Banks battle with credit unions as National Credit Union Day approaches

CNY Business Journal (1996+), Oct 14, 1996 by Apte, Vivek

Credit-union regulations

In terms of whom they can lend to, credit unions argue that there is far more regulation of credit-union lending than there is of bank lending. Credit unions cannot do corporate lending, for example, or administer municipal funds. Ron Ehrenreich, treasurer of Syracuse Cooperative FCU in Syracuse, argues that credit-union lending is geared toward keeping money within a community, "rather than sending it to some bloated plutocracy and to corporations that send jobs overseas." To further his point, Ehrenreich adds, "If banks had the same level of regulation as the credit unions, we would never have had the savings-and-loan debacle of the '80s."

And if banks feel that the playing field is uneven, Ehrenreich says, "they should join us. It would be great to have a level playing field. They should not be able to compensate their board of directors. And if they want to be not-for-profit, that would be great. I think financial institutions should be not-for-profit."

Ehrenreich voices the ideological commitment expressed by many credit-union supporters. Credit unions have steadily fought, and won, bankers' lawsuits ever since 1934, when U.S. credit unions were first formed. The Credit Union National Association (CUNA) recently urged its members to help "finance the effort to prevail against banker attacks," by suggesting that they donate six cents per year for each of their members.

The banks versus credit-unions battle shows no signs of slowing. Although credit unions don't have nearly as much money to wage the fight, they have many millions mare owners than banks do. NYSBA's Smith acknowledges that changing credit unions to become tax-paying institutions isn't going to be easy. "It's an uphill battle," he says, "but you have to start somewhere." He notes that credit unions in Canada are no longer tax-free. And he notes also that U.S. savings-and-loan institutions were once tax-exempt, but stopped being so when the courts ruled that they weren't true nonprofit organizations.