So you would have rather had us fail than do what we had to, to survive?

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No, not fail, but a search for additional SEG's would have been way more acceptable, especially if those SEG's fit into the target market that CU's were created to assist.

By the way, you may be citing a perfect example of the problem, in that silicon valley high-tech company employees are not likely to not have access to banking services and beyond that, they are strictly high-paid employees. So why create a CU for those people, given CU industry goals? Was your CU formed specifically for that type of SEG or did you start out working with CU type SEG's (generally lower paid employee groups with limited access to banking services)?

And It Goes On and On

From a July 12th article

"The National Credit Union Administration wants to make it easier for credit unions to make SBA loans.

The NCUA has proposed a regulation that would allow federally chartered credit unions to follow the SBA's collateral and security requirements instead of the more-restrictive requirements that usually apply to business loans made by credit unions.

"This rule will complete a comprehensive two-year effort to remove barriers that were preventing credit unions from making more SBA loans," says Debbie Matz, the NCUA board's liaison to the SBA.

In February 2003, the SBA made all credit unions eligible to participate in its government-guaranteed loan programs. Since then, the number of credit unions making SBA loans has doubled to 150, but that's just a fraction of the 1,600 credit unions making business loans.

More credit unions will make SBA loans under the new NCUA regulation, SBA Administrator Hector Barreto says. "

Oh, now small businesses cannot find a bank to make them an SBA loan? I don't think so as SBA loans are bread and butter to some banks. Those banks are going to have to survive on water alone.

Now even the interest income generated through Small Business Administration loans will not be taxed at the CU level, but the interest paid to the CU will be deductible for the paying business.

Is this Socialism, Fascism or Communism? It is a free ride for some people while others need to pay more tax to support those people, so it sure isn't Capitalism.

So, what is the asset size of your CU at this time?

Quote:

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Should the enlisted men and women be able to have membership in the Navy's credit union (THE largest in the country), but not the officers because they make more money?

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The bulk of clients at Navy Fed are low or moderate income men and women. Most of the folks in the service are not "high income" and darned few are middle income. Navy Fed still serves a market that CU's were chartered to serve and I have no problem with them despite the size. Looking at their numbers in comparison to an Outstanding CRA bank, they can hold their own quite easily.

Can a CU in sillacone valley say the same? Can I spell sillacone? (ok that's another question and probably a "no" answer to both)

I'll second that - Go Navy. Also, the Navy CU does not have branches located on some of the most expensive real estate in the World, as TISA's CU probably does.

Once again, here's my experience (short time CU employment):

I recommended a SEG - 300 employees making burritos all day - close to minimum wage, primarily hispanic - located in a not so great part of the Southern California area. They were not affiliated with any CU - needs were banking services, car loans, etc. I knew the owners who asked me to see if I could assist their employees with banking needs, especially car loans. Actually, they all needed deceit cars as it was not an area to be in after dark - Compton - for those that know the area.

I was informed that a SEG like that was way too much trouble and the turnover was way too high. Car loans would go south and the low wages would not add any value to the CU as far as balances or income.

I lived through that sort of attitude for about one year, while being pay a huge amount of money. Life is way too short to live a lie for at least 8 hours a day.

Therefore, I experienced the CU bias toward the people that they were created to serve. I wanted to participate in the effort to serve those in need, but CU’s talk the talk, but they don’t walk the walk.

My BS meter is indicating a very high level.

First, SEG's always include everyone that works for the sponsor company - I know that, you know that.

Second, to say that low income includes more people based on the fact that you are in a very high income area is nonsensical at the extreme, given the original CU objective of serving the under-banked and people of limited means.

You are probably thinking about a new branch is Beverly Hills or Bel Air to help those people with the lack of access to banking.

Tisa, I now believe that you work for a primary target institution that has a classic primary target attitude.

Andy - stay off my posts

Tisa, a couple of points that should be covered:

First, while you say that you'd have to take all of the employees of the Burrito Company and therefore would get some rich with the poor so there's no value in this. The majority of folks that would be doing business with you from that entity would be poor. No one says you can't bank a mix, but your stated CU goal is to serve those who are underserved. The execs are not underserved, nor are most folks in Silicon valley.

If you had to face the CRA Service test, let me give you a quick picture of SVCU. You have 100% of your branches located in middle and upper income tracts. 0% in low or moderate tracts. Actually a full 75% are in upper income tracts with surrounding tracts at the same or similar (mid and upper) income levels. The score for this type of set up on the service test? Needs to improve most likely.

You say that your figure for low income is "just higher here". Actually the figure for low and moderate income people and geographies throughout the nation is variable. Your figure is probably higher than Oregon, and Hawaii's is probably higher than yours. My figures in rural Alaska could be as high or higher than yours in some cases, who knows. The real issue is that there IS AN ASSIGNED INCOME LEVEL that defines LMI people within your geographies. We don't have to compare each others dollar amounts, we can instead talk apples to apples by saying that % of our clients are "low income" or whatever figure we're chatting about on a very factual basis.

Your financial institution seems to be focused on a different level of income bracket than is being discussed. You don't offer used car loans below $5M, you require $50 min balance in a savings account to keep it open, you offer Estate and Fiancial Planning, Trust services, etc. These are not the services that LMI people in your geographies need Tisa. Your CU is exactly the type of CU that I'd like to see go through a CRA test to prove they are serving the population they say they are.

I'd guess you'd fail that unfortunately, but if not, if you're everything you say you are, why would you object to a CRA test? Put your money where your mouth is and shut me up...show me how you serve your community and I'll show you how I do, given an apples to apples test...the CRA.

It appears to me that CU's keep repeating some old ideas about why they were formed and the clientèle they were set up to serve. This is what is taught their employees and what is disseminated to the public.

What seems to be missing from this mantra is that they have worked very hard to pass legislation that completely eliminates the original ideology. In recent years the original purpose of a CU has been legislated away in order to allow SEG expansion. The old arguments are not applicable anymore and are just a PR manipulation

The frustration is the CU industry is trying to have it both ways. Be a Bank under the guise of a CU that promotes itself using outdated and invalid ideological rhetoric.

It has nothing to do with the many fine people employed by CU's that work very hard every day to serve their customers. So Tisa I hope you, and any other CU employee, don't take any of this personally. We're just trying to convert you, and several million others into seeing the light.

I know it is difficult for CU employees to think that bankers aren't after them. It is simply NOT true! Bankers only want CU's to operate like CU's or pay taxes and follow Fed. regulations like banks. There is nothing wrong with CU's being run for their original purpose.

Tisa, please understand that the debate is not about asset size, it's about the reason you have the special concessions you do. You don't pay taxes because you're supposed to serve LMI people. For that you get a break. You're also supposed to offer a limited product line, the products being those that serve LMI people. For that you get the break.

I don't care if a CU is $100MM in assets or $40 billion. If they are $40 billion and they can prove they serve the market they're intended to serve, more power to them!

Credit unions that serve niche markets survive despite the clients possible requests for "additional services". They survive because they work with a limited enough group of people who learn to understand the value of their CU and the value the CU brings to them, despite the product line. As they grow out of your services (a good CU) they tend to move some of their relationship, but still maintain the basic products with CU's because of that value you bring.

I didn't mean to attack your CU specifically. When you touted it as one of the good guys I just wanted to help you understand some of the information you were posting. I don't want to "win" or lose. I'd like to see you and I on the same basis, showing the public how we do at meeting the needs of LMI populations. You posted some information that was skewed and I wanted to correct it and show in a very visual manner what I was saying about CRA and the communities you serve. I'm sorry if I offended. I didn't post about other CU's or banks because they didn't post in regards to how they were doing as you did.

You can ask a few BOL'ers who've asked me to tell them what I think their weak points are...I haven't held back. Some of them had goober in their files and some had strong points as I'm sure you do, but it's not apparent to the naked eye because we're not on level playing fields.

I didn't mean to offend you, but if I've done so, I am sorry.

Well said, Dawnie.

Perhaps size doesn't matter, but one can bet that large and huge CU's are not even interested in serving the intended group that were originally deserving of a tax break.

The problem is at the NCUA level. For example, the NCUA is currently asking Congress to allow them to cash checks and provide wire transfer and money transfer services to non-members within their field of membership - meaning that they want CU to be authorized to conduct business with non-members of the CU.

The NCUA is also recommending:

• Increase investment limit from 1% to 3% in CUSO's (for profit ventures)
• Exempt Federal CU's from SEC's broker-dealer and investment advisor registration requirements.

So, the NCUA is on-board and stepping over the line, big time.

IMHO - if a particular credit union makes small business loans, then it should be subject to CRA. This means the small institution test for CU's under $250MM in assets that make business loans, and large institution test along with Data Reporting for CU's $250MM and above and make business loans.

Don't want to be subject to CRA? Don't make business loans.

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are we as bankers powerless to stop on the recommendations that the NCUA are asking to take place?

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Darn near. The ABA has a full court press on this and has for some time. The problem is, we may be seen as bellyachers who don't like the competition. Making negative changes to CUs would be seen as very "un-consumer friendly" and not good, especially during an election year. And when banks are making record profits it is even harder.

Paragon...are we as bankers powerless to stop on the recommendations that the NCUA are asking to take place?

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As Andy stated, we are close to powerless. We may as well let them run over us as recommendations at the NCUA level, as the regulator, carry a lot of weight, as would recommendations by the OCC or FDIC.

The power of CU's is vested in the 72 million members. They are willing to contact the political people as needed, they want a deal on banking products and services and they know, as well as us, that the 'deal' comes from a tax advantage.

"They" means "us" with more than a few bankers belong to CU's. We all look for deals, discounts, free stuff, etc - practically everyday. It appears to be human to do so and avoiding tax at any level seems to make a lot of us happy campers. Besides, it's legal tax avoidance in the case of CU membership.

One additional point - a ton of CUs’ maintain insurance coverage on deposits, in excess of $100,000 - based on the fact that they have lots of customers that need and desire that level of coverage. It's expensive for CU's, as it would be for bank's, but since CU's avoid around a 37% hit on income (no tax), there is plenty of revenue to go around to pay for yet another member perk. Just think, CU's regularly go for the extra insurance - over $100,000 per customer - based on member need - well, is that not special, given the original purpose of CU's?

Let's face it, CU's are out to take over the banking world and all the taxes that banks pay at this time will disappear. That tax base will have to be replaced, partially by members of CU's as they pay higher taxes in other areas of life. It's almost a fools game (there is no free lunch) as CU's grow and take over more and more banking territory. Someone must pay the taxes needed to run this country.

I am sure that CU's would take a great hit to suddenly start paying taxes. Maybe Congress would be more willing to gradually start taxing CU's. Ist year...5%...2nd year 10 % and on and on until they are inline with bank's tax requirements. It probably won't happen. It just seems like a lot of money out there that could be used to offset the national debt and make the playing field more level.

Good idea, but Congress goes with the votes and CU's have members that are willing to barrage Congress with emails, etc to make sure that a tax does not happen.

My Prediction:
I believe that there is no stopping the CU movement. Years from now, we will end up with a few Corporate banks (huge banks) and a bunch of CU’s servicing the small business and retail environments. Small and mid-size banks will be a memory as they will be run over by the tax advantaged CU movement. On the for-profit side, I’d compare that scenario to WalMart coming to your town.

Most of the posters here will retire or join the CU movement as relatively few banking jobs will exist in the future.

I think the way to attack CU's is to force CRA on them. We know politically that we're not going to get taxes through, but who can argue that making their efforts to serve the LMI populations public isn't of value? Personally I think that step should be the first, and when we can publically show how bad they're doing (and I know we can for many) we then talk turkey about the balance of the issues.

(If this passes and you're a behemooth credit union I'm available for hire...NOT CHEEP)

From ABA Newsbytes:

WEST COAST CU SPREADS OUT
The National Credit Union Administration this week approved the largest federal community charter ever granted to L.A. Financial Credit Union in Pasadena, Calif. The expanded field of membership allows the credit union to offer its services to anyone who lives, works, worships or attends school in the 4,084 square miles of Los Angeles County, an area about 800 square miles larger than the states of Delaware and Rhode Island combined. It includes both San Clemente and Santa Catalina islands and has a coastline 81 miles long. Los Angeles County's population of 10.1 million also is the largest of any county in the nation, and it exceeds all but eight states. Read more. For more information, contact ABA's Keith Leggett.

Well there you go - it's the NCUA - a government agency that is on board. By the way, Pasadena is a wonderful area of LA, very expensive real estate with more than a few CU's headquartered in that immediate area. One needs to wonder what the future of banking will be in 20-30 years against this tax-advantaged competition.

There are a number of CU radio ads being played in LA Orange and San Diego counties. Every one of them speaks of providing the kinds of "BANKING" services you don't get at your Bank. They also state it doesn't matter where you work or live you can join.

I think Dawnie is right. They need to take the CRA test and I'm sure it frightens them to death thinking about the possibilities of having to do so.

Its time we as banker start the grass roots campaign and start asking our legislative folks to get involved. No one is bugging them and this issue has a low priority. Lets begin to make it an issue ourselves as we can no longer count on ABA or hope someone else is doing something about it.

We start with calling and writting our respective congressional people asking why the expansion of markets and services allowed by credit unions does not bring them under CRA requirements. Here is a hugh financial industry duplicating what banks do and is currently exempted. Why is that?

Second Its time to contact some non profit organizations and ask them why they are excluding credit unions from their oversight.

There are several thousand people on this board. Anyone interested in organizing a campaign. I'll set up a web site and e-mail for this purpose if anyone is interested.