ACB leadership focuses on credit union competition

Northwestern Financial Review, Nov 15-Nov 30, 2006

The leaders of America's Community Bankers focused on credit union competition as they outlined goals for tho coming year. Mark Macomber, president and CEO of Litchfield Bancorp., Litchfield, Conn., became the association's 2006-2007 chairman, taking the gavel from Weller Meyer, chairman, president and CEO of Acacia Federal Savings Bank, Falls Church, Va. They both addressed bankers attending the ACB annual convention last month in San Diego.

"I'm a mutual community banker," commented Macomber. Tm part of the industry that lost our tax exemption more than 40 years ago because Congress felt that we were like other banks and should pay taxes. And it didn't hurt us. Mutual community banks have thrived since then.

"We serve our customers and communities. . .and we pay a lot of taxes. As an industry we paid over $800 million last year.

"So imagine my reaction when the Treasury Department's Emil Henry told a bunch of credit unions that the administration supports the credit unions' tax exemption because their business model and organizational structures are different from banks, even though they're in the banking business."

Macomber said he was dismayed.

"Credit unions, particularly the large, complex ones, should step up and pay their fair share of taxes," he said. "Giant credit unions do everything banks do and, through their affiliated service organizations, they do even more.

"And so, to claim that credit unions are somehow different flies in the face of reality. And it sets dangerous political precedents. The continuing expansion of credit union powers further exempts a major U.S. industry from taxation. ... It strengthens the hand of the National Credit Union Administration in over-reaching its authority on the conversion issue."

Macomber referred to a letter he wrote with Steve Swiontek of Gate City Bank in Fargo, N.D., to the Credit Union Times, which said: "It is wrong for a trade association - or a regulator - to oppose the business decisions that credit union leaders make for business reasons... .Unfortunately, the National Credit Union Administration views the freedom to choose the way the former Soviet Union viewed Estonia's decision to leave the Soviet bloc."

Macomber added: "And it's just about as tough to escape the NCUA."

Meyer said progress has been made on credit union competition because of the work of ACB. "Congress has been openly discussing an issue that was only whispered about before. And state officials are also evaluating the local impact of this issue.

"Last November, the House Ways and Means Committee held a hearing on credit union taxation," Meyer continued. "There is only one reason that hearing was held. It was held because ACB had been working with the committee on this issue for two years. For the first time. Congress openly questioned the credit union tax exemption and called on the NCUA to demonstrate how credit unions serve the needs of low and moderate-income customers.

"Credit unions cannot have it both ways," he stated. "They cannot be tax-exempt and bank-like at the same time."

Meyer said regulatory relief, which has been a priority for the organization during recent years, will remain a key issue. Congress passed a regulatory relief bill, but it is not enough, he said. "We will work with the next Congress to eliminate the limits on small business lending, and to increase commercial lending authority for federal savings associations," he said. "We want to reduce the burdens of the Bank secrecy Act, and the Sarbanes Oxley Act. And, we'll seek an exemption from the annual privacy notice requirements."