One Man's Troubles Are Another's Chance To Cash In
Frankly, I was getting a wee bit disappointed.
Really, you had to have begun wondering if the banking trade groups and the charter-conversion consultants weren't getting a little off their games. Not dropping the putts that used to be gimmes. Not catching up with that fastball like when they were young. Not anticipating where the puck was headed.
Yet in the end, the slick old vets proved again that experience matters.
Still, what took the bankers and the conversion profiteers so long to try to take advantage of credit unions' problems as a way of drawing attention away from their own meltdowns and/or lining their own pockets, respectively?
When NCUA announced it was conserving three more corporate CUs and also finally unveiled its plan for trying to clean up the so-called "legacy assets," the credit union community was angered, perplexed, frustrated and relieved. The banking industry and those who make a buck convincing other charters to join their ranks couldn't have been more pleased.
Bad News For You, Good For Us
As Credit Union Journal reported earlier, the community bankers have called on Treasury Secretary Timothy Geithner to begin a review of the CU tax exemption in light of what the bankers are portraying as a government-assisted rescue of the corporate system. (You can take this request from the bankers and add it to their long history of citing other events-the Depression, the gas crisis, the S&L meltdown, the recession of the early 1990s, the new cultural low brought about by "Jersey Shore," etc.-as reasons to revoke the tax exemption.)
Camden Fine, president of the Independent Community Bankers of America, announced loudly, "The NCUA's solution to this crisis involves the isolation of the bad assets in a securitization trust that will sell government guaranteed notes...The taxpayer bailout of the credit union system should cast doubt on the wisdom and the fairness of their tax exempt status."
And, showing the old vets still have it, they dusted off a seasoned saw that has become their new hot button, and added, "At a time of record deficits, every dollar of revenue counts...But now, credit unions not only do not pay tax, but when they are troubled they get a taxpayer bailout."
You should have your hand over your heart as you admire the bankers' patriotism as so great that they have even been able to overlook their own much larger meltdown and resulting TARP bailout so as to highlight how CUs can do their part as citizens.
Working behind the scenes with a much-lower profile but at a potentially much higher cost, are the "conversion" hucksters, preaching that salvation lies just over a hill known as Mutual Savings Bank. Their sales brochures never mention that the benefits will not be mutual and it's unlikely there will ever be any savings-you can bank on that.
Obviously, the decision to change charters is up to every board, which ultimately must ask itself: 1) Do we have all the facts (and if it's getting those facts only from the charter-converters, the answer to that is self-evident), and 2) Is this move in the best interests of our members?
This space has been a sounding board on conversions to bank charters for years, and it appears it will be for a while yet to come. But make no mistake-the argument here isn't about converting to a mutual savings bank-that's just the soft bubble wrap the charter-converters bundle around their pitch.
For the charter converters, MSB doesn't stand for mutual savings bank, it represents Making Some Bucks. The conversion consultants know that when those checks have been cashed, they will be back proposing a full conversion to a commercial bank. In short order, members go from the place that once knew their name to becoming customers of a place where they don't know the name.
That the bank trade groups, facing negative consumer surveys and congressional scrutiny, would shout, "Hey, look over there!" as a way to deflect attention from their dues-payers' troubles, is just another page in a well-worn playbook. Same for the charter-converters and their spiel that the grass is much greener on the other side of the fence. But that's not grass, it's mold. There have been 125 bank failures so far in 2010. And those followed the 140 in 2009.
One credit union that seriously examined the prospects of the value of a charter conversion several years ago said it has no plans to re-open the case.
"My personal reaction is it's no panacea, for a lot of reasons," Frank Pollack, CEO of Pentagon FCU, commented to Credit Union Journal. "For one, the banks are going to be paying a heavy cost themselves for a period of time. Maybe not as long [as credit unions], but they're going to be paying. And, if the costs are comparable, what do your members gain? Nothing."
Credit unions may be mad as hell, but it would be wise to think before deciding that they can't take it anymore. Most CU leaders believe the big issue in front of them is the future of corporate CUs. It's not.
Corporates were created out of collaboration among credit unions tired of doing business with banks. Whatever lies ahead for credit unions will similarly blossom from collaboration. It has been and always will be the CU community's singular strength. So beware those who are selling strength though being single.
Frank J. Diekmann can be reached at email@example.com.