NEW YORK–Credit union acquisitions of banks, and more broadly, the CU tax exemption, were the subject of a segment on the CNBC program “Power Lunch.”
Introduced by host Brian Sullivan who said, “We begin with the intriguing story of the rise of the credit union,” before giving way to Business News Senior Banking and Finance Reporter Leslie Picker, who introduced the issue by saying, “There is this kind of under the radar evolution taking place… Credit unions were established about 150 years ago in rural America to create community based lending for those without traditional access to banking. Throughout the last century credit unions have operated as nonprofits exempt from most taxes. However, recently, they've scaled to the point where they are buying billions in assets from community banks, a record trend that's become controversial. Critics say credit unions’ tax exempt status gives them an M&A advantage and their scale no longer justifies the $21 billion in annual taxpayer subsidies they enjoy.”
Critic of CUs Featured
The segment then turned to Scott Hodge, senior tax policy advisor with the Tax Foundation, who has been a frequent critic of the credit union tax exemption.
“There’s just something wrong with what are essentially nonprofit organizations buying taxpaying commercial and profit-making organizations,” said Hodge. “I think it's time to reevaluate the tax exemption that the credit unions now have because they're no longer these…membership-serving organizations. They're growing and expanding and they're essentially commercial banks masquerading as nonprofits.”
Picker followed up by quoting the credit union position (and showing a graphic of data previously compiled by NAFCU) that the tax exemption allows credit unions to charge less for loans and pay more on deposits as well as to provide greater access to credit.
NCUA Chairman Appears
NCUA Chairman Todd Harper appeared, saying, “Generally credit unions do pay more on their share deposits and they charge less on the loans they make to consumers. I think that that's a good thing for the American consumer.”
In response to a statement from Picker, Harper said he is aware of 12 more bank acquisitions by credit unions that are in the works.
During a follow-up discussion, Picker again outlined the credit union arguments that the tax exemption provides CUs with pricing advantages that put pressure on traditional banks to price their loan rates lower and to pay more on deposits.
The full segment can be viewed here.