As banks grow, so does their hypocrisy
Bankers have been taking their claws out lately when it comes to credit unions. In addition to the usual attacks on the credit union tax status, they loudly protested the latest emergency merger, despite that merger being a win for the credit union system, the two institutions involved and all credit union members.
All this is nothing new, but what is new is the staggering hypocrisy of these attacks coming as the big banks reap profits and benefits previously unheard of in the financial sector.
Bloomberg reported this week that major U.S. banks saw a $21 billion decrease in their tax bills in 2018 due to the Tax Cuts and Jobs Act. Four of the top six banks saw their tax bills lower than even their own internal projections and all six saw their profits surpass a combined $120 billion for the first time ever.
Surely after all the big bank talk of the “cost” of the credit union tax status ($1.7 billion in 2018, down 41 percent from $2.9 billion in 2017), their tax windfall would be put to good use.
But the big banks didn’t invest that money in their own people. Instead they cut around 4,300 jobs last year. The ratio of bank personnel costs to bank revenue declined, as bank employees helped make more money for shareholders but got a smaller part of it.
Banks didn’t invest it into communities. Lending growth was 1.3% slower than the previous year.
The real winner of the bank tax windfall seems to be shareholders who got a $28 billion increase in dividends and stock buybacks in 2018.
In sharp contrast, credit unions generate more than $17 billion in other federal, state and local tax revenue each year. Members see nearly $11 billion in savings, and even bank customers see $4.3 billion in savings due to competition from credit unions each year.
Banks also made quite the fuss about the emergency merger between Progressive Credit Union and PenFed Credit Union.
But this emergency merger saved 3,000 members of Progressive Credit Union from losing their financial institution. It saved the National Credit Union Share Insurance Fund from the loss that comes with a failed credit union, benefitting all 115 million credit union members in America.
During all their outcry, bankers were working on a merger of their own — one that would see BB&T and SunTrust combined into what would instantly be the sixth-largest bank in the country with nearly one-third the assets ($442 billion) of the entire credit union movement ($1.4 trillion).
Unlike credit union emergency mergers, this one is a win for no one — unless you’re a bank shareholder.
Community banks are finding themselves increasingly squeezed by ever-larger banks, and they end up losers in a world with yet another too-big-to-fail bank.
It’s quite a feat for the banking industry to advocate for the end of member-owned financial cooperatives as they reap 11-figure tax windfalls. Or to cry foul on an emergency merger that ensures 3,000 Americans can receive uninterrupted financial services while taking additional steps to harm community bankers.
Unfortunately, like so much recent history involving the big banks, consumers lose once again.