Same questions, same answers

WASHINGTON-Bankers and bank trade associations have lobbed hand grenades over federal taxation of CUs for a long time, but the last fusillade came during the effort to pass the Credit Union Membership Access Act. CUNA prepared a booklet titled "Credit Unions: The Consumer's Choice" that dealt with the issue, and the answers given then to banker arguments are still valid today, said Tom Dunn, from the CUNA communications office. It's point-counterpoint: * Size doesn't matter, despite banks' dislike of large CUs and their multi-product offerings. It's the not-for-profit structure that warrants the exemption. * The "level playing field" and "tax subsidy" argument is moot because Congress empowered CUs in order to spur competition, not contain it. * Banks can raise capital by selling stock; credit unions cannot; they only raise capital through retained earnings. * Banks have fewer limitations on lending and investment choices (especially high-yield instruments); CUs are restricted to Treasuries and other government securities (low-risk vehicles). * CUs cannot export capital to foreign companies that are unprofitable in order to show losses that are tax deductible; banks can and do, especially the mega-banks. * The field-of-membership issue was decided in banks' favor by the U.S. Supreme Court's ruling that limited a CU to a single common bond. The Court was bettered by passage of CUMAA. * Banks only pick on CUs because they cannot take on Wall Street competition; CU market share (under 3%) made them appear an easy mark. The attempt failed. * Banks strive to pay as little in tax as possible. Many privately held banks make use of Subchapter S status. - caburger@cutimes.com