ABA Banking Journal - June 2008 - (Page 16)

briefing ABA Chairman’s Position ABA Resources Continued from page 15 BRADLEY E. ROCK CEO, Smithtown Bancorp brock@aba.com Tom Stenson, Farmer Mac executive vice-president and COO. To learn more, go to www.aba.com/BusinessSolutions or call 1-800-BANKERS. Credit union campaign is paying dividends IN MARCH, TREASURY SECRETARY Henry Paulson released his department’s Blueprint for a Modernized Financial Regulatory Structure, and it says much the same thing about credit unions that ABA has been saying all along. The blueprint’s core message about credit unions is that they have changed fundamentally from their original mission of serving lowincome consumers. Here is what it said: “Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions.” That is what ABA has been saying for years! The blueprint also had this to say about credit unions: • “Over time, a key aspect of the credit union system, the field of membership, has become less meaningful.” • “Multiple-common bond credit unions can add ‘select employee groups’ fairly easily … ” • “… community charters where members share a geographic bond … have expanded rapidly in recent years.” • “… the increasing share of credit union assets held by larger credit unions indicates movement toward a broader focus … ” The blueprint also acknowledged that taxexempt credit unions “typically focus on a range of services offered by commercial banks… ” Treasury’s analysis of the credit union industry is correct. It recognizes the facts that ABA has been talking about to the public and to policymakers alike. The credit union industry has changed and the new breed of large bank-like credit unions act more like banks than the credit unions they were intended to be. And they benefit, moreover, from two distinct advantages. First, almost all credit unions are exempt from the Community Reinvestment Act requirements that banks must meet. Second, the credit union industry receives a tax exemption of absolutely staggering proportions. Credit unions are a $757 billion industry that earned $5.6 billion for the 12 months ending in June 2007. Who else but credit unions could avoid taxes on profits like that? Over the next ten years, that credit union tax exemption will cost the federal government nearly $19 billion. That exemption exists because credit unions are supposed to serve people of modest means. But is that really the customer that credit unions look for? Apparently not. In November 2006, the Government Accountability Office reported that for the second time in three years, “credit unions lagged behind banks in serving low- and moderateincome households.” And a 2005 study by the National Community Reinvestment Coalition found that banks do a better job of serving people of modest means than do credit unions. ABA has been working on this problem for some time, and we have a solution. Bank-like credit unions need to make a choice: They should either return their focus to the traditional credit union mission of serving—truly serving—low-income customers. Or, they should convert their charter to that of a mutual savings bank. And credit union members who want to make that choice should be able to do so without unnecessary interference from the credit union regulator. Treasury Treasury’s blueprint has put the credit union industry on the defensive. Maybe that will give them a new perspective on what the credit union mission really ought to be. BJ Bank insurance revenue up slightly in ‘07 The nation’s bank holding companies saw a slight increase of 0.5% in their total insurance revenue from $43.5 billion in 2006 to $43.7 billion in 2007, according to research conducted by the American Bankers Insurance Association, an ABA affiliate, and Michael White Associates. Citigroup, Wells Fargo, HSBC North America, BB&T, and Bank of America led all bank holding companies with significant banking activities in total insurance fee income in 2007. “Among the top 50 in insurance revenue, the mean ratio of insurance revenue to noninterest income was 13.4% in 2007,” said Michael D. White, president of Michael White Associates. “Insurance brokerage fee income had been racing upward at a compound annual growth rate of 19.5% from 2001 through 2006,” said Valerie Barton, executive director of the American Bankers Insurance Association. “It flattened out in 2007 due to softening property-casualty premiums, changes in bank charters to thrifts that do not report insurance brokerage income, and a few sales of large property-casualty agencies by banks. The prospects for a resumption of growth in bank insurance revenues are very positive.” To learn more about the study and the American Bankers Insurance Association, go to www.aba.com/ABIA. 16 JUNE 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.aba.com/BusinessSolutions http://www.treas.gov/offices/domestic-finance/regulatory-blueprint/ http://www.treas.gov/offices/domestic-finance/regulatory-blueprint/ http://www.aba.com/ABIA http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - June 2008

ABA Banking Journal - June 2008 Contents Editor’s Column Do Fee-based Services Have an Edge? Snapshot: Net Interest Margins Vary Sharply with Size 100th Anniversary: Then & Now Letters ABA Resources ABA Chairman’s Position "What? No Annual Surprise Bonus?" Pass the Aspirin Cover Story: Top Community Banks: How They Did... ...And How They Did It Charter Bank First East Side Savings Bank Mackinac Financial Corp. The Peoples Bank Managing the E-mail Monster In Brief Handling PEPs in the Age of "L'affaire Spitzer" Mailbox Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - June 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.