House Financial Services Committee Chairman Barney Frank (D-Mass.) has assured credit  unions that the Treasury Department’s proposal to effectively abolish the nation’s credit unions does not have “the slightest chance of succeeding.” Rep. Frank made the assurances in a letter to Credit Union National Association President Dan Mica, which was released on April 8.

“I understand your dismay at the proposal,” Frank said in his letter. “Of course I am completely opposed to it, and I can assure you that as long as there are Members of Congress who know the value of credit unions on the Committee, no such proposal will have the slightest chance of succeeding.”

Under the Treasury Department’s proposals for financial regulation, all institutions desiring federal deposit insurance -- whether banks, thrifts, or credit unions; including state-chartered institutions -- would be required to obtain a new federal charter. To qualify for the tax-exemption, these institutions would be required to elect “community status” and meet a series of apparently stringent tests in terms of asset size, field of membership, and service to the underserved. In addition, the National Credit Union Administration would cease to exist under the Treasury scheme.

“What may be most disturbing about the Treasury plan is its assumption that financial institutions can be compared solely on the basis of the services they offer, without regard to structural and cultural differences between different types of institutions,” said Mica. “As a result, Treasury does not acknowledge any unique contribution from credit unions based on their not-for-profit, cooperative structure.”

Rep. Frank’s Letter to CUNA (PDF file)

Mica: Treasury's Plan Perilous (CUNA 4/1/08)
 
What It Means to Agents:  For many years, credit unions have been a thorn in the sides of banks. Operating on a non-profit basis, they often offer their members lower interest rates and better service than many banks provide. It is not surprising that the Treasury Department’s proposals for financial regulation – which appear designed to give big banks everything they have ever, in their wildest imagination, wanted – would also include getting rid of those “pesky” credit unions.

April 15, 2008