CUNA Analysis: Pay Me Now – or in 300 Years!
GAO study shows CU tax exemption dwarfed by billions spent on S&L crisis

June 25, 2007

FOR IMMEDIATE RELEASE
Contact:
Pat Keefe, CUNA
(202) 508-6765; pkeefe@cuna.com

WASHINGTON -- It would take 313 years at the Treasury’s 2007 estimate of $1.4 billion for the annual credit union tax exemption amount to equal the total amount taxpayers forked over to deal with the savings and loan crisis, according to results of a new CUNA analysis of the recent Government Accountability Office (GAO) report on banking activities.

According to GAO’s updated estimates of the costs of the Federal Savings and Loan Insurance Corp. (FSLIC) bailout in the late 1980s and early 1990s, in 2006 dollars, the total FSLIC bailout costs borne by taxpayers is $438 billion. That total comes from $166 billion of total resolution costs borne by taxpayers, and $272 billion in total interest costs borne by taxpayers.

“Three centuries is a long time to wait to get paid,” said CUNA President and CEO Dan Mica. “The GAO study shows just how absurd is the banker argument that the credit union tax exemption must be erased to help pay government bills.

“Further, as banks have posted five straight years of record profits, the GAO study clearly indicates: The existence of credit unions has no impact on the ability of banks to make money – lots and lots of it.”

The GAO study found that, measured by return on assets, banks are generally more profitable than are thrifts, and both (in turn) are more profitable than credit unions. In 2006, GAO reported, banks posted 1.27 percent ROA, thrifts 0.96 percent and credit unions 0.81 percent.

However, CUNA’s analysis, incorporating FDIC data with the GAO results, reveals that even smaller banks have been very profitable over the last several years, such as posting an average ROA of 1.2 percent in 2006.

Other findings of CUNA’s analysis of the GAO study revealed:

• Banking institution federal tax breaks yield a 2007 total of between $1.3 billion and $1.9 billion (based on CUNA’s combination of known or conservatively estimated bank tax advantages).
• The 2006 tax revenue loss from the 2,356 Subchapter S banking institutions was $726 million. (GAO reported that banks are significant users of Subchapter S status, and presented an analysis showing that the net effect of electing Subchapter S status is to lower the total amount of tax for a Sub S bank and its owners by almost 22 percent, compared to what a Subchapter C bank and its owners would pay. Additionally, two of the more than 2,300 Sub S banks held more than $10 billion in assets at year-end 2006.)
• According to a number of private sources consulted by CUNA, in 2006 the average bank CEO total compensation was $353,000; the average credit union CEO compensation, at the same time, was $88,000. The disparity, CUNA found is evident even when comparing like-sized institutions. (The GAO reported that although publicly available information on executive compensation in the banking industry is limited, compensation for bank executives, especially CEOs, has increased.)

An overview of CUNA’s analysis of the GAO report can be found at this page on the CUNA website: www.cuna.org/initiatives/gao/gao_overview.html.

About CUNA
The CREDIT UNION NATIONAL ASSOCIATION (CUNA) is the nation’s largest credit union trade group. With its network of affiliated state credit union leagues, CUNA serves 90 percent of America’s nearly 9,000 credit unions, which are owned by 89 million consumer members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life.

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