WASHINGTON (9/18/14)--The three lawmakers present at Wednesday's The Hill forum agree on at least one thing: that credit unions are an integral part of the country's financial services landscape. Reps. Denny Heck (D-Wash.), Brad Sherman (D-Calif.) and Rob Woodall (R-Ga.) spoke at the forum, which was sponsored by the Credit Union National Association.
The three legislators admitted that banking industry representatives are often pushing them and others to reconsider credit unions' tax status.
"I think the economic revenue that would come with taxing these institutions would be far less than the economic benefit we see now," Sherman said. "And that's not even taking into account the fact that a credit union that charges a little less interest, or pays a little more interest on deposits, is generating personal income tax. If you can make 2% on that account, Uncle Sam is getting a piece of that."
|From left, Reps. Brad Sherman (D-Calif.), Rob Woodall (R-Ga.) and Denny Heck (D-Wash.) speak to The Hill's Kevin Cirilli about the role of credit unions in today's financial landscape. (CUNA Photo)|
He added that while some opponents of credit unions advertise an additional $2 billion to $3 billion in revenue, the Joint Committee on Taxation has estimated the number to be almost 40% less than that.
Heck said he has a standard response to banking officials that keep pushing him to re-examine credit unions' tax status, paraphrasing a famous quote from economist Walter Heller on supply-side economics.
"To keep coming to us and asking for that, waiting for it to happen, is a little bit akin for leaving the landing lights on for Amelia Earhart," he said. "Credit unions are not taxed the same as banks as a matter of policy."
Woodall said he has an answer prepared as well, should the question be put to him.
"If they believe the credit union structure is so advantageous that it must be changed in order for you to maintain your competitive edge, maybe just join the credit union movement," Woodall said. "I think it's a red herring to suggest that the playing field we have today is somehow uneven."
When the topic shifted to ideas for regulatory relief, Heck admitted that "there's an appetite in the United States House of Representatives for regulatory relief," but the process has been difficult.
"As credit unions have become a bigger and more integral part of the fabric of the community, their concerns about the regulatory environment have grown over time, and I think it behooves Congress to listen to that and act on it," he said.
The second part of the forum, moderated by CUNA interim President/CEO Bill Hampel, featured Steve Pociask, president of the American Consumer Institute, and Michael Mandel, chief economic strategist of the Progressive Policy Institute.
Both were asked about the consequences of overregulation on credit unions, and how this overregulation can affect recovery from the economic crisis as a whole.
Pociask pointed to the 12.25% member business lending cap for credit unions as a regulation that could be slowing recovery. He emphasized the importance of credit unions for picking up their small business lending by 38% since the onset of the recession, while banks have reduced their small business lending by 17% over that same time period.
"As banks were dropping their lending to small businesses, credit unions were stepping up and increasing that lending," he said. "Why is that important? Because if you look at how the cycle works, 65%-70% of jobs created in the upturn are jobs from small businesses. So it's very important to get capital to them. There's definitely demand for it, but the banks aren't meeting it."
With regard to the National Credit Union Administration's risk-based capital proposal, Mandel said it was a "classic case of regulatory oversight."
"It's tightening up regulations just when we need more lending. We saw this after 2000, with the change in accounting rules, which was an overreaction that imposed a lot of costs, but it didn't stop the next financial crisis," he said, adding, "This is the same type of thing, imposing extra costs without doing what needs to be done."
Mandel didn't mince words when he said that the post-crisis reaction of targeting institutions like credit unions "is going to turn out in retrospect to be a disaster. Because it misses the point about what caused this disaster."