Academic journal article ABA Banking Journal

Sorry, We're Not Contrite

Academic journal article ABA Banking Journal

Sorry, We're Not Contrite

Article excerpt

Sorry, we're not contrite

Shame on banks. Bashing the little guy again. That's the tone of the letters we received from credit unions in response to our April cover story. The story expressed bankers' frustration over having to compete on unequal terms with credit unions.

The way we see it, though, banks have every right to point out the disparity of treatment between the two groups of competitors. Perhaps some of our letter writers are from small credit unions, managed by volunteers and offering only limited deposit and loan services. If so, they would do better to direct their complaints to members of their own industry. It is they who are forcing the issue by expanding aggressively from their traditional role, all the while clinging to their favored tax treatment, bestowed under much different circumstances. They can't have it both ways.

It may be true that the credit union industry in total is but a fraction of banking's size. Yet it is equally true that for community banks, the majority of banks by number, credit unions are significant competitors that don't have to play by the same rules. The whole truth. One writer accused us of printing the half-truth about credit unions. We regret if only half the story was told. Fact is, two reports on credit unions prepared by the ABA since our cover story appeared present an even stronger case for banks.

In one report, Tax Legislative Representative Linda Rearick makes several cogent points. Among them:

. One of the most popular methods for credit unions to expand their field of membership is to include additional employer groups (employees of a particular company), even though the groups have nothing in common with each other or with the group that originally formed the credit union. Credit Union Magazine (October 1988) reported that 51% of all credit unions do this--more than double the 1981 figure of 24%. …

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