THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, February 15, 1997 TAG: 9702150017
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: OPINION
SOURCE: By WALTER C. AYERS
LENGTH: 61 lines
The Feb. 3 edition of Business Weekly published an opinion column written by Robert Hawkins Jr., the CEO of a San Francisco-based ``think tank.'' Unfortunately, Mr. Hawkins' ``thinking'' is completely at odds with the facts. Allow me to set the record straight.
First, Mr. Hawkins alleges that ``credit unions are fighting for their very existence'' Such a statement is ridiculous given the credit-union industry's annual growth rate of 12 percent, compared to the banking industry's annual growth in assets of just 5 percent.
Second, Mr. Hawkins says the credit-union industry is relatively small size compared to banks make for a ``David and Goliath'' struggle. But the fact is that in many local markets, Virginia included, very large credit unions often compete for the same customers against much smaller banks. Navy Federal Credit Union, for example, boasts $8 billion in assets. In contrast, 95 percent of Virginia banks have less that $1 billion in assets.
He also claims that credit unions focus primarily on what he chooses to call ``little people.'' Wrong again. The average income of credit-union members is $42,050, significantly higher than the average income of about $36,740 for all U.S. households. It would appear that many credit unions have in fact used the common-bond concept to hand pick whom they want to serve and in doing so have left out those so-called ``little people.'' Banks made 26 percent of their home loans in poor census tracts last year vs. the credit unions' 21 percent.
So what is the banking industry's real objective when it comes to credit unions? It's simply to suggest that credit unions be held to the law. The banking industry has no quarrel with the thousands of credit unions that are in compliance with federal laws limiting their membership and which focus on people of ``small means,'' as credit unions were chartered to do.
A federal court ruled recently that the credit-union industry's regulator - and by extension many credit unions - broke the law by allowing hundred or even thousands of unrelated groups to be members of the same credit union. The court said that a credit union must stick to a single common bond, such as employment by the same company.
It is important to stop common-bond abuses because credit unions are subsidized by taxpayer dollars. That subsidy is expected to reach $1 billion in the next few years. Ironically, Mr. Hawkins' column appeared next to an article dealing with ``corporate welfare.'' That's a wholly appropriate description for many credit unions today which serve the general public with the same services as banks, but continue to receive a tax subsidy.
To the thousands of credit unions that remain true to their charter by serving people of small means with a real common bond, let me be very clear: Your favored tax and regulatory status is deserved.
But the U.S. Court of Appeals was right when it blew the whistle on certain other credit unions that have ignored the common bond concept and now operate like any other federally insured depository institution. Virginia banks paid $1 billion in federal income taxes over the past five years. Credit unions paid zero. Why should taxpayers continue to subsidize credit unions that no longer seem interested in the very purpose for which their tax exemption was granted in the first place? MEMO: Walter C. Ayers is executive vice president of the Virginia
Bankers Association.