To the Editor:
I read with interest your article, "Banks turn up the heat against credit unions," in the July fedgazette. There is a small, but important story that is being missed in the bank vs. credit union argument. Community development credit unions (CDCUs), which were created to serve low- and moderate-income persons, have been accidentally dragged into a fight that they don't deserve.
We at West Side Neighborhood Housing Services, a nonprofit community lender serving low- and moderate-income families in St. Paul, are in the process of developing a federal charter for a CDCU (the NHS Federal Credit Union) to compliment our work in mortgage lending, home improvement loans and credit counseling. The NHS Credit Union will allow us to provide checking, savings, small consumer loans and other financial services to our families. Many of our clients are not served by banks, thrifts or mainstream credit unions, which have difficulty serving these groups for a variety of reasons. We hope that the NHS Credit Union will provide a bridge between low- and moderate-income persons, people of color and non-English speaking clients and the conventional lending institutions. It is neither our intent nor desire to replace these other institutions. Unfortunately a number of banks, including one long-time supporter and partner, see this service to low- and moderate-income persons as a threat, and they have objected to NHS Credit Union because of the bank initiative against the mainstream credit unions.
Although the American Bankers Association has language which exempts CDCUs from their legislative assault on credit unions, many bankers are unaware of this and continue to lump the NHS Credit Union and other CDCUs with the mainstream credit unions. If the banking community were to look at CDCUs they would discover an important new partner in solving their CRA needs and in their efforts to serve the community and a more diverse population. CDCUs may in fact be a bridge to new clients when they have economically outgrown the services that the CDCUs can provide. Bank CRA investments in CDCUs meet the new CRA lending requirements better than anything else available, and because CDCUs are federally insured, these investments are risk free up to $100,000. There are not any other CRA risk-free investments available.
One informed long-term bank partner of West Side NHS, who strongly supports the legislative initiative to tax credit unions, summed his support of the our CDCU as follows: "Banks are the investors and protectors of other people's money. Because of this we will always have a limited appetite and finite dollars to reinvest in communities of need. Where we have a legal and moral obligation to provide for communities of need, we will always be frustrated by these limits. I have come to the conclusion that banks as an industry, for a variety of reasons, are not very good at reaching these underserved groups. It makes the most sense to me to put the resources that I can afford into the NHS Credit Union where it will reach these people and do the most good for the most people. It is just good business."
CDCUs need, want and deserve bank support. Banks should follow the lead of the American Bankers Association and several of our local bankers; they should exempt CDCUs from this current bank vs. credit union dialog.
Jerry Carrier
Executive Director
West Side Neighborhood Housing Services
St. Paul, Minn.
