In a blitz of activity the National Credit Union Administration has approved conversion to federal charters for three large Utah credit unions that the state's bankers had targeted for taxation.
The action early this month was a blow to Utah bankers, who had hoped that the creation of a task force to study credit unions' business practices would eventually lead to legislation to tax the largest state-chartered credit unions. By converting to federal charters, America First Credit Union and Goldenwest Credit Union, both in Ogden, and Mountain America Credit Union of Salt Lake City will avoid the annual legislative battles over taxation as well as issues such as expanding fields of membership and business lending.
The conversions also free them from newly enacted curbs on business lending in the state.
"It's not just about taxation," said Fred Nydegger, a vice president at the $1.4 billion-asset Mountain America. "It seems like every year we go through the same fights with the bankers, and after a while the question is, 'What are you going to compromise.' Enough is enough. We don't want to compromise anymore."
The speed and the secretive method by which the NCUA approved the three charter conversions angered Utah bankers, who were lobbying Congress at the time to restrict the agency's power to provide such escapes.
"Congress cannot sit by idly and watch this happen," said Howard Headlee, the president of the Utah Bankers Association. "This is an affront to the state of Utah - to come in here after our locally elected legislators put … hands around this issue. This is an arrogant, uninformed, typically bureaucratic Washington move."
NCUA Chairman Dennis Dollar would only say, in a carefully worded written statement, that the three charter conversions were all legal and within his agency's authority.
State Sen. Dan Eastman, a Republican who is co-chairman of the 13-member legislative task force, said last week that the NCUA move essentially ended the fight to tax Utah's largest credit unions.
"It makes it a moot issue now that the credit unions are gone," he said.
Mr. Nydegger said that Mountain America's main motive for converting was to continue expanding its business lending operation, which was severely curtailed during 11th-hour negotiations in the legislative session that ended in March.
Mountain America, which has built a substantial business loan portfolio through its credit union service organization, recently qualified as a participant in the Small Business Administration's guaranteed loan program. "Had we not qualified for a federal charter we would have lost all that," Mr. Nydegger said.
