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League to INJ BIZI CUs helping economy
HIGHTSTOWN, N.J. (4/5/11)--New Jersey Credit Union League President Paul Gentile “set the record straight” with an editorial in the April 4 edition of in response to an editorial by New Jersey Bankers President John McWeeney. Gentile responded to McWeeney’s editorial, “Banks, credit unions must compete on level ground,” by noting the structural difference between banks and credit unions. “Credit unions are structured as nonprofit financial cooperatives and have volunteer boards of directors, who come from the membership,” Gentile wrote in his response, “Credit unions are helping the boost economy’s rebound ” and said they have “volunteers elected by their fellow members. There are no stock options. There is no director pay.” Credit unions enjoy their tax exemption because of that cooperative structure, Gentile explained. In turn, the average savings and loan rates at credit unions are better than at their for-profit competitors. “McWeeney failed to note that there are more than 3,000 subchapter S banks in this country that also are tax-exempt,” Gentile added. While New Jersey banks boasted profits of $860 million in 2010, a 5% increase from 2009, they pulled back on their lending, Gentile said. Meanwhile, the “real story” about New Jersey’s credit unions is their positive effect on the economy, he wrote. “Through the third quarter of [2010], credit union mortgage lending in New Jersey was up 9%,” Gentile explained. “Credit union small-business lending was up 16.6% through the third quarter. Credit unions do true small-business lending, with an average loan of approximately $123,000.” Gentile also pointed out a major advantage banks have over credit unions: the ability to raise capital. Banks can raise funds in capital markets, where credit unions can only create capital through retained earnings. This can at times slow credit union growth, but it also serves as a hedge against credit unions getting caught up in risky financial moves such as the subprime mortgage mess that was a critical factor in the financial crisis, he said. Responding to McWeeney’s contention that New Jersey credit unions should not be allowed to take municipal deposits, Gentile wrote: “In this era of high property taxes, how can the bankers argue against allowing credit unions the same opportunity to compete for municipal deposits that can help drive more competition and give municipalities a better return on their money to help lower taxes? This authority is already allowed in half the states in the country.” In closing, Gentile noted that Sen. Mark Udall (D-Colo.) introduced legislation to raise the member business lending cap on credit unions from to 27.5% of assets from 12.25%. Gentile cited the potential economic growth and job creation the measure would spur. The Credit Union National Association has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. “We don’t begrudge the bankers for their success, but they must recognize that credit unions can play an even more important role in helping our economy,” Gentile wrote.
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