Five years ago this week, a collapsing housing bubble plunged America into its worst financial crisis since the Depression. Wall Street’s near meltdown midwifed both the tea party and the Occupy movement, and triggered a bitter debate about the big banks that continues to this day.
The ongoing controversy over whether we have solved or compounded the “too big to fail” problem may have cost Larry Summers his shot at the Federal Reserve’s big chair. But amid all the focus on the handful of U.S. mega-banks, policymakers have paid scant attention to their little cousins – America’s credit unions.
Now, however, credit unions are drawing fire from the banking industry for their not-for-profit tax status. The banks claim this exemption should be revoked because it gives credit unions an unfair competitive advantage over for-profit banks. “Credit unions were never intended to be untaxed banks, yet that is what many have become,” according to Frank Keating, president and CEO of the American Bankers Association.
Keating’s sentiment is representative of many in the banking industry, but ultimately his words ring hollow. His association boasts a diverse membership of large and small banks. Last time I checked, there aren’t any credit unions that maintain a profitable global derivatives business and an essential investment-banking unit that underwrites multi-billion dollar corporate mergers and acquisitions like some of his members.
Eliminating the tax exemption is a terrible idea that would deal a fatal blow to 6,815 credit unions that provide low-cost financial services to 93.8 million members nationwide. It would also eliminate one of the safest and soundest segments of the financial services industry that stewards more than $1 trillion.
Continue reading at U.S. News & World Report.