CEO of Long Island's largest credit unions reacts to complaint of

Long Island Business News, Oct 3, 2003 by Ben Abelson

When it comes to the complaint among banks that credit unions have unfair competitive advantages, Bob Allen is anything but diplomatic.

"If their main concern about credit unions is them having such a tremendous advantage, and being so much better, as they encourage credit unions to convert to banks - which they do - why don't they themselves convert to credit unions?"

It's an interesting take on the age-old battle between the American Banker's Association and the credit union industry. In his role for the past 15 years as president and CEO of Teacher's Federal Credit Union, Long Island's largest in terms of assets ($1.7 billion) and membership, Allen has had plenty of time to think about the two industries' relationships.

And if the last three decades of credit union expansion are any indication, Allen has picked the winning side in what he characterized as a modern day David vs. Goliath battle royale. (The ABA, the banking industry's trade association, has lost nearly every legal and legislative challenge it's made to try and limit the growing expansion of power by federally chartered credit unions.)

The issue, according to ABA spokeswoman Charlotte Birch, isn't so simple. While mutually-owned banks could indeed convert to credit unions, this type of institution only makes up about 8 percent of the nation's 9000 some-odd banks. For other banks, their structure is simply too complex to ever contemplate conversion into credit unions.

It's interesting to note, however, that significantly more credit unions have converted into mutually-owned banks in the past decade than vice-versa.

Born in Brooklyn, Allen lived in the Bronx and Queens before his parents moved to Nassau County. He met his future wife at a friend's New Year's Eve party when he was a senior in high school and married her four years later.

While working full-time at the Household Finance Corp., Allen earned an associate's degree from Queensborough Community College, and later received a bachelor's in finance from SUNY Old Westbury. He began in the credit union industry with the Pan-American Airlines Credit Union at John F. Kennedy International Airport in the 1970s, and climbed his way up the ladder at several other institutions. By the mid-1980s he was the CEO of the United Nation's Credit Union. He joined Teachers in 1988.

The one constancy through that entire period, he says, has been the seemingly endless fight with the banking industry. The industry has long charged that credit unions, untaxed not-for-profit cooperatives that offer many of the same consumer services as banks, have a grossly unfair competitive advantage.

Like other aspects of his life, the issue is one that Allen tackles with a refreshingly honest, down-to-earth, straight-talking approach.

"It's always been banks complaining about the expansion of credit union powers. Look at banks in general, the nature of them. Banks don't want real estate people doing loans, but banks want to sell real estate, they want to move into that side of the business. Banks don't want insurance companies offering the services that the banks offer, but the banks want to sell insurance. Their nature is to spread out, but on a one-way street. They want to go into what other people are doing and not vice-versa."

And while credit unions, most notably Nassau County's Bethpage Federal, have revised their charters to expand their potential membership to entire geographic areas, Allen has said Teachers Federal will continue to remain committed to its core member groups.

A point to consider, of course, is that between these groups Teachers Federal has gained exposure to almost the entire population of Suffolk County.

Its namesake membership, the educational system, gives it access to all teachers, students, and school employees in the county - and all of their immediate families. Additionally, the credit union counts the employees and their relatives of some 40-odd other companies and organizations among its members - including Suffolk County's three Internal Revenue Service campuses, workers at five area hospitals, and staff at Brookhaven National Laboratory and Cold Spring Harbor Laboratory. The credit union's 138,000 current members represent about 10 percent of Suffolk County's population.

While the credit union's rate of growth is intrinsically limited by its ability to raise and maintain capital (unlike banks, it cannot raise capital through the sale of stock), that doesn't mean that Teachers Federal doesn't have expansion plans.

Already, the institution has established an outreach program in an area that banks long-ago forsook in their quest for ever-higher profits - the public school system. Teachers Federal currently has student-run branches operating in several area high schools, and runs financial education programs throughout the county's school system. While the idea of education is in line with the institution's nonprofit structure - it also plays a valuable role in customer retention, Allen notes.

"Most of them [banks], many years ago, found that economically the school systems were not a profit center for them."