One big thing:
Credit unions are buying banks – but it’s not what you think
When credit unions acquire banks, it’s actually bank owners who are often driving these deals to pocket future tax revenues, creating an unintended exploitation of a Depression-era tax policy meant to help the poor.
Why it matters:
This growing trend highlights how a well-intentioned tax exemption has strayed far from its original purpose, potentially costing taxpayers millions while enriching bank owners and credit union executives.
What they’re saying:
“When Congress established this tax exemption they intended the benefit to go to the working poor,” says Howard Headlee, president and CEO of the Utah Bankers Association. “But over the years, wealthy people figured out how to take advantage of the tax subsidy. And then small businesses, and then big businesses and developers.”
How it works:
- Banks calculate their sale price based on after-tax profits
- Credit unions can pay more because they won’t have to pay those taxes
- Bank owners pocket the difference that would have gone to taxes
By the numbers:
Credit union executives also benefit from these deals since their compensation is tied to institution size. They retain higher profits from members through:
- Higher loan rates
- Lower deposit rates
- Increased fees
The bottom line:
“A tax exemption that was created in 1935 to help the poor get access to credit is now putting millions in the pockets of bank owners,” says Headlee. “That’s about as far out of control a bad tax policy can get.”
What’s next:
Congress may finally be forced to address this issue as the collaborative exploitation between banks and credit unions becomes more apparent.