CUNA Deflects Bankers' 'Deceptive Rhetoric'
Cheney meets with Treasury to set the record straight.
The corporate credit union-related problems credit unions are paying for today—with their own money, not taxpayers’—have nothing to do with imprudent lending standards, as claimed by the Independent Community Bankers of America (ICBA).
Such charges are a thinly veiled attempt by bankers to use the corporate situation to further their anti-credit union agenda.
That’s the gist of a letter to Treasury Secretary Timothy Geithner that CUNA President/CEO Bill Cheney delivered during a meeting with Michael Barr, the Treasury Department’s assistant secretary for financial institutions.
Cheney points out that ICBA’s arguments rely on inaccuracies and falsehoods.
The CUNA president informs Geithner that “the corporate credit union situation was caused by highly rated investments made by the corporate credit unions going sour during the most significant financial crisis of the last 80 years.
“Corporate credit unions invested natural person credit union money in the same type of asset-backed securities that have become infamous during this crisis. The problems that credit unions are paying for today—with their own money, not taxpayer money—have nothing to do with imprudent lending standards."
Cheney’s letter notes credit unions’ longstanding history of making loans, including business loans, more prudently than community banks. He cites the fact that since 1997, the loss rate on credit union business loans has averaged only 0.15% compared to 0.82% at banks.
Even in the recent recession, when losses have increased across the board, 2009 credit union business loan losses (0.6%) were only one-fourth the similar losses at banks (2.4%), Cheney explains.
Cheney also refutes ICBA’s claims that the NCUA action related to the legacy assets of the conserved corporate credit unions amounts to a taxpayer bailout.
“This is simply not true,” Cheney writes. “While the bonds to be issued by NCUA have the full faith and credit of the U.S. government, credit unions—not taxpayers—will pay all of the costs.
“In contrast, according to an SNL Financial analysis of community bank recipients of TARP funds, over 621 banks—most under $10 billion in total assets—still owe the taxpayer $50 billion. More than 100 of these banks are behind on their payments to Treasury. Taxpayers will very likely be left on the hook for some of the bailout these community banks have received.”
“Deceptive rhetoric” is what Cheney calls ICBA’s claims that the corporate credit union situation should “cast doubts on the wisdom and the fairness of their tax-exempt status.”
“The value both credit union members and nonmembers receive because credit unions are tax exempt far outweighs the ‘cost’ of the exemption to the government,” Cheney writes, citing the $7.5 billion annual benefit credit unions provide the nation’s 93 million members.
“Further, the tax exemption helps to ensure consumers have choices beyond commercial banks in the financial marketplace.”