Stop the Credit Union Power Grab

posted 12/18/2012 in General

High loan-to-asset ratios result in Credit Union failures.
Credit Unions pose large risk to your community banks.

Over the past few years you may have noticed the appearance of credit unions around your community. While they may appear to be the same as a bank like Lincoln Savings Bank on the surface and offer many of the same services, credit unions also have very distinct difference: they are exempt from paying federal income taxes.

Now, there are calls from the credit union industry to allow them to increase their business-lending authority from 12.25 percent to 27.5 percent. This, according to a study done by Ike Brannon of Capital Policy Analytics, would reduce tax revenues and pose a large risk to both the credit union industry and the financial industry as a whole. This position is supported by the Iowa Community Bankers Association (ICBA), of which LSB is a member.
Therefore, LSB encourages you to look through the following findings of the study to see the damage an increase in lending power to credit unions could inflict:
  • Additional commercial lending from tax-subsidized credit unions would decrease tax revenues. The taxes that would otherwise be paid by commercial banks like LSB on those loans would not be paid.
  • Credit unions with high business loan-to-asset ratios makeup a large share of credit union failures since 2008. Therefore, allowing for even higher loan-to-asset ratios could result in even more credit union failures.
  • A large majority of credit unions are nowhere near their business-lending limit, and over 70 percent of credit unions have no member business lending loans at all. Why then do they need this controversial legislation?
  • Job-growth estimates by those in favor of this legislation paint a far more cheerful picture than real world data from the last three years indicates.
Along with the ICBA, LSB will continue to oppose any legislation that hurts tax-paying community banks and increases the business-lending cap for credit unions. We urge you to help us contact our Congressional representatives to halt this legislation that could cause damage to community banks and the financial industry as a whole.
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