On Wednesday, May 6, Lynn R. Kuehne sent a letter to the editor, titled "Credit unions do play fair." This letter contained false information about banks that needs to be corrected. This bad information has been mailed to thousands of credit union members and perhaps that is where this erroneous information originated. May I note the statements and the corrections:
1. Mr. Kuehne said, "Between 1980 and 1994, the FDIC reports that 1,617 banks and 1,295 thrifts failed. The losses were so large that once again the banking industry looked to Congress and to the public for more money, this time maybe $300 billion or so. This was a subsidy."The truth is every bank that failed between 1980 and 1994 was covered by the FDIC Bank Insurance Fund, paid for by assessments made to banks; not one penny of taxpayer money was used to cover bank failures. Banks also recapitalized their insurance fund from assessments to banks and it stands at over $28 billion as of December 31, 1997. Savings and loans (thrifts) had a separate Federal Savings and Loan Insurance Corp. (FSLIC), which did not cover their losses, so they did require a taxpayer bailout of about $132.1 billion, final count, not $300 billion. The FDIC Insurance Fund and banks had no connection to the huge savings and loan losses. In fact, two years ago banks were required by Congress to pay part of the FICO bonds issued to cover part of the savings and loan losses. In other words, banks are picking up part of the tab for a disaster that banks did not create, just because banks have Federal Deposit Insurance. Why weren't credit unions asked to do the same since they also have Federal Deposit Insurance?
2. While I am not an apologist for the S&L industry, Congress did deregulate the financial industry without giving them adequate time to restructure their loan portfolios. All losses covered by the taxpayers went to provide protection for depositor's accounts. That is what the federal insurance system was set up to do, and it worked. If credit unions are so certain they will never use the federal insurance safety net, why do they want Federal Deposit Insurance? After all, why should income taxpayers guarantee deposits for an industry that doesn't pay any federal income tax?
If people who support credit unions are going to write letters to the editor, they can at least be responsible enough to get the facts straight.
Ronald W. Heaton
President & CEO
State Bank of Southern Utah