Credit Unions Are Good for Local Communities
Banks are outraged by CUs due to their desire to increase their own profits by working to undercut a competing, yet separate industry.
“Is this the best possible decision our credit union can make for our members and local community?”
Each time I meet with a credit union CEO across America, I hear that same exact question asked over and over. It is like clockwork, and it comes as no surprise to anyone who has seen the honest service credit unions provide their members.
And yes, that same question holds true when a bank approaches a credit union with a potential M&A deal. If a deal is not in the best interests of its members and local community, the credit union outright rejects the deal and walks away.
But if a credit union chooses to ink a deal with a selling bank, it would be for good reason: The merger would benefit its members and local community.
According to the St. Louis Fed, these types of deals are all well and good, and they “have the potential to be a win for all the stakeholders involved.” But of course they do, because should a failing bank be unable to find a buyer, communities could lose access to needed financial services.
In a recent hearing before the House Financial Services Committee, NCUA Chairman Rodney Hood said it best: “If it weren’t for credit unions acquiring some of these banks, then the community would be left without a financial institution – it would leave them vulnerable to pernicious payday lenders.”
When a bank closes its doors, who suffers? People, families and whole communities do. But to opponents of credit union-bank mergers, they would much rather have the branches, lending capacity and economic benefits abruptly exit the community than be serviced by a credit union.
Words like “buying spree” and “growing trend” have been used to describe every time a bank decides to sell to a credit union – but those descriptions are deeply misleading. There have only been a handful of credit union-bank mergers in the last two years. Over that same timeframe, there have been nearly 400 bank-bank mergers.
While credit unions have grown slightly over the past decades – a 2% increase in market share from 1992 to 2018 – it is the big banks that are devouring community banks’ lunch.
The 15 largest banks have grown substantially since the financial crisis, even with increased regulation and while incurring billions in fines for consumer abuses. And the total market share of total assets of the largest 100 banks is 74.9%, crunching smaller banks down from 53.3% in 1992 to just 17.4%, according to recent data. That means credit unions own just 7.6% of the market.
So why are banks outraged by credit unions? It’s simple: A desire to increase their own profits by working to undercut a competing, yet separate industry.
Make no mistake, banking groups will continue to cry foul; they will continue to fund and propagate studies designed to undermine credit unions; they will continue to create misleading, anti-credit union social media accounts; and they will continue to launch ridiculous campaigns to oppose credit unions’ tax-exempt status, which would result in America losing $38 billion in tax revenue, $142 billion in GDP, and 900,000 jobs over the next 10 years, according to an independent, NAFCU-commissioned study.
We know all of this.
But the red herring in the room for them is the fact that these same banking groups won’t make a peep about their $28 billion tax windfall they received as a result of the Tax Cuts and Jobs Act of 2017. Nor will they openly acknowledge how nearly one-third of U.S. banks enjoy Subchapter S status, thereby allowing them to distribute untaxed profits directly to their shareholders and avoid paying federal taxes.
Credit unions will continue to pay every cent of local and state income taxes, sales tax and payroll taxes, while returning profits to members, American consumers, in the form of higher savings rates and lower interest rates on their loans.
Credit union members’ financial needs still need to be met, checks still need to be cashed and credit still needs to be extended to borrowers in need. That is where our industry will continue to focus – on serving local communities and furthering the lives of 119 million Americans.
Credit unions will continue to serve the greater good, rather than the greater greed.
B. Dan Berger is President/CEO for NAFCU in Washington, D.C.