Credit Unions Are Not Banks!

ALBANY, NY (04/01/2008)(readMedia)-- NYS Credit Union League Responds To Just Released U.S. Treasury Department Proposal

League President/CEO William J. Mellin emphatic – The practices of credit unions and their regulators should be viewed as a model for ensuring the financial safety of all Americans, not as an industry to eliminate.

On behalf of the credit unions of the New York State Credit Union League and the millions of members who have chosen to put their monies in these institutions, I would like to take this opportunity to express my strong misgivings about some of the proposals contained in the Treasury's Blueprint for a Modernized Financial Regulatory Structure. By proposing the elimination of the federal credit union charter and the National Credit Union Administration and by severely restricting the continued viability of state-chartered credit unions, the report represents a radical, imprudent and ultimately counterproductive attempt to eliminate the credit union industry. Both federal and state credit unions across the state will oppose these proposals.

As member-owned, not-for-profit, democratically controlled and volunteer-driven organizations, credit unions represent a distinct financial alternative that members freely elect to join. Members are more satisfied with the services they receive than are bank customers and receive these services in a more cost-effective manner. However, the report suggests that the nation’s regulatory framework would be improved by eliminating these institutions. It is at best perplexing, and at worst gratuitous, that the Treasury Department would advocate the elimination of credit unions in the same report in which it advocates tighter regulation of the mortgage industry. Credit unions do not engage in the type of sub prime lending and rampant loan origination without regard to credit risk that is at the core of the current financial crisis. In fact, far from suggesting doing away with credit unions, the practices of credit unions and their regulators should be viewed as a model for ensuring the financial safety of all Americans.

Another issue considered in the report is the proper balance between federal and state supervision of financial institutions. Credit unions choose whether to charter as a state or a federal entity based on a variety of reasons such as nuanced differences between state and federal charters. Regardless of the reason, the dual chartering system has strengthened and enhanced financial services in the credit union industry by ensuring that credit unions have an optimal amount of choices in which to operate in what is otherwise an extremely stringent regulatory environment.

Finally, the proposal would radically alter the regulatory system. Three distinct regulators would be responsible for one of the following: market stability, business conduct or prudential regulation. There is a concern that these distinctions, no matter how thoughtful they may be in the abstract, will in practice create overlapping bureaucracies, each competing for a share of regulatory oversight and imposing competing demands on credit unions, which are already burdened by ever expanding compliance mandates.

The question of how best to regulate the financial industry to ensure that institutions are both strong and responsive to consumers and members is one of the most important issues confronting the nation today. The decisions we make will have consequences for decades to come. The importance of these issues should not be used as a pretext for eliminating an entire industry, which provides more than 90 million members financial services. Such an attempt is cynical and can and will be opposed by all our members.

The New York State Credit Union League (NYSCUL)has served as the trade association for the state’s credit unions for 91 years. It is the fifth largest league in the country. New York credit unions have assets of more than $39 billion and 4.2 million members. To learn more about the League, visit www.nyscul.org.

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