Should taxpayers subsidize sports stars’ checking accounts?

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Would you believe that multimillionaire basketball stars Tim Duncan and LeBron James could soon be eligible for taxpayer subsidies intended for low-income Americans?

Although Duncan and the San Antonio Spurs trounced the Miami Heat 4-1 in the NBA finals, members of both teams are big winners in the financial arena. The average Miami player earned $4.7 million this year, while the average Spur took home $3.9 million.

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And if the National Credit Union Administration (NCUA) proceeds as expected, Duncan and James could choose to deposit their millions in taxpayer-subsidized checking accounts or get lower-interest loans at taxpayer expense. 

How? The agency recently gave preliminary approval to a credit union focused on serving pro athletes.

Players Choice Federal Credit Union is seeking to establish overlapping customer bases, or “fields of membership,” that would serve players in big-league baseball, basketball, football, soccer, hockey and golf. The idea came from a Major League Baseball player’s ex-wife, who found herself penniless after her husband gambled away $47 million in career earnings. Her idea is to combine financial services with a focus on financial literacy for athletes.

On one level, it’s a nice idea. Pro athletes have unique financial needs — they earn high salaries for only a short period of time and must plan ahead in case they have a career-ending injury. Their high profiles also make them targets for dubious business deals and investments. That’s why leagues offer financial coaching; some universities offer specialized degrees to help sports stars deal wisely with sudden wealth.

But why should pro athletes benefit from tax privileges that Congress intended for America’s low-income citizens? In authorizing federal credit unions in 1934, Congress said its explicit aim was to “make more available to people of small means credit for provident purposes.” The inherent trade-off in the law making credit unions tax-exempt is that they are intended to serve low-income individuals who don’t have other financial options.

Over the years, the National Credit Union Administration and the credit union lobby have stretched this rationale to the breaking point, assembling fields of membership so broad as to have no meaningful limit, expanding business lending and pursuing affluent customers.

Today, more than 200 credit unions have more than $1 billion in assets. Banks do better at serving the very people of “small means” credit unions are subsidized to serve — nearly half of credit union members are upper-income, while only 41 percent of bank customers are; meanwhile, fewer than one-third of credit union members are low-to-moderate-income, while 40 percent of banks’ customers are.

And when NCUA is chartering a credit union whose targeted fields of membership will be among the country’s highest earners, it’s clear that the credit union industry has lost its way.

Congress should rein in the NCUA so it better follows the spirit of credit union laws: enforcing field-of-membership limits and maintaining a focus on people of “small means.” The NCUA needs to stop credit unions that use their tax privileges to serve the wealthy, finance luxury goods like boats, make jumbo mortgage loans and buy stadium naming rights.

Congress should also revisit the credit union tax exemption itself. Are all credit unions earning their tax exemption by serving people of modest means? The existence of a credit union for pro athletes makes it clear that the answer is no. 

Keating is president and CEO of the American Bankers Association. He served as Oklahoma’s governor from 1995 to 2003.