Congratulations to the Iowa Hawkeyes for their tremendous Holiday Bowl win over the USC Trojans. The Hawkeyes were dominant in nearly every phase of the game while competing on a level playing field with one of the nation’s blue blood programs. The Hawkeyes demonstrated that, all else being equal, the most skilled and hardworking competitors will succeed.
Clearly, the same cannot be said for San Diego County Credit Union, sponsor of the Holiday Bowl. Their brash “Don’t Feed the Bankers” television advertisements plainly exposed what is wrong with large credit unions in our country. While clever, these ads simply made the case that large, multibillion dollar credit unions continue to stray far from their original mission.
Consider this: the SDCCU was originally chartered in 1938 as San Diego County Employees Credit Union. Its founding purpose was to serve the financial needs of county government employees. During the 1970s, SDCCU relaxed its membership requirement and now is open to everyone living or working in three densely populated counties, comprising nearly 9 million residents. But the story gets better as SDCCU membership is essentially now unrestricted, which explains how their membership has ballooned to over 400,000 and they have amassed $8.3 billion in assets. Most importantly, it explains why SDCCU would spend millions sponsoring and advertising during a national sporting event!
Here are the pure numbers: In 2018, the SDCCU earned a profit of $106 million. That’s a nice profit for a “not for profit” entity. The SDCCU also spent $16 million on advertising. It lends its name to a pro sports stadium and sponsors a popular football bowl game. And, it paid its CEO compensation well in excess of $3 million in 2017. Most commercial banks pay more than twenty cents of each dollar earned in federal and state income taxes. And it is a fact that commercial banks are more efficient entities than are credit unions, who are not required to pay income taxes on income earned. “More efficient” simply means that banks have more money to return to their communities in loans and investments. The Congressional Budget Office estimates that the tax exemption credit unions enjoy costs federal taxpayers nearly $3 billion each year.
The largest four credit unions in Iowa now control 61 percent of all credit union assets in the state and together had net income of $146 million in 2018. Not a dollar of income tax was paid on this income. Think of what this means to Iowa. Were large, multibillion credit unions paying state taxes, how many teachers or highway patrol officers could be hired or mental health clinics funded?
How long are our taxpayers willing to continue subsidizing these mega credit unions, who ironically are far larger than almost every commercial bank in our state? Just as the Hawkeyes and USC played on a level playing field, it’s past time to level the field for the financial services industry.
Charlie Funk is president and CEO of MidWestOne Bank and past chairman of the Iowa Bankers Association.