The Mother of All Tax Subsidies
It’s time for CUNA’s Annual GAC in Washington so it’s not surprising that the Bankers’ Association has begun its annual blitz of DC-centered advertising expressing outrage at the credit union tax exemption. But even by the normal standards of Association bravado, this year’s advertising push takes a tremendous amount of chutzpah. Why?
Because it appears that the largest banks in the country receive an indirect tax subsidy equal to $83 billion annually. That’s right, the equivalent of $0.03 of every tax dollar goes to subsidizing the captains of capitalism. As succinctly summarized in a Bloomberg News editorial that means that but for the taxpayer guarantee of their solvency, the largest U.S. banks wouldn’t be profitable at all. According to research performed by International Monetary Fund economists the commitment of governments to support systemically important financial institutions translates into an 80 basis point discount in borrowing costs for these banks. Now that’s one heck of a subsidy, especially when one considers how little the American taxpayer has gotten in return for its support.
On top of all that, whereas credit unions are comprised of volunteer boards of directors with each shareholder getting an equal vote in the credit union’s activities, the banking industry is getting so complicated, according to an article in last months Atlantic Magazine, that institutional investors are shying away from investing in big banks. In fact, a surprising number of individuals were willing to go on the record in the article saying that the numbers peddled by the big banks simply can’t be trusted.
So, if you’re in Washington this week, don’t begrudge the Bankers’ Association for believing that the best defense is a good offense. But, there’s no getting around the fact that the industry they represent still has a lot of explaining to do that has nothing to do with credit unions and everything to do with treating the American public fairly.
NCUA Releases Guidance on Member Business Lending
NCUA released a letter to credit unions detailing the waiver process for which credit unions may be eligible when seeking to provide loans to small businesses that would put them up against the various caps embedded in NCUA regulations. The guidance is a helpful reminder to credit unions that despite all their justifiable frustration with MBL limitations, there are mechanisms to get around at least some of these roadblocks if they are willing and able to work with their regulators.