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Instead of CRA make banks more like CUs federation says
WASHINGTON (5/5/09)—The head of the National Federation of Community Development Credit Unions reiterated the group’s long-held position that Community Reinvestment Act (CRA) requirements are unnecessary for credit unions, in response to a recent blog posting. The federation was established in 1974 to represent credit unions with a specialized mission of serving low- and moderate-income people and communities. Executive Director Clifford Rosenthal highlighted in his comments that credit unions last year, despite the unprecedented crisis that rocked the financial system, “actually increased their mortgage lending and auto lending, while banks (freeze) out millions of Americans.” An earlier blog posting had alleged that a fear of CRA was a primary factor in credit unions not taking federal funds, like the Troubled Asset Relief Program (TARP) funds being poured into banks. Rosenthal noted that credit unions were split over the issue of federal funds, but he emphasized that CRA was “very much a subordinate concern.” More key to the debate, he said, were credit union concerns about increased federal taxes, as well as the pride the credit union movement takes in never having taken taxpayer funds in the past. He noted that the federation was on the side of credit unions who worked to be included as eligible for federal funds. Rosenthal also pointed out the credit union movement was itself bearing the cost of the National Credit Union Administration’s (NCUA’s) corporate credit union stabilization efforts. Even with legislation currently being considered to allow the cost to credit unions to be spread out over time, the “burden” is borne by credit unions. Responding to the blog post's question of how the federation can support CRA in general but not for credit unions, Rosenthal stated, "If the goal is to achieve a kind of parity or symmetry between banks and credit unions, I would suggest a far better solution would be to make banks more like credit unions." Such parity, he explained, would entail a system where all banks were not-for-profit, transparent, locally controlled, directly accountable to those they serve, steered by democratically elected boards, limited in the compensation of senior management, focused on providing small, unsecured credit on affordable terms, and lending 70% or more of their assets back to their customers. "These are the basic characteristics of credit unions in the United States," he added.
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