Is a Bank Charter in Your Future?

In September the Senate Banking Committee Chairman Paul Sarbanes, D-Md, ordered the Government Accounting Office (GAO) to conduct a study of credit unions. Some believe the study could be a first step toward a Senate bill to re-characterize large credit unions in order to gain tax revenues and appease bankers. In contrast to the tax discussions during the budget surplus year of 1998, when HR-1151 was debated, the next Congress faces deficits. Congress and many state legislatures are likely to be turning over every stone in search of tax dollars.

 
 

n September the Senate Banking Committee Chairman Paul Sarbanes, D-Md, ordered the Government Accounting Office (GAO) to conduct a study of credit unions. Some believe the study could be a first step toward a Senate bill to re-characterize large credit unions in order to gain tax revenues and appease bankers. In contrast to the tax discussions during the budget surplus year of 1998, when HR-1151 was debated, the next Congress faces deficits. Congress and many state legislatures are likely to be turning over every stone in search of tax dollars.

According to political observers, a proposal resulting in taxes affecting just 10% of the credit unions is likely to surface. Although numbering only 1,000, these credit unions are the most profitable and fastest growing. Controlling about 75% of credit union assets, their profile deviates from the median credit union. Many are capturing market share from the smaller 9,000 credit unions, alienating that group. Without the support of the 9,000; and, facing banking groups efforts to ''limit competition''; this small group of fast growing credit unions (likely re-characterized as ''credit associations'') may end up getting squeezed into a box resulting in taxation and only modest new powers. Mutual savings banks had to wait over 20 years after being taxed before gaining any significant new powers.

 

 

 

Oct. 14, 2002


Comments

 
 
 
  • I knew it would happen, but just not this soon.
    Anonymous
     
     
     
  • Very well written article. The author has obviously done his homework.
    Anonymous
     
     
     
  • The future of the credit union as it exists today is certainly a topic of interest to us all. I suspect the credit union movement is not on top of the probable impending changes in more ways than just charter!
    Anonymous
     
     
     
  • Thanks for the information.
    Anonymous
     
     
     
  • The Treasury Department is not making this study.
    Anonymous
     
     
     
  • Awesome insight!
    Anonymous
     
     
     
  • I worked with Bob Freedman when I was with the FSLIC of the Federal Home Loan Bank Board. He worked with clients who wanted to purchase defunct S & L's.
    Anonymous