Banks/Credit Unions
I’m often asked, “Are you for banks or credit unions?” Like most Utahns, I answer that question with a “yes.” It isn’t an either/or proposition. I have accounts at both types of financial institutions and I value both. Also like most Utahns, I tire of the bank/credit union bloodbaths. The rhetoric on these issues often is overblown and incorrect.
Legislative bodies, though, were designed to deal with tough, frustrating issues. So, into those choppy waters, I take this blog.
I will vote for HJR 1 (Financial Institutions Task Force Resolution) and will explain why. In doing so, I’m sure to tick off both warring camps, but hopefully my reasoning will make sense to others.
Credit Unions are vibrant institutions. No one would argue they are static. Some of the changes, such as the types of services provided and the field of membership (meaning, who can join the credit union), take credit unions into new economic arenas. I personally think many of these changes represent natural progression and are good. However, the financial arena is highly regulated. That being the case, the regulatory environment must treat all institutions equally. Therefore, it is necessary to determine how best to address the expanded arenas of credit union service.
The Utah legislature examined the expanding role of credit unions in 2003. Part of that examination was referred to a 2-year task force for further study. Specifically, the task force was to determine whether state credit unions should pay income tax. Much changed during those two years, including (1) several large credit unions moved from a state charter to a federal charter and (2) a federal court determined that the field of membership of one Utah federally-chartered credit union was too expansive. These developments place the issue in the hands of Congress.
HJR 1 encourages Congress to bring the issue to resolution – so that the institutions might be regulated in an even-handed manner and, hopefully, so that there might be some resolution to the issue. Also, to clear up an item of confusion, HJR 1 does not impose a tax on credit unions.
Legislative bodies, though, were designed to deal with tough, frustrating issues. So, into those choppy waters, I take this blog.
I will vote for HJR 1 (Financial Institutions Task Force Resolution) and will explain why. In doing so, I’m sure to tick off both warring camps, but hopefully my reasoning will make sense to others.
Credit Unions are vibrant institutions. No one would argue they are static. Some of the changes, such as the types of services provided and the field of membership (meaning, who can join the credit union), take credit unions into new economic arenas. I personally think many of these changes represent natural progression and are good. However, the financial arena is highly regulated. That being the case, the regulatory environment must treat all institutions equally. Therefore, it is necessary to determine how best to address the expanded arenas of credit union service.
The Utah legislature examined the expanding role of credit unions in 2003. Part of that examination was referred to a 2-year task force for further study. Specifically, the task force was to determine whether state credit unions should pay income tax. Much changed during those two years, including (1) several large credit unions moved from a state charter to a federal charter and (2) a federal court determined that the field of membership of one Utah federally-chartered credit union was too expansive. These developments place the issue in the hands of Congress.
HJR 1 encourages Congress to bring the issue to resolution – so that the institutions might be regulated in an even-handed manner and, hopefully, so that there might be some resolution to the issue. Also, to clear up an item of confusion, HJR 1 does not impose a tax on credit unions.
posted by steve u. at 1/19/2005
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3 Comments:
Steve,
Thanks for bringing up this issue. I know this has become frustrating to deal with on a regular basis. But I wanted to make a few points just on my causes behalf.
I think it was smart of the legislature to refer the issue to a 2-year task force. To make sure I understood what Task Forces do I looked it up in a Legislative Dictionary: A legislative committee authorized by legislative leadership to study a specific subject for a specified period of time. It concerns me that we are basing new legislation or proposals to congress on a 2-year task force that met only twice during those two years with a final meeting just before the deadline. Secondly it is concerning that banks and credit unions were never asked to make a presentation to the task force explaining their position. I am not sure if this task force actually fits the definition of a Task Force.
What I believe this real struggle is about—is power. It is not about who is being taxed or not, it is not about who makes more revenue. It is all about power. For once people are being asked to choose. That takes power away from those who have had it in the past. The banks should understand that this competition is good for our economy.
Here is an example of the banks going through the same thing:
Currently banks are being barred from also being real estate brokerages. Banks have been pushing for some time now to overturn this. Brokerages want congress to uphold this law feeling it would be unfair to have someone who could offer all the services they do and also be a financial institution. The ABA has received many attacks from brokerages like Coldwell Banker. In response to these attacks the ABA has released the following statement: “The ABA supports an end to that prohibition, arguing that allowing banks into the brokerage business would increase competition, provide consumers more choice and enable banks to round out their services”
I love how the ABA puts it, “…provide consumers more choices and enable banks to round out their services.”
The tax-exempt status of the credit unions, may give some competitive edge in some areas, but it is this competitive edge that (in the words of the ABA), “…provides consumers more choices…”
I appreciate Steve putting together this blog and I hope others will find it. I would like to correct a couple of statements made by the earlier respondent. If you go to the Legislative Website and look up the Financial Institutions Task Force you will see that the task force met 7 time over the two years. There were several meetings toward the end of the task force to draft a report and legislation.
Second the task force did allow both groups of financial institutions to submit written reports for the task force to review and I think if you review the minutes you will see that representatives from both institutions addressed the task force.
Finally the thing I find most frustrating are the misleading ads being sponsored by the credit unions. The task force resolution does not and could not increase taxes on credit unions. This is not an attack on "your" credit union. This resolution is a culmination of two years research and hard work. This resolution is not a bank resolution. If the banks had gotten the bill they wanted I would better understand the credit unions feeling threatened. However the task force listened to both sides, outside third parties and they drafted a piece of legislation that neither side would have drafted on their own. The credit unions had two years to make their case. I would challenge anyone to please point out where there is an incorrect statement in the resolution. I applaud the task force chairs for finding a reasonable way to present their findings and hopefully putting an end to this debate at the state level for several years to come.
Representative Urquhart,
Your perspective on this issue echos my sentiments. I too feel it is not necessary to side with one group or the other. It is in all of Utah's best interest for both banks and credit unions to remain successful.
I appreciate your willingness to tackle such an overblown and controversial issue in your blog. I get the impression that several legislators are shirking away from the problem because it has been a difficult, divisive, and lengthy debate thus far. Your attitude is exemplary; the very reason we have legislative bodies is to solve difficult and inhibiting problems to enable progress in our communities.
Though I don't necessarily care to defend banks, I would like to express how irked I have been by the credit unions' negative radio and television commercials. I respect their wishes to defend their current tax-exempt status, but the advertisements are misleading and inflamatory.
The way I see it, these commercials miss the point entirely. As a credit union member, when I heard the commercials I felt as though someone was trying to scare me by telling me that the resolution would create a new tax that would harm me personally, which is completely innaccurate.
The truth is HJR 1 is basically putting an end to the battle here in Utah by asking Congress to deal with something they've let get out of control. In my opinion, HJR 1 is something everyone here should welcome with open arms.
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