stopped anything from taking on a life of its own in Washington?
Frank J. Diekmann is editor of The Credit Union Journal.
