Academic journal article ABA Banking Journal

Against All Odds

Academic journal article ABA Banking Journal

Against All Odds

Article excerpt

What chances would the oddsmakers give for banks to prevail over credit unions? "Long shot" comes to mind.

But then they probably wouldn't have given Lindbergh much chance either, or Sir Edmund Hillary (or, for that matter, banks to win three straight court decisions over the insurance agents).

The same sort of pluck that we admire in a person who refuses to be discouraged by seemingly insurmountable obstacles is just what will be needed for banks to succeed in leveling the playing field between them and credit unions. Making the job even tougher is that bankers won't get much admiration for their trouble. In fact, they'll have to endure the slings and arrows of outraged supporters of the credit union "movement."

The refrain might go something like this: "How dare powerful, rich, privileged banks question the right of small, volunteer-run credit unions to serve the working man! If it weren't for nonprofit, member-owned credit unions, millions of working-class people wouldn't be able to afford financial services because of the high prices banks charge."

Starting to stick in your craw? You can bet that's just a taste of what the credit union defenders will lob at you from their well-entrenched mortars.

But it's all a smoke screen. Credit unions were not created by the Almighty. They are not invincible. Their arguments, some of which are hinted at above, are full of holes, which even their own research confirms.

Credit unions' great strengths are their populist image and their ability to offer very attractive pricing and rates thanks largely to their tax-exempt status. By skillfully striking an "Aw shucks, folks, we're just little guys" pose, numerous large aggressive credit unions have grown into full-service financial institutions with many thousands of customers and well-paid professional staffs.

There are still credit unions that fit the original concept of a small group of people closely bound by a common interest who are willing to pool funds to lend to each other. Banks have no quarrel with such organizations. But for the rest, the credit union movement has grown to become a $300 billion business. Businesses pay taxes. And companies within the same field should play by the same rules. Many credit unions function like retail banks and should be treated the same.

As indicated at the outset, plenty of people will tell you that banks can't beat the credit unions--they're too popular with consumers and with Congress. …

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