Letter to the Editor

Holiday Bowl and a level playing field

Tuesday, February 4, 2020

Congratulations to the Iowa Hawkeyes for their tremendous Holiday Bowl win over their PAC-12 foe the USC Trojans. The Hawkeyes were dominant in nearly every phase of the game, while competing on a level playing field with one of the country's blue blood programs. The Hawkeyes demonstrated that, all else being equal, the most skilled and hardworking competitors will succeed.

This should be true of every field of endeavor, including financial services. Yet, the Holiday Bowl game sponsor – San Diego County Credit Union (SDCCU) – is a prime example of why that is not the case today. Like other large credit unions, SDCCU has leveraged a well-intended nonprofit charter into a financial conglomerate with $8 billion in assets, $100 million in tax-free profits and multimillion-dollar executive salaries. And, rather than returning dividends to their members, these mega credit unions use their tax-free money to spend millions on sponsorships, like that of the Holiday Bowl, and they run advertisements denigrating their taxpaying competitors.

Although I give the SDCCU credit for their clever ads, the facts don’t back them up. Studies, including one by Moebs Services, have consistently shown credit unions have higher customer fees than banks. And, thanks to market forces, banks are more efficient than credit unions. This means a greater share of every bank dollar is returned to the community through loans and investments, while credit unions devote more to operating expenses.

During a recent hearing on Capitol Hill, Federal Deposit Insurance Corp. Chairman Jelena McWilliams expressed concern about the impact on rural communities when large credit unions acquire community banks. We've seen over 20 of these acquisitions during the past year alone, including two in Iowa. When these transactions occur, the tax base suffers, and the resulting credit unions lack any statutory requirement to serve the whole community. In Iowa, we’ve also seen our largest credit unions mine deposits from rural areas to use for investment in wealthy urban areas where they are placing new branches.

It's time for policymakers to recognize that a small number of fake credit unions have abandoned the traditional credit union principles as we know them — serving individuals of modest means with a common bond. These fake credit unions have become billion-dollar, mainstream financial providers with high-paid executives, commercial lending platforms and wealth management divisions. It's time to hold them accountable to their tax-exempt purpose. Or, at least level the financial services playing field, and let consumers decide who wins.

Mary Kay Bates

President & CEO – Bank Midwest