| To the Editor:
The entire community banking industry in Massachusetts was disappointed in the Jan. 4, 2016 article entitled, “Credit Unions Resolve to Win Public Deposits.” The article liberally quoted bank-like credit union supporters who presented a particularly one-sided perspective on a controversial issue. Unfortunately, the banking industry wasn’t provided similar space in the story to refute those claims, so we’d like to set the record straight.
Unlike the position presented by credit union advocates that say the laws create “confusion,” the statutes are very clear: under current Massachusetts law, public funds cannot be deposited in tax exempt state- and federally chartered credit unions in the commonwealth. The fact that “other states allow it,” and that federal law permits federal credit unions to accept these deposits, are not substantive arguments in favor of changing longstanding Massachusetts law. In fact, the credit union industry has been filing similar legislation for many years and each time the Legislature has rejected those bills.
The Massachusetts Bankers Association and our member banks strongly believe that public funds should not be deposited in credit unions that are exempt from state and federal taxes. Tax-paying community banks use state and municipal deposits to fund loans to homeowners, businesses, nonprofits and other community investments. And, unlike large, federally chartered credit unions in Massachusetts, all banks pay taxes and are subject to state and/or federal Community Reinvestment Act requirements.
There is also ample competition for public deposits within the banking sector. More than 120 banks currently bid for the several billion dollars of public funds from the commonwealth, municipal governments and other political subdivisions. Many local community banks offer specialized public deposit programs to better fit municipality needs including online banking, wire transfers, stop payments, positive pay, remote deposit services, account reconciliation, specialized trust reporting, printing and supply of check stock.
In this entire debate this is perhaps the greatest and saddest irony: if credit unions are given the authority to accept public deposits, they will use their tax exemption to bid against tax-paying community banks for deposits created by payments from ordinary taxpayers to local communities and the commonwealth.
The government subsidy of not taxing the income of credit unions, including the largest state-chartered credit union, the $1.4 billion Metro Credit Union, and the largest credit union, the $6.5 billion Digital Federal Credit Union, is premised on a credit union being controlled, run and managed democratically by its members who share a common bond – still a basic tenet in which credit unions are supposed to adhere. Yet, according to public records, while Metro Credit Union has approximately 185,000 members, only 26 members, including directors, officers and any family of those insiders, voted on its recent merger to acquire another credit union. We think that’s something to liberally quote the credit union industry about.
