A new report published by the Federal Reserve Bank of St. Louis concludes that there is notenough evidence to support the assertion by bankers that thecredit union tax exemption and expanded field of membershiprules provide credit unions with a competitive advantage.

“The evidence does not permit any sharp conclusions,” wroteeconomist Richard Anderson and senior research associate Yang Liu,who both work at the St. Louis central bank.

The two reviewed the history of credit union field of membershipexpansion and compared growth between credit unions and small bankssince 1998, when Congress passed H.R. 1151, the Credit UnionMembership Access Act.

What the Fed researchers discovered were similar growth patternsin numbers of credit unions and banks, which has shrunk, and totalassets, which have increased.

The report wasn't particularly complimentary of credit unions,but didn't vilify them either.

For example, the report noted that academic studies haveconfirmed that “credit union lending to small businesses partlydisplaces bank lending,” but also said “credit union lending hasbeen steadier through business cycles, including the recentfinancial crisis, than bank lending.”

The authors agree with the bank lobby's charge that the creditunion tax exemption reduces the cost of capital by approximately40% relative to a fully taxed environment; however, the report alsonotes that several thousand small and medium-sized banks that haveSubchapter S charters are similarly exempt from federal incometaxes.

“Despite the often-heated rhetoric of competing advocates, bothindustries have experienced similar trend growth since 1998,” thereport said.

“Further, the relative proportions of assets held by federallychartered single, multiple and community bond credit unions havechanged little. The only safe prediction is that, in the future,credit unions and community banks will continue to grow moresimilar.”