Banks Use Failures To Go After CU Tax Exemption
WASHINGTON-In a new assault on credit unions, community bankers called on Treasury Secretary Timothy Geithner last week to begin a review of the credit union tax exemption in light of the government-assisted rescue of the corporate system.
"The NCUA's solution to this crisis involves the isolation of the bad assets in a securitization trust that will sell government guaranteed notes. This tax-funded backstop will prevent the immediate recognition of the losses that would result from a fire sale of the assets," Camden Fine, president of the Independent Community Bankers of America, told Geithner in a letter the trade association sent last week.
"The taxpayer bailout of the credit union system should cast doubt on the wisdom and the fairness of their tax exempt status," said the banking lobbyist. "At a time of record deficits, every dollar of revenue counts. This consideration alone makes a strong case for repealing the tax exemption for credit unions. But now, credit unions not only do not pay tax, but when they are troubled they get a taxpayer bailout."
The banking lobbyist was referring to the government guarantee of the NCUA Guaranteed Notes that will be created by the securitization of some $35 billion of toxic assets on the books of the five corporate failures, U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU. NCUA has chartered "bridges" for U.S. Central and WesCorp.
The ICBA, which represents 5,000 community banks, has been leading banking lobby's assault on the credit union tax exemption for many years.