NAFCU Rebuts Bankers Claims

Re: What the bankers won’t tell you this week

This week, you may be hearing from bankers as part of their continuing attack on the effort by credit unions to help our nation’s small businesses.  NAFCU would like to set the facts straight and encourage you to support the bipartisan effort to raise the arbitrary and outdated credit union member business lending cap and to help small businesses access the credit they need to create jobs.

What the bankers won’t tell you is that the Special Inspector General for TARP, Christy Romero, recently reported that the Small Business Lending Fund for community banks intended to spur lending and create jobs fell painfully short. Out of the 332 banks participating in the small business lending fund program run by the Treasury Department, 137 used more than half of about $4 billion disbursed by the program to help fund their exits from the Troubled Asset Relief Program. It was also found that a sizeable number of these banks didn’t increase lending at all.

On Wednesday, the House Oversight and Government Reform Committee is holding a hearing titled, “Broken Promises: The Small Business Lending Fund’s Backdoor Bank Bailout.” The timing is ironic, but not surprising, as bankers still relying on taxpayer funds continue to shamelessly attack credit unions and their 95 million member-owners.

While banks want you to believe that raising the credit union member business lending cap will threaten the business done by other financial institutions, this is simply untrue. What the bankers won’t tell you is that a 2011 study commissioned by the Small Business Administration’s (SBA) Office of Advocacy found that bank business lending was largely unaffected by changes in credit unions’ business lending, and credit unions’ business lending can actually help offset declines in bank business lending during a recession (James A. Wilcox, The Increasing Importance of Credit Unions in Small Business Lending, Small Business Research Summary, SBA Office of Advocacy, No. 387 (Sept. 2011)). The study shows that during the 2007-2010 financial crisis, while banks’ small business lending decreased, credit union business lending increased in terms of the percentage of their assets both before and during the crisis.

Additionally, the banking industry also claims that very few credit unions have reached the 12.25% of assets cap. What the bankers won’t tell you is that the very existence of an arbitrary cap is a disincentive for credit unions to open member business lending portfolios, as a modicum of success could force them to scale back their new efforts.  As the country recovers from the worst financial crisis of our time, Congress should leave no stone unturned in terms of assisting small businesses to get the capital that they need.

Furthermore, banks claim that credit unions have unfair advantages and should be taxed.  If credit unions have such an extraordinary advantage, why are the banks not lining up to convert to credit unions?  What the bankers won’t tell you is that nearly 1/3 of banks are Subchapter S corporations and pay no corporate income tax.  Yes, they pay other taxes, but so do credit unions and their nearly 95 million member-owners who pay personal income taxes on the dividends they get from their credit union.  Next time a banker complains to you about credit unions, ask them if they have looked at converting to one.

Finally, what the bankers won’t tell you is that an independent study  examining the “Economic Benefits of the Credit Union Tax Exemption to Consumers, Businesses, and the U.S. Economy” released by NAFCU last year found that the total benefit of the credit union federal income tax exemption to U.S. consumers is over $10 billion per year.  Altering the tax status of member-owned credit unions would have a devastating impact not only on the 95 million credit union members across the country, but also on consumers in general.  Eliminating the credit union tax exemption would result in the loss, on average, of over 150,000 jobs a year over the next decade, a shrinking of the GDP and a net loss of revenue to the federal government.

I thank you for the opportunity to share with you these important facts that the bankers won’t tell you this week.  If you have additional questions legislative issues impacting credit unions, please feel free to contact me at (703) 842-2204 or


Brad Thaler
Vice President of Legislative Affairs
National Association of Federal Credit Unions

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