First of all, if Mr. Keating were to read the Congressional Record from the year credit unions were chartered, he would find that credit unions were chartered because specifically banks were not serving families of “modest means.” Federal employees at that time wanted a credit union because what the banks were charging them was usurious.
Quite simply, Mr. Keating is cherry picking and misstating facts to avoid the simple truth: Credit unions are working to support our small business owner-members who have been denied by local, regional and national banks. Credit unions are currently prevented from helping more small business owners have that opportunity due to the arbitrary lending cap.
Mr. Keating’s also states that this is really about freeing “[credit unions] from important regulatory safeguards that are intended to reinforce credit unions’ mission, safety and cooperative nature.” I find it interesting that for the first 90 years of credit union history, this particular safeguard was not needed until the banks were able to press for its inclusion in the 1998 Credit Union Membership Access Act.
Keating claims that credit unions don’t pay taxes and have an unfair tax advantage. Credit unions are organized as not-for-profit financial institutions. Credit unions don’t pay federal income taxes on profits due to that structure, but they pay payroll taxes, property taxes, and a number of other taxes. The boards are unpaid, democratically elected volunteers from the membership and work to return any “profits” to the members in the form of lower rates on loans, higher rates on savings, and sometimes deposits into the members accounts at the end of the year if they have excess revenue. Ever heard of a bank doing that? Credit unions are different from banks due to their not-for-profit structure and social mission of helping America’s working families succeed financially.
Ask Mr. Keating about the number of Subchapter S banks there are in the country. Subchapter S banks have a special filing status that eliminates much of their federal income tax. Subchapter S banks earned $6 billion in tax-exempt net income in 2011. That income is estimated to have cost taxpayers revenues of $700 million. Although it sounds very similar to the credit union status, unlike credit unions, these banks have no restrictions on the type of lending they do. And the only people who benefit are shareholders. Credit unions benefit everyone they serve, and also provide a benefit to their communities by offering more financial choices.
As the CEO of the American Bankers Association, I understand Mr. Keating’s bias and position. As a member of a credit union for over three decades that has supported and worked with me, I am equally biased in favor of my credit union friends.
is director pf tje
United Credit Union, Mexico, Mo.