The Graduate School of Banking at UW Madison just came out with a “study” on the credit union “tax subsidy.”
Here’s the story and it’s an easy story to tell because it hasn’t changed in years. The GSB says the credit union federal tax exemption on income (earned because credit unions are non-profit, member-owned financial cooperatives) benefits affluent members more so than members with average incomes. Same old song, different song book.
Ok…here we go:
1) First, know that the Graduate School of Banking’s former CEO, Harry Argue, is at the genesis of this study. Harry used to be the CEO of the Wisconsin Bankers Association and, while he was there, hired a fellow by the name of Kurt Bauer. Kurt took Harry’s place as CEO of the Wisconsin Bankers Association when Harry went to the Graduate School of Banking. Kurt’s now the CEO of the Wisconsin Bankers Association.
2) Kurt likes to bash credit unions because – well – credit unions are easier to take a shot at than trying to explain why credit unions always come out ahead of banks in customer service and trust surveys. This makes his board of directors think he’s contributing to the organization.
3) Bill Kelly, the current CEO of the GSB, used to work at CUNA – the national trade association for credit unions. Bill left CUNA. Not sure why. Not sure if there’s an axe to grind there or not. Just sayin’ is all. Someone might want to look into that. Do a study.
4) The credit union tax exemption is not a tax subsidy. The tax exemption on corporate income is because the profits of the credit union go back to the member-owners of the credit union – not a small group of share holders like at a bank. (How’d that profit driven motive thing work out at those banks that folded like a cheap tent?)
The Federal Credit Union Act of 1934, which included the federal tax exemption of corporate income for credit unions, came about because banks were screwing the citizens. Since not much has changed lately, good luck getting that law changed. Credit unions are a nice alternative to consumers who want to know their money is safe, stays in their community and isn’t subsidizing a small group of investors.
5) Bill Kelley keeps talking about “the credit union mission.” What IS the credit union mission, Bill? You’re an educated guy. Tell me where in the Federal Credit Union Act it says the credit union mission is to serve only people of modest means.
I could go on. For now, Kurt Bauer will be trying to find someone in the media to pick this up. He’ll be at the Capitol looking for a legislator who can use the study to raise some campaign funds and, in return, sponsor legislation to make sure credit unions don’t get out of place. I guarantee it.
Looks like Kurt isn’t the only banker who thinks a “study” is easier than trying to explain why more and more people are leaving banks and becoming a member-owner of a credit union. Stay tuned …