DC's War on Small Banks: Credit Union Cronyism Edition
I have written with great frequency about the cronyism Big Government has delivered for Big Banks. DC taxes and regulates everything in a HUGELY uneven fashion. So as to best benefit their Big Business benefactors. The financial sector is not immune to DC’s harms.
DC makes life miserable for the Big Banks’ small bank competitors. This cronyism has murdered thousands of small banks. The Big Banks then vulture in and buy the carcasses - and their marketshares - on the cheap. It’s backdoor Big Bank market consolidation. Exactly the opposite of the “Too Big to Fail” lie we were all told.
But DC’s assault on small banks is multi-frontal. Another beneficiary of small-bank-destroying Big Gov cronyism? Federal credit unions:
“(A) not-for-profit member-owned financial cooperative offering traditional banking services, including credit cards, loans and checking accounts.”
So…credit unions are banks. With some distinct DC-Crony advantages.
Elon Musk and his Department of Government Efficiency (DOGE) have shone the light of reality upon DC thoroughly scamming up what is known as the non-profit organization (AKA the Non-Governmental Organization [NGO]).
Sure, non-profits/NGOs can - and do - do good stuff. But in the hands of DC and its many cronies? Things go very bad quite quickly.
As mentioned above, credit unions are “not-for-profits” rather than non-profits. In DC, that’s a distinction without a difference:
“Not-for-profit and nonprofit are often used interchangeably, as both terms generally refer to exempt organizations that do not distribute profits to owners and have tax-exempt status, meaning they do not pay taxes on money earned.
“The IRS does not make a distinct classification between them either. Nonprofits can be charitable organizations, churches and religious organizations, private foundations, political organizations or other types of nonprofits.
“Not-for-profits, while not an official legal term, typically fall under what the IRS calls other nonprofits. These include social welfare organizations, social clubs, labor organizations and business leagues, and they can qualify for exemption under subsections other than 501(c)(3).”
You read that right. Credit unions do not pay income taxes. Which most people would say is a HUGE DC-Crony advantage to have over the small banks with which credit unions are competing.
But wait - there’s more.
Federal credit unions are also exempt from Unrelated Business Income Taxes (UBIT). Small banks are not.
Federal credit unions do not have to file Internal Revenue Service (IRS) Form 990s. Which is a GIANT regulatory pain in the keister. Which many businesses - especially small ones - do erroneously. And we all know how much fun the IRS is when you file something erroneously.
Federal credit unions get tax benefits coming and going. Not just exemptions - but subsidies:
“Credit unions benefit from both a tax subsidy and a nonprofit subsidy. The tax subsidy is roughly $3 billion annually, but studies find the combined subsidy is many times the tax subsidy, as much as $21 billion annually.”
All of this DC-Crony tax savings allows credit unions to do some very Big Bank things. Like sponsor multiple National Football League (NFL) teams. Further raising their business profiles vis-a-vis their small bank competitors. Via their savings on the many taxes their small bank competitors have to pay.
Another Big Bank thing federal credit unions do? HUGE banking penalties and fines: “Originally, the Financial Health Network clocked credit unions' fee revenue for 2023 at $1.4 billion; now its estimate is $5.3 billion.”
But in true DC-Crony fashion? The National Credit Union Administration (NCUA) - the DC joint allegedly overseeing credit unions? Is no longer requiring credit unions to report information on overdraft fees. Which almost certainly means “$5.3 billion in 2023” will henceforth be referred to as “the good old days.”
Get all that? Federal credit unions get all the Big Bank cronyism. Plus they get all sorts of additional DC-Crony benefits.
All while massively ripping off their victims - oops, I mean customers - to further pad their tax-free profits.
Which is really weird. Because DC deems federal credit unions “not-for-profits.”
Meanwhile, their DC-abused small bank competitors stare into the DC abyss and rightly, righteously ask:
“What the heck is going on here?”
