By Frank J. Diekmann
Two questions for you: Do you think the bankers will ever get the congressional hearing on credit unions they’ve been demanding? And if they do, will they succeed in turning CUs against themselves?
Don’t discount the possibility and especially the danger posed by the latter of those two questions. Both deserve credit unions’ attention because it seems inevitable the banking industry will eventually get Congress to hold the hearing they want on credit union acquisitions of banks. Perhaps not in this Congress, or even the next, but…
Democrats have traditionally aligned with credit unions and their working-class roots, but with hundreds of CUs now boasting assets of more than a billion dollars—and with a new focus on anti-competitive practices, they may be receptive to a hearing on the issue of acquisitions (and in acquiring some bank PAC money in the process). Similarly, as free marketers (at least in theory), Republicans have supported credit unions, but there’s nothing free about running for and remaining in Congress, and the bankers have deep pockets (are you seeing a theme here?).
As CUToday.info reported here, the Independent Community Bankers of America (ICBA) is again calling on Congress to hold hearings to investigate the growing practice of credit unions buying banks following the announcement VyStar Credit Union in Jacksonville is buying a $1.6-billion bank in the Peach State.
VyStar, said the ICBA, is “leveraging its tax exemption and crossing state lines to purchase” Jonesboro, Ga.-based Heritage Southeast Bank, “eliminating a locally based lender and further consolidating the banking industry.”
But, full disclosure, before I go any further, I should note that not everyone agrees a hearing will ever take place. When I asked Carrie Hunt, EVP and general counsel with NAFCU, for her thoughts on such an event, she believes it’s unlikely.
“My gut says no,” Hunt said. As for a hearing specifically on CU acquisitions of banks, Hunt also said there is no reason for credit unions to ever fear such a hearing.
“Credit unions have a strong a defendable position on this,” she said. “There is nothing to hide here.”
Skippable Stuff
Let’s skip past the testimony portion of the hearing we already all know. Banks will trot out a community banker who has memorized all the talking points about “taxpayer-funded credit union acquisitions” that exacerbate industry consolidation, shrink state and local tax revenues, and show credit unions have become “virtually indistinguishable from taxpaying commercial banks.”
Whomever NAFCU and CUNA send up to the Hill as their witnesses—and I’m guessing it will be one large CU that has done an acquisition and maybe even the former CEO of an acquired bank talking about the benefits to the community–we already know all their bullet points, too.
The Hairy Part
But here’s the hairy part. What if the bankers have as their other witness the manager of a small credit union in a town where a large CU suddenly showed up by buying the local community bank. And the credit union doesn’t like it, believes it has nothing to do with people helping people, and tells the House Financial Services Committee, for instance, they believe the CU tax exemption should be eliminated for CUs of a certain asset size?
However the credit union witnesses attempt to respond isn’t going to matter, as we won’t be able to hear them over the sound of champagne bottles being simultaneously uncorked across town at the headquarters of the ABA and the ICBA.
I can’t imagine that would ever happen, Frank, you may be thinking. Might I suggest you work on your imagination. I’ve had plenty of off-the-record conversations with folks who gave the impression they sort of lean that way. I've heard from more than a few who believe their state or national trade association is run by and for the benefit of the big guys. And I seem to recall a day not long ago, too, when global pandemics were the stuff of sci-fi movies.
There are two ways to attack an enemy: head on or from the inside out. Head-on clashes typically get the headlines and the movie treatments, but it’s the divide-and-conquer strategies that are usually the more effective silent killers.
Another Toast!
A great example is all around us every day.
It’s hard not to imagine Russian hackers tossing back vodka toasts every time they plant “stories” and “reports” on Facebook and Twitter and the so-called dark recesses of the web that result in Americans toasting each other. Indeed, the Russians and Chinese and other bad actors must literally be LOLing at how easy it is not so much to divide people, but to get them to divide themselves.
Why invest in expensive military hardware (or pricey K St. lobbyists and multi-media campaigns) when you can much more easily and cheaply turn the United States into red states and blue states (or cleave credit unions into large and small)?
If you’ve been bingeing on House of CU Cards during the pandemic then you’ve seen the episodes in recent years in which the banking industry has evolved to a divide-and-conquer strategy against credit unions, saying it’s only interested in revoking the tax exemption of “large” credit unions. (You have to give it to them for having the chutzpah to say, “We have no problem with CUs too small to pose any type of competitive threat; our interest is purely with those CUs large enough to attract our customers. But we’re only thinking of the taxpayers, of course.”)
Credit union acquisitions of banks aren’t some fad. CUToday.info’s Ray Birch, who has led the industry in coverage of the bank buys, has heard from sources that many, many more are in the pipeline. And the acquisitions are an obvious difference between the capabilities of large and small CUs.
Nothing to Laugh-In About
At some point either one of the deals or their sum total is going to catch the ear of a congressman, especially if it’s an out-of-state CU doing the buying of a community bank in his or her largely rural district. And that—or just the Washington strength of the banking industry—is going to lead to a hearing credit unions should be thinking about now.
Some of you are no doubt thinking it’s not going to be easy to find many credit union leaders willing to testify on behalf of banks. And that reminds me of a sketch I saw on TV Land recently from the old Rowan & Martin’s Laugh-In.
Dick Martin announces he’s started a TV Repair business that charges a flat-rate of $20,000 per repair.
“20,000? You're not gonna get many customers at that price,” says Dan Rowan.
Answers Martin, “I only need one."
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of the new book, ‘501 Name Tags: Everything You Need to Know About Business Can be Learned at a Conference & Forgotten in the Trade Show.” For info: www.501nametags.com.