Magazine article American Banker

FEEDBACK: Another Alternative for Credit Unions

Magazine article American Banker

FEEDBACK: Another Alternative for Credit Unions

Article excerpt

In his Jan. 8 Viewpoint, "A Better Charter Alternative for Credit Unions," Alan D. Theriault recommends rules that would more aggressively promote the conversion of credit unions to banks, citing capital pressures as the reason. But his call for credit unions to give up their charters flies in the face of today's economic realities and public sentiment.

I would note first that the "free movement from charter to charter" that Theriault advocates for credit unions already exists. The National Credit Union Administration's rules already allow credit unions to convert to mutual savings banks, provided clear and adequate disclosures are made to the credit unions' members, which is only fitting since credit unions are owned by their members and it is ultimately the members' decision. Relatively few of the nation's 8,000 credit unions have opted to convert their charters, however, particularly in recent years.

The reasons are clear. Even as the economic downturn has ground on, credit unions' average capital-to-asset ratio is still 10%, a number many banks would envy. (Mr. Theriault's characterization of credit union capital as "decimated" is simply preposterous.) Moreover, credit unions are handling the costs of stabilizing the wholesale, or "corporate," credit union system on their own. No government bailouts needed.

Mr. Theriault's advocacy of bank charters in these times amounts to swimming against the tide. Credit union loan delinquencies and chargeoffs compare far more favorably to banks'. …

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