FOR IMMEDIATE RELEASE
GAO: Tax-Free Credit Unions Shouldn't Attempt to Sell 'Stock'
Washington, D.C. (Sept. 8, 2004) - The General Accountability Office (GAO), the federal government's watchdog agency, has released a report criticizing a National Credit Union Association (NCUA) proposal to allow tax-free credit unions to sell stock to raise secondary capital to further fuel their rapid growth.
The 55-page report, titled "Credit Unions: Available Information Indicates No Compelling Need for Secondary Capital," concludes that the NCUA proposal would fundamentally jeopardize the member-owned, nonprofit nature of credit unions or create additional systemic risk for the industry. The report also debunks the contentions of credit unions that current law is stifling their growth.
The Independent Community Bankers of America (ICBA) said the NCUA's proposal exposes the hypocrisy of many in the credit union industry. "Credit unions constantly criticize community banks as stockholder-owned institutions," noted Camden R. Fine, ICBA's president and CEO. "Meanwhile, this report shows they are willing to abandon their cooperative structure for a stockholder model to further grow their operations, while keeping the tax-exemptions that give them an unfair advantage over other financial institutions. 'Growth-by any means necessary' should be the motto of the credit union industry."
"The credit union industry's desire to permit additional forms of capital in the definition of net worth has been exposed for what it is-a blatant attempt to circumvent current law to promote unbridled expansion of the credit union industry," Fine added. "As ICBA has said for years, it is time for the mega-credit unions to focus on their statutory mission to serve people of modest means. If they want to be banks, they should apply for a bank charter and pay taxes."
Last year the GAO issued a report documenting the growth of tax-exempt mega-credit unions throughout the country and cited the need for greater risk management by credit unions because of the growing concentration of industry assets in large credit unions.
The GAO's current study is at www.gao.gov/new.items/d04849.pdf.