CU Boards Likened To `Saddam' in Utah by State Representative; League Prepares for More Banker Attacks

SALT LAKE CITY – The Utah League of Credit Unions has its work cut out over the summer: girding not only for the November gubernatorial election and state races, but also the prospect of tough new anti-CU taxation bills in the 2005 session of the legislature. “They’re ready to slam us,” is how the League’s executive vice president, Lynn Kuehne, characterized the current environment following a bank-influenced hearing of the 12-member Financial Institutions Task Force. The panel, slated to come up with legislative recommendations in 2005 including a possible tax on CUs, was created in a 2003 law which narrowly placed a first time 35% franchise and “competitive equity” tax on CUs. That law, seeking to be overturned by the League and which barred business lending for CUs, also triggered an exodus of 10 large state chartered CUs to a federal charter with threats by others to do the same perhaps later this year or in 2005, in effect undermining the dual charter system. The League has charged the task force is heavily biased towards the banking lobby considering one of the co-chairman, Rep. Jeff Alexander (R-Provo), was a sponsor of the 2003 anti-cu tax law. Scott Simpson, the president and CEO of the League and who warned the panel of more conversions, has previously said the League “objects to the very composition and fundamental purpose of this panel.” At the June 17th hearing, which lasted just under two hours and with no future sessions slated until after the November election, one Draper Republican, considered a strong ally of the Utah Bankers Association, likened selection of CU boards to “Saddam Hussein elections” or “dummy elections.” Utah League officials promptly labeled the comments by state Rep. LaVar Christensen a further example of the frivolous charges brought by legislators whose bank-run agenda is to put CUs out of business in Utah. Much of the June 17 session was devoted to a discussion of CU capital structure and the reasoning and fallout from the state-to-federal conversions as well as debate on industrial banks and predatory lending. In addition to Simpson, also speaking at the hearing was Ed Leary, the state’s commissioner of financial institutions, who said the panel has three options: it can continue to study tax structure, decide the 2003 legislature went “too far” in restricting CUs and reel back changes – a choice pushed by the League – or it can decide that it did not go far enough. “Speaking personally, I don’t think that is necessary,” said Leary referring to the third option. Whatever lawmakers decide, the department would go along with whatever lawmakers choose. Christensen, the Draper representative, insisted that the task force work “isn’t about targeting credit unions,” but he said the state has to look at current CU definitions and decide whether they are relevant or accurate when $1 billion CUs act like banks and are exempt from paying business income taxes. “Is there ever a point,” he asked where the definition “becomes so attenuated that it becomes fiction?” Kuehne said the new line of attack by Christensen and others on the panel shows some new strategies by the bankers particularly in trying to demonstrate “that there is no need for credit unions” in an environment where there is plenty of credit available. -