To the Editor:

It was interesting to note that Sen. Charles Schumer is proposing to introduce legislation that would remove the statutory limit, presently at 12.25%, on the volume of business loans that can be made by credit unions ["CU Small-Business Effort Wins Schumer's Backing," March 10].

While the differences that used to distinguish credit unions from banks and thrift institutions are now almost non-existent, Sen. Schumer is losing sight of a key issue — credit unions enjoy an exemption from federal income taxes, whereas the banks, thrift institutions and other industries do not.

Hence, the logical question has to be asked: Why grant expanded powers to an industry (i.e., the credit unions) that wants to have the same commercial lending powers as banks and thrift institutions but wants to continue a free lunch by not having to pay federal income taxes?

Since Sen. Schumer's proposed legislation is likely to enable a credit union to realize increased earnings as the result of expanded commercial lending, wouldn't it be logical to expect the credit union to pay a portion of its enhanced earnings to the Treasury Department?

At a time when the Treasury Department is grasping to find ways to cut the federal budget deficit, why is Sen. Schumer allowing a costly free lunch to continue?

Sen. Schumer is grossly in error by asserting that there are "so many large banks in bad shape." He should take a look in the backyard in the credit union industry, which has its own share of financial problems. In Florida, two troubled credit unions agreed to merge, creating a behemoth with $7.8 billion in assets. In Wisconsin, the state regulator had to place one credit union in receivership, and in Montana, one credit union reported a yearend loss of $4.8 million, which prompted its merger into another credit union.

The members of the Senate and the House should demand an end to the free lunch days for the credit unions. At a time when many businesses in this country are struggling just to survive, it makes no sense to let a huge industry, such as the credit unions, have expanded powers without paying federal income taxes.Barry J. Zadworny
Senior vice president, compliance
Roma Bank, Robbinsville, N.J.

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