Hoosier Banker 19 Other projects – such as Pentagon Federal Credit Union’s partnership with Goldman Sachs on luxury mixed-use developments in the nation’s capital – don’t reflect the traditional credit union mission, either. Perhaps most egregious of all, irresponsible lending related to New York City taxi medallions dominated by half a dozen credit unions led to financial ruin for thousands of families and an estimated $765.5 million in losses to the NCUA’s Share Insurance Fund. Lax Oversight The NCUA itself has had a considerable role in the credit union industry’s evolution as it continues finding new ways to increase the powers of the industry it is charged with regulating. In fact, its latest proposal would allow the most complex credit unions to issue subordinated debt as an alternative form of capital, which would allow outside investors to exploit the credit union tax subsidy and could encourage even more community bank acquisitions by larger credit unions. The NCUA also recently proposed a second delay in implementing rules requiring credit unions to hold adequate capital to protect against losses, more than a decade after the Wall Street financial crisis. In his dissent, NCUA board member Todd Harper asked if the agency is forgetting the past repeatedly, “just like characters in ‘Groundhog Day.’” Further, the NCUA has reissued a proposed rule that would allow credit unions to include wealthy suburbs of metropolitan areas in their fields of membership while leaving out their urban cores. That came after the U.S. Court of Appeals for the District of Columbia Circuit ordered the agency to explain how its plan would prevent redlining. While the NCUA claims legal protections will prevent illegal discrimination, the agency’s 25 yearly on-site compliance and lending exams are insufficient for an industry that serves 117 million members. Wake Up The credit union tax exemption dates to 1934, when Congress chartered credit unions as not-for-profit institutions to serve people of modest means with a “common bond” of occupation or association. Today, large credit unions are virtually indistinguishable from tax-paying community and regional banks. The $1.51 trillion industry now earns billions of dollars in profits every quarter and features outsized CEO salaries while remaining tax-exempt. Congress should wake up to this growing list of concerns. It wouldn’t be the first time that lawmakers reconsidered a tax break for the financial sector. In 1951 Congress revoked the tax exemption for building and loan associations, cooperative banks and mutual savings banks. Policymakers ruled that these institutions operated much like commercial banks and should be taxed accordingly, and the rest is history. With even credit union executives expressing concerns, now is the time for Congress to open its eyes to the need for credit union reforms and take action. HB CINNAIRE.COM To bring meaningful transformation to a community you need to be part of the community. Know the people. Understand their needs. Create a shared vision. And deliver capital, development capacity and trusted partnerships. Over 25 years, we’ve delivered more than $7.3 billion in community impact. And our commitment to creating healthy communities has never wavered. The Return on Investment: Safe, Affordable Homes. Healthy Communities. Better Lives. INVESTING IN INDIANA COMMUNITIES FOR MORE THAN 25 YEARS. Transforming Communities. Transforming Lives.
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