On November 26th, the Boston Globe published an editorial titled “Big Banks Need Competition.” The crux of their PoV was:
“People are sick of finding their checking accounts shrinking because of unexpected fees… Luckily, customers who are tired of playing hide and seek with their financial institutions have another option: credit unions. Credit unions, nonprofit cooperative financial institutions owned by their members, tend to offer lower fees and higher interest rates…If consumers vote with their wallets, credit unions could apply some much-needed competitive pressure to the banking behemoths.”
On December 2nd, the Globe published a rebuttal from Daniel J. Forte, the President of the Massachusetts Bankers Association. Mr. Forte countered that:
“Our objection is not with the notion of healthy competition, but with the idea that credit unions are the solution, and with the omission of the fact that there are more than 190 banks in Massachusetts providing choice and value to consumers while providing thousands of jobs in the Commonwealth.”
Mr. Forte’s views rested on this argument:
“The Globe ignores the fact that credit unions pay no state and federal income taxes. That’s lost money that could be used to support necessary services such as fire and rescue, police, and other government programs that benefit everyone, especially in these hard times.”
My take: With all due respect to Mr. Forte, his argument was poorly constructed, and misguided.
Mr. Forte’s argument should have focused on the fact that the Globe overlooked the role of community banks — in addition to credit unions — as a competitive alternative to the “banking behemoths.” Mr. Forte does allude to 190 banks in Massachusetts, but nowhere in his editorial does he specifically make a distinction between the behemoths and the smaller institutions.
Instead, he focused on the “credit unions pay no taxes” argument. Again, with all due respect, this argument simply doesn’t win any friends. Credit unions employ people who do pay taxes. And the successful ones pay dividends which I’m sure help many people in these “hard times.” (Side note: As a Massachusetts resident myself for the past 20 years, I’ve seen little evidence that my tax dollars support government programs that benefit “everyone”).
Mr. Forte should have simply taken the Globe to task for not mentioning the role of community banks. Instead, the editorial further fans the flames of this silly bickering between banks and credit unions. The only people who care about this are people who work for banks or credit unions.
The financial services industry — as a whole — needs to rebuild trust, reinvent itself, and innovate in the development of new products and services. Instead, it comes off looking like whiny kids complaining to their mommies and daddies. (And listen up, credit union folks, because you’re just as guilty of this).
In the end, both editorials were wrong. The Globe was foolish for not recognizing community banks, and Mr. Forte was wrong for bashing credit unions instead of the Globe.