Credit unions in Oregon and Wyoming are again pushing for the right to compete with banks for public deposits.
Though credit union trade groups in both states have been pushing for such legislation session after session, there is new urgency now because member deposits are drying up, diverted to other sorts of investments, said John H. Zimmerman, public relations manager for the National Association of Federal Credit Unions. He predicted the fight will grow more intense.
"Credit unions, just like many banks, are running into a loanable-funds problem," said Keith Leggett, senior economist with the American Bankers Association.
California recently passed a law that spreads the state's deposits among more banks. And in Kansas, community bankers are fighting the proposed repeal of a law that allows only state-chartered banks to compete for public deposits.
In Oregon, state-chartered credit unions are looking for the right to accept public funds from the state and local governments. The Oregon Bankers Association, not surprisingly, plans to oppose the bill when it is introduced to the state legislature in January, said Tom Perrick, the trade group's president and chief executive officer.
It is a similar story in Wyoming. The League of Wyoming Credit Unions plans to introduce a bill in January that would let cities, counties, and school districts - but not the state itself - deposit money in credit unions. (All of Wyoming's credit unions have federal charters, since there is no Wyoming charter.)
Jane Willard, the trade group's vice president of governmental affairs, said the bill is designed to give municipalities more options. She added that 18 states currently allow their municipalities to deposit money in credit unions.
"We're talking about small dollars in most cases," she said.
Ms. Willard said the bill started to take shape after credit unions had to turn away local officials in small towns who sought to open an account. She gave as an example
Fremont County School District No. 24 in Shoshoni had banked with the local branch of First State Bank of Thermopolis. When the branch closed in June, school officials tried to open an account at a local credit union but found that they could not under Wyoming law.
"We have to bank in Riverton, which is 22 miles away," said Kay Watson, the school district's business manager.
But Wyoming bankers say that they are already under liquidity pressure, and that the loss of municipal deposits would only make things worse. They fear credit unions will use their tax-exempt status to outbid them for government deposits and push banks out of the market.
"To have credit unions step in tax free will make it very tough for us," said Rod Jensen, president of $40 million-asset Bank of Star Valley in Afton. "I'd just love everybody to play the same game."
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