[Congressional Record Volume 143, Number 44 (Tuesday, April 15, 1997)]
[Extensions of Remarks]
[Page E658]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       IN PRAISE OF CREDIT UNIONS

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                        Tuesday, April 15, 1997

  Mr. KUCINICH. Mr. Speaker, I rise to praise credit unions. Credit 
unions do not charge exorbitant bank fees; they do not have excessive 
account minimums. They make low interest loans, mainly to their members 
in the communities in which they live. Credit unions are run by their 
members, who have a voice in the operation and policies of their credit 
union.
  Small businesses depend on credit unions for those reasons because 
offering credit union membership as a benefit to prospective employees 
is a benefit which workers value.
  Credit unions are very small compared with banks. The average credit 
union has less than $28 million in assets--less than one-sixteenth the 
assets of the average bank. The two largest U.S. banks--Chase and 
Citibank--combined have more assets than all 12,047 credit unions 
combined.
  Credit unions are modest compared to banks. Banks today control 
nearly every dollar in savings--93 percent--and in loans--94 percent--
in the United States.
  Banks overshadow credit unions by market share and profitability, as 
was recently detailed in the March 14, 1997, edition of the American 
Banker, ``Commercial Banks Set $52 Billion Profit Record Last Year, 
FDIC Says.'' I commend it to my colleagues.

               [From the American Banker, Mar. 14, 1997]

  Commercial Banks Set $52 Billion Profit Record Last Year, FDIC Says

                            (By Dean Anason)

       Washington.--The banking industry earned a record $52.4 
     billion last year, although losses on consumer loans 
     continued to grow.
       The Federal Deposit Insurance Corp. said Thursday that the 
     nation's 9,528 commercial banks earned $13.7 billion in the 
     fourth quarter, up 14.5% from the same period a year ago.
       For the year, profits rose 7.5% despite the $650 million 
     banks paid to help rescue the Savings Association Insurance 
     Fund.
       Profits were driven by noninterest income from fees and 
     service charges, which increased 13.5% in 1996 to $93.6 
     billion. Interest income rose to $162.8 billion, but at half 
     the rate of noninterest income.
       Despite the record profits, FDIC Chairman Ricki Helfer 
     described as ``worrisome'' the yearend statistics on consumer 
     loans, particularly credit card loans.
       Net loan losses rose to $15.5 billion, a 27% increase from 
     1995. Credit card loan writeoffs accounted for $9.5 billion 
     of that total.
       ``We have seen both delinquent and noncurrent consumer 
     loans increase at the same time that chargeoffs have risen 
     dramatically,'' Mrs. Helfer said. ``Chargeoff rates are 
     approaching the levels reached in the last recession.''
       Commercial banks wrote off 2.29% of their consumer loans, 
     compared with 1.73% in 1995. Credit card writeoffs amounted 
     to 4.3% in 1996, up from 3.4% the previous year. Writeoffs 
     reached 4.72% in the fourth quarter.
       The doubling of credit card loans in the past four years 
     and rising personal bankruptcy filings only exacerbate 
     concern, Ms. Helfer said.
       Ms. Helfer declined to say whether banks should tighten 
     their credit card lending standards more, but she cautioned 
     that banks must be ``very careful'' in making assumptions 
     about a very unpredictable line of business. Further, she 
     warned against underestimating risk caused by liabilities 
     from credit card loans that have been securitized.
       Not all loan categories performed poorly. Commercial 
     and industrial loans rose 7.3 percent to $710 billion, and 
     real estate loans jumped 5.5 percent to $1.1 trillion.
       Average return on investment approached record levels, 
     rising to 1.19 percent in 1996 from 1.17 percent in 1995. 
     Nearly 70 percent of banks equaled or surpassed the 
     traditional benchmark 1 percent ROA.
       The industry's asset growth slowed for the second year in a 
     row, increasing 6.2 percent to $266 billion in 1996. Assets 
     had grown at annual rates of 7.5 percent and 8.2 percent in 
     the two prior years. Ms. Helfer described that as ``probably 
     a good sign'' considering that rapid asset growth in the late 
     1980s and early 1990s foreshadowed industry downturns.
       The bank deposit insurance fund topped $2 trillion for the 
     first time and reached reserves of $1.34 for every $100 of 
     insured deposits at the end of 1996. After a $4.5 billion 
     capitalization in October, the thrift fund achieved reserves 
     of $1.30 for every $100 at the end of the 1996, versus 55 
     cents per $100 six months earlier.
       A slowdown in merger activity and rising numbers of new 
     banks caused the smallest quarterly decline in commercial 
     banks in 11 years, according to the FDIC. Only five banks and 
     one thrift failed in 1996, the fewest since 1972.
       Echoing recently released figures by the Office of Thrift 
     Supervision, the FDIC reported healthy thrift profits, too. 
     The nation's 1,924 savings institutions earned $7 billion in 
     1996 despite spending $3.5 billion to capitalize the thrift 
     fund.

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