Good Morning,
On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association exclusively representing the interests of our nation’s federally chartered credit unions, I write today to disarm the desperate arguments of the banking trades in their ongoing effort to distort the truth about credit unions. In their latest effort, they release a report attacking the credit union tax exemption. Perhaps they now feel it is easier to attack credit unions than defend the multi-billion dollar tax benefits that banks enjoy.
It is an ironic and remarkable attack from those that represent the institutions that engaged in the risky lending that led to the financial crisis to begin with. In fact, their report fails to mention that the banks they represent were bailed out by the American taxpayer to the tune of hundreds of billions of dollars through the TARP program because of the large number of subprime loans that they gave to hard-working Americans.
As we have communicated to you before, the cumulative benefit credit unions provide the greater economy totals over $10 billion a year according to an independent study released by NAFCU last year. As the study also shows, altering the tax status of credit unions would have a devastating impact not only on credit union members across the country, but also on consumers and small businesses in general. Eliminating the credit union tax exemption would result in the loss of 150,000 jobs a year, a shrinking of the GDP and a net loss of revenue to the federal government. You can access a copy of the independent study here.
Simply put, the tax exemption is an issue of survival for credit unions. Despite what the authors of the banker’s report claim, there remain significant regulatory and statutory differences between not-for-profit member-owned credit unions and other types of financial institutions – including limits on who they can serve and their ability to raise capital. In other countries where the tax exemption has been eliminated for credit unions, the number of credit unions has declined dramatically. If the tax exemption was removed, many would convert to banks or just go away. Without credit unions, which serve to provide checks and balances in the marketplace, for-profit banks would likely increase rates and fees on consumers to enrich their shareholders at the public’s expense – perhaps this is the ultimate goal of the bankers.
While all financial institutions have grown since the passage of the Federal Credit Union Act in 1934, it should be noted that the credit union market share of household financial assets is roughly the same today as it was 30 years ago. The defining characteristics of credit unions remain unchanged today from when credit unions gained their tax exemption – they are not-for-profit cooperatives that serve a defined field of membership and cannot issue capital stock. These defining characteristics are the same for both the largest credit union and the smallest credit union.
If you have additional questions about the credit union tax exemption or other legislative issues impacting credit unions, please feel free to contact me at (703) 842-2204 or bthaler@nafcu.org.
Sincerely,
Brad Thaler
Vice President of Legislative Affairs
National Association of Federal Credit Unions