[Congressional Record Volume 144, Number 34 (Tuesday, March 24, 1998)]
[Extensions of Remarks]
[Pages E459-E462]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    SUPPORT GROWS FOR CREDIT UNIONS

                                 ______
                                 

                         HON. PAUL E. KANJORSKI

                            of pennsylvania

                        HON. STEVE C. LaTOURETTE

                                of ohio

                    in the house of representatives

                        Tuesday, March 24, 1998

  Mr. KANJORSKI. Mr. Speaker, my colleague, Mr. LaTourette, and I are 
pleased to announce that support for H.R. 1151, the Credit Union 
Membership Access Act, continues to grow. Below are the thirty-first 
through fortieth of the more than 100 editorials and columns from 
newspapers all across our nation which support giving consumers the 
right to chose a non-profit, cooperative, credit union for their 
financial services.
  Surveys have consistently shown that consumers strongly support the 
value and services they receive from their credit unions. That is why 
the Consumer Federation of America endorses H.R. 1151, the Credit Union 
Membership Access Act.
  A bipartisan group of more than 190 Members from all regions of our 
country, and all parts of the political spectrum, are now cosponsoring 
the Credit Union Membership Access Act. We should pass it quickly so 
that credit unions can stop worrying about their future and return to 
serving their members.

              [From the Des Moines Register, Mar. 7, 1998]

Banks vs. Credit Unions--Both Sides Have Exaggerated the Threat--There 
                       Should Be a Place for Both

       Next week, Iowa Congressman Jim Leach has scheduled 
     hearings on whether Congress should act in response to the 
     U.S. Supreme Court's Feb. 25 ruling regarding credit-union 
     membership. Leach had better wear his hard hat.
       The court case is part of an increasingly acrimonious 
     debate as banks battle to prevent credit unions from eating 
     into their market.
       The banks, which pay hefty taxes, say credit unions, which 
     don't, have an unfair advantage. That advantage might be 
     acceptable for the classic mom-and-pop credit union, but 
     bankers are alarmed at the growth of huge credit unions like 
     the John Deere Community Credit Union in Waterloo with more 
     than $385 million in assets and a full array of financial 
     services offered to 77,000 members.
       Credit unions, in response, point out that at best they 
     still have a slender 6 percent slice of the total market pie 
     nationally, while banks have 77 percent. In Iowa the ratio is 
     something like to 88 to 5. As for the tax disparity, credit 
     unions note that, unlike banks, they have no profits on which 
     to pay taxes. Credit unions return all profits to their 
     members, who pay taxes on their earnings. In fact, some Iowa 
     banks are now switching to that very taxing scheme under a 
     new state law.
       Although these issues are not central to the question that 
     prompted Leach's hearing, they are what drove the bankers to 
     bring suit against federally chartered credit unions. The 
     suit challenged recent interpretations of federal law that 
     have allowed credit unions to broaden eligibility for 
     membership.

[[Page E460]]

       The Supreme Court, in its Feb. 25 ruling, came down on the 
     side of the banks: Federal laws says there must be a ``common 
     bond'' between employee groups belonging to a credit union, 
     and the National Credit Union Administration has been reading 
     the law too liberally by allowing federally chartered 
     credit unions to sign up any employee group that walks in 
     the door.
       Only five of the 212 credit unions in Iowa are federally 
     chartered; the remainder are chartered under state law, which 
     requires a common bond among employee groups. But, while this 
     ruling may not have direct consequences here, Iowa credit 
     unions see the bankers' Supreme Court victory as the possible 
     leading edge for other victories by the banks.
       Credit-union advocates see this as a life-or-death struggle 
     and suspect the bankers' ultimate aim is to destroy credit 
     unions. That's a bit of an exaggeration, though the bankers 
     have done themselves no favors with their own exaggerations 
     of the credit unions' potential threat.
       While most credit unions hardly pose a serious threat to 
     banks, the bankers have a good argument about the phenomenon 
     of a few giant credit unions that have morphed into full 
     service institutions that look an awfully lot like banks. As 
     long as those operations continue to grow, they make an 
     attractive target for banks and other financial institutions 
     looking to curb credit unions.
       Whatever legislation emerges from Congress should 
     ultimately aim to assure the banks of a fair shake and to 
     leave the credit unions intact.
       Credit unions have for 80 years served a vital function for 
     millions of Americans by offering services to their members 
     that are not offered by banks. They still serve a vital 
     function today.

                               __________
                               

                       [From the Cincinnati Post]

                        Credit for Credit Unions

       Credit unions, which have been helping people with their 
     financial needs for more than six decades, are themselves in 
     need now. They need to win a legal fight and, failing that, 
     they need some political help from Congress.
       If they don't get it, the credit unions themselves may no 
     longer be available for millions when they come knocking, and 
     American consumers, especially those of modest means, will 
     have reason to grieve.
       Congress established credit unions as non-profit 
     cooperatives in 1934 chiefly for poorer people left out of 
     the loop by banks. It required that members have a ``common 
     bond,'' such as being employees of the same company.
       The formula worked fine until the late 1970s, when the 
     disappearance of large manufacturing plants and other 
     economic changes began robbing the credit unions of members. 
     A federal agency then said a credit union could include a 
     multitude of groups in its membership in order to maintain a 
     sufficiently large operational base.
       The commercial banks yelped. What's more, they sued. They 
     maintained that the federal agency, the National Credit Union 
     Administration, had misconstrued the law, and a federal judge 
     said the commercial banks were right. The Supreme Court has 
     agreed to hear the case either late this year or early next. 
     If the high court concurs with lower court rulings, some 10 
     million people will no longer be members of credit unions.
       Banks say the competition from the credit unions is unfair 
     because they don't pay taxes. It's true that, as non-profits, 
     the credit unions don't have profits to pay taxes on. Members 
     do pay income taxes on any dividends.
       If the credit unions lose in court, Congress could come to 
     the rescue with just a slight change in the 1934 law's 
     wording about ``common bonds.''
       You would think many would support the amendment. After 
     all, 70 million Americans belong to credit unions, and that's 
     a lot of voters.
       It's possible that another number speaks more loudly in the 
     legislative ear: 4.4 trillion, which is the accumulation of 
     dollars the banks have in assets, and more than 12 times the 
     assets of credit unions.
       The banks would not seem to be at much of a disadvantage 
     economically, after all.

                               __________
                               

         [From the Louisville Courier-Journal, Sept. 15, 1997]

          Bankers Should Quit Bullying Workers' Credit Unions

       With America's banks raking in record profits, you'd think 
     that bankers would have little to complain about. But you'd 
     be wrong.
       At the annual convention of the Kentucky Bankers 
     Association in Louisville last week, the president-elect of 
     the American Bankers Association and the president of 
     America's Community Bankers worried aloud about the growth of 
     credit unions and a sharp rise in personal bankruptcies.
       Their concern about bankruptcies is valid. Federal laws 
     make it too easy to declare bankruptcy. If bankruptcy were 
     more painful, fewer people would resort to it, and, instead, 
     would struggle to pay their creditors.
       (Of course, if banks and other lenders were more careful 
     about extending credit, fewer potential deadbeats would have 
     a chance to get deeply into debt to begin with:)
       The verbal volleys against credit unions were less 
     persuasive.
       Yes, credit unions have grown rapidly, and as non-profit 
     institutions they don't pay federal taxes. This irritates 
     bankers.
       But the reason credit unions have grown is because they 
     serve an important function in our economy. They help a lot 
     of workers buy cars or finance college education--including 
     workers who might find it hard to get a bank loan for the 
     same purposes, at least not one at an affordable interest 
     rate.
       The banks and the nation's credit unions are battling it 
     out in the courts and in Congress:
       For the moment, the bankers have the upper hand, thanks to 
     a federal appeals court ruling that has stalled the 
     industry's expansion.
       But the Supreme Court will hear an appeal of that ruling 
     soon, and Congress could make the legal battle moot by 
     changing the law governing credit unions.
       If the credit unions win, you'll hear more grumbling from 
     bankers about unfair competition.
       But they'll be crying all the way to the bank. Profits, we 
     suspect, will remain robust.

                               __________
                               

              [From the Evansville Courier, Mar. 5, 1998]

    Credit Unions Have Remedy to Setback--Lawsuit Threatens Needed 
                              Institutions

       The U.S. Supreme Court has ruled that a 1934 law that 
     permitted the creation of credit unions also prohibits any 
     single one of them from getting its members from different 
     companies in different industries. The decision is a setback 
     to a consumer-friendly institution, but nothing that a 1998 
     law couldn't or shouldn't fix.
       Congress decided to allow credit unions during the 
     Depression so that workers who couldn't get loans from banks 
     would have someplace to turn. Credit unions are nonprofit 
     cooperatives, and that has enabled them to skip taxes, 
     operate cheaply and keep interest rates on loans down. But 
     Congress also set limits on them, insisting that members have 
     a common bond, such as the same occupation or the same 
     workplace. Many credit unions have been ignoring that 
     restraint since a 1982 reinterpretation of the law by a 
     federal agency. That agency ruling was probably necessary to 
     keep credit unions thriving. For a variety of reasons, many 
     places of business were declining in size, meaning that some 
     of them individually did not have enough employees to support 
     a credit union.
       The ruling rankled banks, though. They have not liked this 
     expanding competition, especially when the competition has 
     not been paying taxes like they have been. It was a lawsuit 
     brought by banks that led to the Supreme Court decision. 
     While it's true that the bankers who brought this suit say 
     they will not move to have current members kicked out of 
     their credit unions, it's also true that no institution that 
     remains valuable to many millions of people ultimately could 
     be endangered by an incapacity to grow and serve those who 
     need it most. There's nothing intrinsically unconstitutional 
     or unfair about exempting organizations from taxes if they 
     have forsaken profits, and there's certainly room in this 
     economy for this particular alternative to banks.
       Locally, credit union officials have been scrambling to 
     explain to customers the implications of the ruling. One is 
     that it has no impact on community--(such as the Warrick 
     Federal Credit Union) or state-chartered credit unions. John 
     McKenzie, president of the Indiana Credit Union League, said 
     Congress should make sure the banking industry does not get 
     in the way of people's access to credit unions.
       Obviously, a new law should not give credit unions carte 
     blanche to operate any way they choose, but it should relieve 
     them of some of those 1934 restrictions.

                               __________
                               

               [From the Palm Beach Post, Mar. 17, 1997]

                         Tell Banks To Back Off

       Credit unions fill just a tiny niche in American banking, 
     but their members appreciate them. Why, then, are bankers 
     attacking credit unions every way possible?
       The House Banking Committee is holding hearings on whether 
     federally chartered credit unions should be allowed to 
     recruit members outside limited groups with a ``common 
     bond.'' Banks are fighting the change in Congress and in the 
     courts. The Supreme Court will hear a bank-inspired case that 
     could end with credit unions having to drop 20 million 
     members.
       You don't join a credit union to finance a 40-story office 
     tower. But you can still get a $50 loan there, as people have 
     been doing since the 1930s. Credit unions are not-for-profit. 
     They don't pay most taxes, so they can charge less interest 
     than banks for loans.
       Credit unions hold 6.8 percent of all banking assets 
     nationally, 7.5 percent in Florida. The percentages are up 
     since 1980 from 3.6 percent and 3.5 percent respectively, but 
     they came at the expense of savings and loans. For-profit 
     banks pulled in more assets of former S&Ls than credit unions 
     ever did.
       The typical credit union was set up by employees of a big 
     company. As large companies shrank, unions served ex-
     employees and recruited outside the fold to stay afloat. The 
     Florida Legislature loosened the ``common bond'' rule for 
     state-chartered credit unions in 1982 to allow that. Now 
     banks are acting as if they are losing $100 bills to credit 
     unions, not nickels.
       A decade ago, the banks were hurting. Corporations found 
     ways to handle their own money. Big depositors switched their 
     checking to their brokers. But the banks roared

[[Page E461]]

     back. They are doing so well that if you are not looking to 
     finance a 40-story office tower, they give the impression 
     that you should deal with their machines and not waste their 
     employees' time.
       Merging and expanding banks are classic cases of a business 
     in need of discipline by market competition. The credit 
     unions are hardly a threat. But they hang in. Smart lawmakers 
     in Washington and Tallahassee will do nothing to make it 
     harder for them.
                               __________
                               

            [From the San Francisco Examiner, Oct. 27, 1997]

Goliath vs. David for Small Bucks--Banks Wage a Harsh Campaign Against 
                   Increasingly Popular Credit Unions

       The nation's banks should drop their mean-spirited campaign 
     to clip the wings of 12,000 credit unions. The banks would do 
     better to emulate some of the credit unions' people-friendly 
     policies instead of dreaming up new ways to extract fees from 
     their hapless customers. (We are braced for the spread of the 
     $3 charge for using the services of a human teller.)
       Nonprofit credit unions have grown hugely popular by 
     offering a break on limited financial services to members 
     under terms of a 1934 federal law. They pay interest on 
     insured deposits and earn interest on loans to members at 
     competitive rates. The members ordinarily share some link 
     like working for the same employer or belonging to the same 
     church. Credit unions were created during the Depression to 
     serve individual savers, who were of little interest to the 
     major banks. This is still part of their function, as when a 
     black church sponsors one in a neighborhood the big banks 
     have deserted.
       While some credit unions have substantial assets, their 
     collective market share hovers around 2 percent--nothing for 
     the bankers to worry about. But the banks are arguing before 
     the U.S. Supreme Court, and in a separate lawsuit in the 
     District of Columbia, to overturn the National Credit Union 
     Administration on loosening ``affinity'' standards for credit 
     union membership. Another fight over credit union rules 
     proceeds in Congress. Both sides are waging public relations 
     campaigns.
       The credit unions are valuable as a tiny check on the 
     financial power of the major banks and as a reminder to them 
     that consumers value decent treatment in the conduct of their 
     financial affairs, however modest. If credit union membership 
     nationwide grows beyond the present 70 million thanks to more 
     generous interpretations of who can join, it will be because 
     more people cherish that alternative to the average cold-
     blooded bank.

                               __________
                               

            [From the San Diego Union Tribune, Mar. 2, 1998]

   The Consumers' Choice--Congress Should not Restrict Credit Unions

       The long-running battle between commercial banks and credit 
     unions didn't end last week when the U.S. Supreme Court ruled 
     that a Depression-era law places strict limits on the 
     membership of credit unions.
       The 1934 Federal Credit Union Act, which established credit 
     unions because banks were perceived as ignoring the needs of 
     low- and moderate-income Americans, limited credit union 
     membership to ``groups having a common bond of occupation or 
     association, or groups within a well-defined neighbor-hood, 
     community or rural district.'' But in 1982, responding to a 
     wave of corporate reorganizations and downsizing that 
     threatened existing credit unions, the National Credit Union 
     Administration expanded membership beyond the single-company, 
     single-community confines. It is this expansion that the 
     Supreme Court, in a 5-4 decision in a case from North 
     Carolina, said was in violation of the 1934 federal law.
       Anticipating the Supreme Court decision, the Credit Union 
     National Association asked Congress last year to consider 
     legislation to allow federally chartered credit unions to 
     maintain their expanded membership base.
       Credit unions operate on a not-for-profit basis. They pay 
     no taxes and tend to offer lower-cost loans and higher 
     earnings for savings. They also tend to charge fewer and 
     lower fees than commercial banks. But the commercial banks 
     say credit unions' not-for-profit status creates an unfair 
     competitive advantage.
       Bankers have reason for concern. Since the 1982 regulation 
     took effect, credit unions have rapidly expanded their 
     membership. Last year, 72 million Americans belonged to 
     credit unions, double the number in 1991. California alone 
     has 735 credit unions, of which 340 are federally chartered 
     and will be directly affected by last week's Supreme Court 
     ruling. Although banking industry officials say consumers who 
     currently belong to credit unions will not be asked to give 
     up their memberships, joining a credit union may prove more 
     difficult in the future unless Congress changes the 1934 law.
       A bill before Congress to allow credit unions to serve 
     multiple groups deserves approval. Credit union industry 
     observers say it takes several thousand employees to form a 
     credit union. In California, not many employers of this size 
     exist. In San Diego, 95 percent of the work force is employed 
     with firms with 50 or fewer employers.
       With Congress set to begin hearings this week on a bill 
     aimed at resolving the dispute between banks and credit 
     unions, both sides already have begun their lobbying efforts. 
     The commercial banks, particularly the smaller community-
     based banks, have legitimate concerns about rapidly expanding 
     credit unions. But in drafting new legislation, Congress must 
     recognize the realities of America's small-business economy. 
     Americans have shown an increasing preference for credit 
     unions, and consumer choice must be preserved.

                               __________
                               

                [From the Tampa Tribune, Jan. 14, 1997]

                   No Reason To Punish Credit Unions

       A financial battle is brewing that warrants consumer 
     attention. The banking industry is putting the squeeze on 
     credit unions in hopes of limiting your opportunity to join 
     one.
       If they are successful, banks will have more business for 
     themselves and some credit unions will be put out of 
     business. Although credit unions handle only a small fraction 
     of the nation's savings accounts and consumer loans, banks 
     are jealous of that little share and worry that credit unions 
     will continue to gain customers.
       A credit union is a group of people who get together to 
     pool their savings and lend each other cash. They began more 
     than 60 years ago, long before the popularity of checking 
     accounts, credit cards and ATM machines. The Federal Credit 
     Union Act of 1934 allowed people to form a financial 
     partnership if they shared a common bond, such as a single 
     employer or trade group. They were, and still are, run by 
     volunteer boards and do not make a profit, and consequently 
     pay no income taxes.
       BANKS HAVE LONG been suspicious of the special relationship 
     credit unions have with their members and the government. The 
     unions have an unfair advantage, banks complain, because they 
     have no taxes to pay and no shareholders to please. Credit 
     unions drew more attention to themselves when some of the 
     larger ones began offering checking accounts, credit cards 
     and mortgages. Because of their lower overhead, they tend to 
     pay higher interest to savers and charge lower interest to 
     borrowers, and banks don't like that.
       As the definition of who qualified to join a credit union 
     expanded in recent years, banks filed suit. Last year a 
     federal judge sided with the banks and ordered federally 
     chartered credit unions to comply with a narrow definition of 
     the ``common bond'' requirement of the 1934 law.
       The case is being appealed, but in the meantime Florida 
     credit unions are expecting banks to try to clip their wings 
     too. Florida law is less restrictive in that it does not 
     require members to have a narrow common bond. An attempt is 
     likely this session to make state law as tight as the 
     outdated federal law. If this happened, it would prevent 
     federally chartered credit unions in Florida from switching 
     to a state charter to get around last year's unfavorable 
     court ruling.
       The Legislature should resist efforts to change the state 
     law. Credit unions are no real threat to banks; in fact, 
     banks are enjoying record profits. Many of the people served 
     by credit unions would be shunned by banks anyway. How many 
     banks would make a $50 loan? Credit unions make small loans 
     every day.
       At the federal level, Congress should not sit idly by while 
     the courts put credit unions into a time machine and ship 
     them back to 1934. Times have changed since then, and so have 
     the needs of consumers.
       Congress should take a close look at what has happened 
     under Florida's more modern law. Credit unions have saved 
     consumers millions of dollars in fees and interest; and banks 
     have continued to grow; offering innovative services and 
     sound management.
       Credit unions don't want to become banks, and banks 
     certainly have no desire to become more like credit unions. 
     Until someone can identify a problem with these member-owned 
     institutions, they deserve to be left alone.

                               __________
                               

                         [From the Goshen News]

                     Giving Credit to Credit Unions

       Credit unions, which have been helping people with their 
     financial needs for more than six decades, are themselves in 
     need now. They need to win a legal fight and, failing that, 
     they need some political help from Congress. If they don't 
     get it, the credit unions themselves may no longer be 
     available for millions when they come knocking, and American 
     consumers, especially those of modest means, will have reason 
     to grieve.
       Congress established credit unions as non-profit 
     cooperatives in 1934 chiefly for poorer people left out of 
     the loop by banks. It required that members have a ``common 
     bond,'' such as being employees of the same company. The 
     formula worked fine until the late 1970s, when the 
     disappearance of large manufacturing plants and other 
     economic changes began robbing the credit unions of members. 
     A federal agency then said a credit union could include a 
     multitude of groups in its membership in order to maintain a 
     sufficiently large operational base.
       The commercial banks yelped. What's more, they sued. They 
     maintained that the federal agency, The National Credit Union 
     Administration, had misconstrued the law, and a federal judge 
     said the commercial banks were right. The Supreme Court has 
     agreed to hear the case either late this year or early next. 
     If the high court concurs with lower court rulings, some 10 
     million people will no longer be members of credit unions, 
     and millions more may never get the chance.
       That would be a shame because credit unions normally pay 
     higher rates of return

[[Page E462]]

     on deposits and charge less interest on loans than banks. 
     They tend to be easy and friendly to deal with, partly 
     because the directors are likely to be the consumer's fellow 
     workers. Banks say the competition from the credit unions is 
     unfair because they don't pay taxes. It's true that, as non-
     profits, the credit unions don't have profits to pay taxes 
     on. Their members do pay income taxes on any dividends.
       If the credit unions lose in court, Congress could quickly 
     come to the rescue with just a slight change in the 1934 
     law's wording about ``common bonds.'' There is some 
     bipartisan support for the amendment, though not exactly a 
     ground swell yet. You would think, at first blush, that there 
     would be more interest. After all, 70 million Americans 
     belong to credit unions, and that's a lot of voters. It's 
     possible, of course, that another number speaks more loudly 
     in the legislative ear: 4.4 trillion, which is the 
     accumulation of dollars the banks have in assets, and more 
     than 12 times the assets of credit unions. The banks would 
     not seem to be at much of a disadvantage economically, after 
     all, although the credit unions may be at a disadvantage 
     politically.