Rantings, Ravings, Half-Truths Demand An Answer
For some time now, I have heard the ratings and ravings of the opponents of credit union charter change. I have also had to listen to slanderous statements and read libelous reports, half-truths, and downright distortions from those folks about what actually happens in a charter conversion.
I have been amazed at what conversion opponents believe happens when we meet with a board of directors and a CEO of a credit union to discuss the topic of charter change. Evidently, they picture the leaders of converting credit unions as persons with green eyeshades, calculators, and "fat" bank accounts, or at least with designs on one. Nothing could be further from the truth.
I have sat and listened to this "trash talk" for some time and have just basically ignored it at the rantings of uninformed people. However, when I read Frank Diekmann's editorial of May 22, 2006 in your newspaper, quite frankly I really could not believe the tirade. This time, I cannot let it go.
I applaud MACUMA for having the courage to invite Marvin Umholtz and me to discuss the topic of charter conversion rationally. I was warned by some individuals that, with Mr. Diekmann as moderator, the topic would degenerate into a shouting match. I credit him with the fact that it did not. Mr. Diekmann did allow us to be heard.
However, in reading his latest editorial, I clearly see the myopic bias of his position coming out again. Even more importantly, I see the irrationality of his focus on stock benefits, which are the equivalent of cash benefits in a credit union; the one-person-one-vote issue, which is a "red herring" because of the limits on voting under an OTS charter; and the lack of any mention of the benefits to the members in a charter conversion.
On page 28 (of the May 22 edition of) The Credit Union Journal, you present what you call "conversion viewpoints" from the recent hearings on HR 3206. These include Tom Dorety, president of Suncoast Schools FCU, testifying for CUNA; JoAnn Johnson, chairman of NCUA; Marc Schaefer, president of Truliant FCU, testifying for NAFCU, and Representative Paul Kanjorski (D-PA), an inveterate credit union supporter. Nowhere do you explain the positions of the OTS, America's Community Bankers, or the American Bankers Association, nor do you report on the comments of Rep. Patrick McHenry (R-NC), or Rep. Jeb Hensarling (R-TX) in support of HR 3206. What is missing from your arguments is a balance that you would find in most reputable newspapers and in a fair-minded presentation of the facts.
Mr. Diekmann and I both know that no organization, be it a credit union, a thrift, or a bank, can survive without its member/customers. We also know that while member/customers may love their credit unions, banks or thrifts, they would not be doing business there if any of four basic elements were missing: (1) good rates, (2) good service, (3) good products, and (4) convenient locations. Credit unions have no monopoly on any of these features.
Of the 30-plus credit union-to-mutual savings bank conversions that have taken place, every single one of them has been successful strategically. All of these institutions have grown and prospered and the membership base has expanded, not contracted. Therefore, they must be doing something right, and since Mr. Diekmann and and the other conversion opponents cannot explain that phenomenon, they have chosen to focus on how much, if anything, the CEO or the board of directors may be paid in connection with their success in running the converted institution.
All the while, you realize, that the average member of a credit union does not even know he has a vote, much less can attend an annual meeting to elect directors or ask for information with regard to the financial condition of the credit union. Nor do credit union members know the salaries of their management officials. They also do not know that, in most cases, volunteer directors get perks such as travel and conference attendance for which they pay no federal or state income tax.
Let's face it-the obligation of a board of directors of a credit union, and the management officials that work for that credit union, is to act in the best interest of the credit union and its members. That includes acting in such a way as to assure the viability and success of that financial institution going forward. If there are deficiencies in the credit union operation that can only be remedied by a charter change, it is not only the duty but the obligation of the board of directors and management to investigate the charter change option.
As a "voice" of the credit union industry, Mr. Diekmann also continues to hold out the enduring hope that risk-based capital standards, secondary capital, and expanded business lending authority will someday come to credit unions. They might, but it will cost something and that may be the loss of the tax exemption.
Scaring Some, Hurting Others
The rantings and ravings of conversion opponents may be effective in scaring some boards of directors of credit unions that need to convert from examining this option. If that credit union later fails because its leadership did act soon enough, or at all, it will be on Mr. Diekmann's conscience, not mine. While I have an obligation as a lawyer not to advise a credit union to convert when it is clear they do not need to do so and cannot handle it, it is also incumbent upon Mr. Diekmann and the other spokespersons for the credit union industry not to lobby for foreclosure of an option that some credit unions may need now, or in the future.
How about trying to be fair and balanced, Frank? Who knows, you may pick up some new subscribers and actually become the editor of an informative newspaper.
Robert L. Freedman
Silver, Freedman & Taff, FFP