A seemingly cohesive lot, credit union managers queried in the Baltimore area about the Credit Union Charter Choice Act expressed little disagreement in their opposition to the bill that would ease credit union-to-mutual savings banks conversion rules.
The Credit Union Charter Choice Act (HR 3206) would strip the National Credit Union Administration of some of its current powers to supervise conversion votes for its insured, member-owned credit unions. (See story on Page 10)
“I think everybody in the credit union [movement] has an opinion on that matter,” said Lois Profili, president of five years of the 11,500-member, $55 million-asset First Eagle FCU in Baltimore City. “There?s really no compelling reason for a credit union to convert to a savings bank. It?s not something that seems to be done to benefit the members of the credit union.”
“The capital that we raise is put there by the members; it?s for the members? benefit,” Profili said. “When [the credit union] converts to a savings bank, the capital then becomes more in the hands of the few owners than every member.”
Rob Windsor, CEO of the 58,000-member, $540 million-asset First Financial FCU in Lutherville, agreed.
“The retained earnings that credit unions have are accumulated over the life of the credit union,” he said, “and don?t necessarily belong to the board of directors or the CEO or any of the current investors when it becomes a stock corporation.
“What I?ve seen is a number of directors and CEOs of credit unions becoming enriched, utilizing the capital that?s accumulated in the reserves ? over the life of the credit union.”
Windsor added that credit unions, unlike banks, typically cannot borrow to generate capital but must “grow” it over time through retained earnings.
“The only thing that happens when a credit union moves over to a bank status is that immediately you are making a mockery of the power of the cooperative,” said Stuart Clode, Bel Air resident and senior vice president of 75,000-member, $570 million-asset Aberdeen Proving Ground FCU. “The [institution?s] interest [then becomes] the financial welfare of the stockholders.”
That said, local bankers might frame their arguments in a similar fashion and be likewise united ? suggesting that the matter could be perceptual and resolved only according to where one stands on competitive versus cooperative endeavors.
