Crisis, Not Credit Unions, Drove Bank Troubles: Carrier

A Federal Reserve Bank of St. Louis report says a look at bank and credit union advantages offers “no sharp conclusions” on whether credit unions’ tax exemption and chartering rules have affected banking industry growth, but NAFCU Chief Economist David Carrier says the details suggest otherwise.

“The report shows clearly that the tax exemption and relaxed FOM rules have not led to a significant increase in market share for credit unions,” said Carrier. “Assets at banks increased from $6 trillion to $13 trillion, and at credit unions from $400 billion to $1 trillion, since 1998. Bank assets took a much bigger hit during the financial crisis than credit unions, so if banks wanted to claim they lost market share to credit unions, they would have to blame it on the financial crisis, not credit unions.”

The St. Louis Fed published an article by economists Richard Anderson and Yan Liu in its April issue of The Regional Economist. The article examines how various rules and statutes have sought to foster competition between the industries while seeking competitive balance, plus the competition between the two industries since enactment of the 1998 Credit Union Membership Access Act.

The authors present data showing credit union and bank growth trends following similar paths during this period, though data related to the period marked by the financial crisis show banks were more sharply affected by the crisis than were credit unions.

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