WASHINGTON–In response to a number of recent attacks by bankers on the credit union tax exemption, NAFCU President Dan Berger questioned what banks are doing to ensure they don’t cause another recession, and called the bank strategy of “making credit unions the scapegoat” transparent and hollow.
Writing in American Banker, Berger said, “For most companies, $174 billion would blow past any previously set revenue benchmarks and place them well on their way to becoming one of America’s most successful firms. But for Wall Street banks, that is the total amount they shelled out in fines and settlement fees to help make amends for their role in the financial crisis. To put that number into greater perspective, it is nearly twice the asset size of America’s largest credit union.”
Yet despite that, bank lobbyists “have been taking to the pulpit this Congress to raise concern over credit unions’ growth. Not fines. Not egregious offenses of trust. But growth.”
‘Hard to Understand’
“As nonprofit, member-owned financial institutions, credit unions successfully serve 114 million consumers across the country,” wrote Berger. “Shortly after the financial crash, credit unions gained attention for being the better financial alternative to the big banks, and rightfully so. Their growth, to put it simply, is the result of better service, better rates and adhering to a better mission. But the banks have grown too, despite claims of suffering from over-regulation. Their growth has been so tremendous, it is hard to understand why some credit unions are being scrutinized for also growing their customer base and asset size, sparking debate over what makes a credit union a credit union.
“…Considering Americans still have not fully recovered from an economic crash big banks created — why are the bank trade groups making noise now? Who gains from their argument?” Berger continued. “Simple. They do. By creating less competition with credit unions and other small financial institutions.”
FOM Evolution
Berger stated that moves by the NCUA to reform FOM laws have been done to keep pace with changes in state laws, technology and the financial services industry.
“While these changes will allow credit unions to grow, there is nothing inherently wrong with growth, nor are they the only financial institutions that have grown over the years. Their counterparts in the banking industry have grown larger and more profitable than ever before,” Berger wrote. “The fact remains, a ‘large’ credit union still pales in comparison to the asset size of large banks.
“The asset sizes of JPMorgan, Wells Fargo, Bank of America and Citigroup are not only well over 20 times that of our nation’s largest credit union, but each one of these individual banks holds more assets than the entire credit union industry combined.
“More so, a single credit union does not tell the tale of an entire industry. Before passage of the Dodd-Frank Act, there were more than 10,000 credit unions in operation,” he continued. “As a result of the regulatory burdens and costs associated with the law, consolidation ensued throughout the financial services sector. While some credit unions may have grown, a mere 5% hold more than $1 billion in assets, with the vast majority holding less than $500 million in total assets. This is far from the excessive largess some would like to propagate.
‘True to Mission’
“While detractors will continue to beat the drum, credit unions have held true to their core mission as nonprofit financial institutions seeking to deliver safe, affordable products and services to their membership base. Credit unions do not waver in their passion and desire to provide their members with an environment that puts people over profit.”
In conclusion, Berger wrote, “If the economy plunges into another 2008-like crisis, I can guarantee it will not be the doing of the credit union industry. What are bank lobbyists doing to ensure their industry does not repeat past mistakes? Right now, it looks like they’re focused on making credit unions the scapegoat — a strategy as transparent as it is hollow.”