The Fight Over MBL (Misc News: November 28, 2012)
CUNA Asks CUs to Comment on Keating Article
CUNA is calling on credit union supporters to comment on a column by the head of the American Bankers Association who calls for Congress to not even consider increasing credit union business authority.
Frank Keating, president and CEO of the American Bankers Association, posted a column on The Hill, a Capitol Hill news outlet, calling for Congress to not consider member business lending legislation. Keating argues that because credit unions do not pay taxes, they should not be given expanded business-lending authority. He also suggests that inexperienced credit unions could lead to losses that the government will have to cover. Click here to read Keating’s column.
In an email to leagues, Pat Keefe, CUNA vice president for communications and media outreach, asked for those who support expanded member business lending for credit unions to comment on Keating’s article.
“The bankers are worried. And they should be,” Keefe said. “The ONLY group that objects to credit unions winning additional authority to make business loans are the banks, as you well know. But not all of the readers of The Hill’s website may get that.”
Below are eight suggested responses to Keating’s comments from CUNA. CUNA says credit union supporters are welcome to post them as is, edit them or post your own comments. MBL supporters can also ask their friends to comment on the letter on facebook, twitter or other social media outlets.
Gov. Keating obviously knows nothing about credit unions (not unusual for a banker or their trade associations). Unlike banks, credit unions are not-for-profit cooperatives that are owned by their members. They exist to provide financial services to their member owners, not to return profits to shareholders. That’s why credit unions are tax-exempt – and why they do a better job at serving their members, including those with small businesses.
This diatribe avoids the central point here: That small businesses need more access to credit – period. Banks won’t do it, but they want to make sure that credit unions won’t either. What sense does this make?
That’s right, credit unions have a tax exemption – but, in the year ending June 2012, credit unions provided $6.3 billion in direct financial benefits to the nation’s credit union members. That’s more than three times the amount Gov. Keating cites in his commentary.
“Banks are outraged?” What about small businesses that cannot get credit from banks? Or those that could get credit from credit unions – but can’t because of an arbitrary limit on their business lending? Who speaks for them?
In the first 90 years of credit unions’ existence in this country, there was no business lending cap. The current cap was an arbitrary limit imposed by Congress in the CU Membership Access Act in 1998 (CUMAA). The CU tax exemption arises from their unique structure as not-for profit, democratically-controlled cooperatives – and that structure is unchanged over the past 100 years. The tax exemption has absolutely nothing to do with the breadth or volume of CU product and service offerings – a fact clearly spelled-out by Congress in CUMAA.
Having credit unions pay federal income taxes will have no discernible effect on the federal budget deficit. The Joint Committee on Taxation’s current estimate of the value of the credit union tax exemption was $400 million in 2011, whereas the federal budget deficit was $1.3 trillion in 2011.
Many individuals of modest means run small businesses and need credit. This is especially true in economic downturns because unemployed and discouraged job seekers are more likely to form businesses during these events. The U.S. Treasury's 2001 comprehensive analysis of credit union business lending showed that CUs do a very good job of serving the business credit needs of low and moderate income business owners.
Even if credit union business lending does crowd out some bank business lending, that would not result in a reduction in bank assets; rather the bank assets would more likely be redeployed from business loans to securities or perhaps other types of loans. Further, a recent study published by the Small Business Administration Office of Advocacy suggests that only 20% of the increases in credit union business lending replaces bank lending with the remaining 80% new loans.