Mica: Industry Health `Excellent,' but Banker Attacks Loom On Business Loans, Taxes

RENO, Nev. – Pronouncing the industry in “excellent” health and ready to combat new banker challenges on taxes or business lending, CUNA President/CEO Dan Mica struck an upbeat theme in his annual message to the organization last week . “We can’t let the bankers scare us,” intoned Mica in describing how the industry should react to claims made in Congress or before regulatory agencies that business lending “is something that we shouldn’t be doing” particularly “after we’ve been making business loans for 100 years.” In his yearend wrap-up address to the Future Forum conference at the Reno Hilton, the head of CUNA covered a wide swath of industry concerns at the same time emphasizing positive developments – many related to the ongoing banker attacks. For one thing, the industry as a result of close cooperation and teamwork by CUNA, state Leagues and individual CU leaders, was successful earlier this year in “beating hands down” a last minute, back door proposal put forward by banks to pass a tax-CU resolution before the National Conference of State Legislators. The banking lobby had acted in a “sleuth” like manner to adopt the resolution, he said, but it was defeated thanks to the “phenomenal job” done by the CUNA-led team. But had it been adopted through behind-the-scenes banker “misdeeds,” it “would be the shot heard round the world” as the industry, he said, would be forced to mobilize to defeat “model bills” which would have been deposited and pushed in every state legislature. The bad news, Mica observed, is that members of the renegade group in NCSL behind the resolution are now slated to move into leadership positions of the organization “and have pledged to come back” next year. On the ongoing state-by-state tax fight in 2003 waged by state Leagues with guidance from CUNA, that battle seems to be going well, he told the Reno gathering. “We have beaten the banks in all five states” listed by CUNA as experiencing the most serious legislative challenge. Though he did not identify any of the states, “in only one do we have a residual,” he declared, apparently referring to Utah where a tax bill was barely turned back but a bar on business lending for three state-chartered CUs was enacted last March. The trio of Utah CUs later converted to federal charters and two of them are targets of the American Bankers Association field of membership July suit against NCUA pending in a Salt Lake City federal court. Regarding the banker attack on business lending, Mica expressed outrage that the banking lobby would try now to curtail a service offered by CUs that has long been upheld by regulation. Business loans “are nothing new” for CUs and yet banking’s attempt to curtail or shut down operations “is nonsense.” “It is your patriotic duty to look into business loans,” declared Mica. Underscoring market differences, he noted that the average business loan at a CU is $118,000 where the average at a bank is $1 million. It is obvious, he said, that banks have failed to meet the needs of small business since businessmen are reaching out to CUs. Citing the new opportunities on SBA loans, he said CUs need to “open up” to the small beauty shop operator who wants to expand, or the paint shop owner buying equipment or the farmer seeking a new tractor. These are all small businessmen turned away by banks but are rightful sources of new business for CUs, he said. On the negative side of the banker attacks, Mica warned CUNA delegates that the industry has one vulnerable area – the clause in H.R. 1151 that designates CUs serve “persons of modest means.” That section raises concerns on how CUs are dealing with the “underserved” market, and so CUs need to continue their reach-out programs to Hispanics and minorities. Those programs have been successful and indeed CUs as a basic element of their charter achieve more than banks in that area, and yet the issue remains a “vulnerable” source for possible attack, he said. In his remarks, the CUNA president repeatedly stressed industry unity and the fact that 90% of CUs belong to a state League. Strong differences of opinion are natural but “on the big issue we have to stay together.” “Divided, we hurt ourselves,” Mica told the 600 CUNA delegates. On another topic in his speech focusing on service, Mica suggested CUs might want to “ramp up their service” operations a bit to maintain their strong lead over banks where it comes to consumer satisfaction based on the American Banker poll. While polling data from the financial newspaper shows CUs well on top of satisfaction surveys, recent numbers and – ones out expected soon – could show the gap narrowing with banks finally making strides. CUs have led the survey as members “most satisfied” among all financial institutions for 18 years in a row, he said. While the numbers narrowing the gap are not alarming, “even a fraction” of a percentage change calls for CUs to pay closer attention to how members are serviced and treated. On industry “health” and safety, Mica said it has been “a fabulous year” for the industry noting the steady rise in total CU assets to $618 billion, a jump from the $400 billion when H.R. 1151 was debated. Members are at 84 million compared to 70 million in 1999. Loan-to-share ratios are at 69.2% and the only perceived negative is the sharp drop in number of institutions – from 25,000 in 1983 to 9,869. However, that is a trend that predominates the entire U.S. financial structure repeated among banks, insurance companies and other entities, Mica concluded. -