It’s official: The nation’s credit unions get to have their tax-exempt cake and eat it too!
Federal regulators last Friday afternoon announced a multi-billion-dollar bailout of the credit union industry due to risky bets on subprime mortgages. Regulators will manage $50 billion in troubled assets and issue approximately $35 billion in taxpayer-backed bonds. In other words, a financial industry that has never paid a dime in federal taxes is enjoying a taxpayer-funded rescue because of their risky and overreaching lending practices.
Under the plan, regulators seized the three largest wholesale credit unions and introduced new restrictions to try to avoid risky practices at credit unions—the same regulators that were urging Congress to expand the lending powers of credit unions!! Well, that sure seems a day late and about $35 billion short.
ICBA has long called on Congress to reconsider the tax-exempt status of the nation’s credit unions. A 2005 Tax Foundation study found that the exemption is costing taxpayers more than $30 billion over 10 years. Last Friday afternoon, that tab just about doubled. With spiraling budget deficits, maybe this bailout is enough to get Congress to finally act to ensure that the rest of us don’t have to take a bite of what the credit union industry is cooking up.