In his Nov. 7 commentary, "What's So Special About Credit Unions?" Bill Issac blithely suggested credit unions are no longer needed as an alternative type of financial institution. He maintains that credit union members are more affluent than nonmembers, that credit unions don't provide any services that other financial institutions don't provide, and that they can no longer justify their exemption from federal income tax.

However, it stands to reason that credit union members have higher incomes than noncredit union members; by definition, they're employed when they join, whereas nonmembers include the unemployed. Clearly, the relevant comparison the author avoids is credit union-member household incomes to bank-customer household incomes. Nor does he comment on nonbank customer incomes.

What's more, estimated household-income data of any type can't fully tell the story of the millions of working families served by credit unions. In the North Carolina markets, where the American Bankers Association has chosen to sue the National Credit Union Administration for permitting small businesses to offer membership in AT&T Family Federal Credit Union, banks either deny service or price their services so that furniture, shoe, and textile factory workers cannot realistically afford them, given their modest disposable incomes.

Michael Griffen of the ABA has admitted that a certain percentage of the population simply can't be served by banks and will provide a market for check-cashers and pawnbrokers. In Asheboro, N.C., with a population of 39,000, 11 finance companies exist (at least one owned by a bank), and two pawnshops that will cash a $230 paycheck for $15. Meanwhile, a check-cashing store plans to open soon. While Comptroller of the Currency Eugene A. Ludwig and Under Secretary of the Treasury Jerry Hawke try to cajole banks into serving unbanked citizens, credit unions are already doing so. Do bankers seek to protect a market they do not intend to serve? There is an obvious place in these markets for nonprofit financial institutions. Why should public policy lead us to eliminate credit unions as a consumer option, as Mr. Issac suggests?

Interestingly, Mr. Issac touts the banks' successes in entering the investment underwriting and insurance businesses, while he advocates that credit unions return to the bankers' interpretation of the 1934 Federal Credit Union Act. Loosened regulatory restrictions, along with four years of record profits, rapid asset growth, and the dismantling of the thrift industry as competitors have apparently not sated bankers' appetite for eliminating credit union competition.

Bank trade associations have effectively been advocating that all transaction-based financial institutions be included in one risk pool. This would clearly result in a monopoly of one type - banks. This is unsound public policy. The consumer wants a choice of financial institutions and wants credit unions included. The financial services sector should have diversification by institution type that includes credit unions, with their separate risk pool, their different pricing policies, and a different philosophy of ownership. Bankers want credit unions to function like banks. Consumers want credit unions to remain as credit unions and the choice to be theirs.

Commercial banking interests were successful in convincing Congress to tax mutual savings institutions in 1951. By 1975, the banking interests had engineered an effective tax rate of 24% for mutuals, while lowering the rate to 13.5% for large commercial banks. Commercial banks had the advantage of tax loopholes and an ability to raise capital in the open market. Mutual savings banks, that had to sustain themselves with retained earnings, saw their capital deteriorate and were unable to withstand the interest rate and asset-quality shocks of the 1970s and early '80s.

Banking interest groups would love to repeat this process by taxing credit unions and/or forcing credit unions to become mutual savings institutions. Thrifts and mutual savings banks have watched their share of household financial assets dwindle from 17% to 5% in the last 15 years. To compete, former credit unions, like many mutuals, would be tempted to convert to private stock ownership, and we could all wave farewell to the favorable social aspects of credit union philosophy forever.

It is a bitter irony that, when the Bank Insurance Fund dipped dangerously low in the early 1990s, the taxpayer was put on notice with a $30 billion line of credit extended from the U.S. Treasury to the Federal Deposit Insurance Corp. On the other hand, when the credit union insurance fund was threatened in the early 1980s by a recession and many plant closings, the regulators responded by developing a plan that spared the taxpayer while helping small business and the economy. This was accomplished by extending credit union services to multiple occupation groups.

Under the heading of "no good deed shall go unpunished," the banking interests are now consciously and recklessly destabilizing the safety and soundness of the entire credit union system by suing credit unions and their regulators at every turn.

Still, it is unlikely we will relegate credit unions to history's dustbin, for the following reasons:

*Consumers want and need a choice of financial institution types.

*A strong economy demands a diversification of financial institution types with different risk pools.

*Americans of moderate means should have access to the affordable financial services credit unions offer.

Banks have followed their trade associations down a perilous and mean- spirited path. They are counting on the 65 million current credit union members and the tens of millions of other consumers to remain passive, as the banks forcibly remove access to credit union membership. What if they're wrong?

Mr. Schaefer is the president and chief executive of AT&T Family Federal Credit Union, St. Louis.

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