Most credit union leaders agree that the taxation issue is a deal breaker. That is if credit unions were to lose their tax-exempt status, there would be very little reason to remain a credit union. Conversions to banks would be the order of the day. Credit unions would enjoy the advantages of more flexible capital options (the most important advantage in my mind), no field of membership restrictions, and fewer restrictions on business lending.

I agree that taxation is a deal breaker, though I argue if the tax-exemption were ever lifted, what we all know as a credit union would cease to exist and credit unions wouldn't need to convert to banks because there would be no credit union charter any longer. The charter could be wiped away all at once by Congress to avoid mass conversion costs.

The bigger question is whether some sort of CRA-like regulation imposed on credit unions would cause a wave of credit unions to vacate the charter.