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This analysis considered not only the cost of the tax subsidy, but what happens to the teix subsidy — i. This included not only the direct tax expenditure that resulted from not teixing the net revenue of credit unions, but the indirect effect on tax revenues of a less competitive marketplace for financial services.

This is a more comprehensive analysis of the teix subsidy than is provided by the Joint Committee on Teixation and the Office of Management and Budget, which consider only the static tax expenditure and exclude behavioral changes in the marketplace. Still, JCT and 0MB also confirm the dramatic growth of the tax expenditure in recent years.

Eleven basis points are absorbed by higher labor costs at a credit union than at a comparable bank (due to inefficiencies).

In summary, the Tax Foundation Florida installment loans no credit check study shows that credit unions generally do not pass on their subsidy to customers.

However, the competitive threat to community banks comes from the fact that credit unions have the option to use the subsidy to secure business they want.

The credit union loan that I mentioned earlier, that was underpriced by 400 basis points, was surely made possible by the tax subsidy, and perhaps a failure to adequately evalu- ate the risk. Given the projected growth in the Federal budget deficit in the coming years and the threat it poses to our national prosperity, we can no longer afford a tax subsidy divorced from its original purpose that generates no public benefit and poses a threat to teix-paying community banks.

This view is also shared by the Debt Reduction Task Force of the Bipartisan Policy Center, Chaired by former Senator Pete Domenici and former 0MB Director Alice Rivlin, whose recent report rec- ommends eliminating the teix exemption for credit unions. Any serious effort to reduce the deficit must consider the merits of repealing the credit union tax exemption. While I have focused my com- ments on the Federal budget, the credit union tax exemption also deprives State and local governments, many of which are facing Florida installment loans no credit check cuts to essential public services to remain solvent, of desperately needed revenue. The recent bailout of corporate credit unions further demonstrates the funda- mental unfairness of the teix exemption. On September 24, 2010, three corporate 84 credit unions were taken into conservatorship by the NCUA, bringing the total to five over a period of 18 months. Seventy percent of corporate credit unions assets were held under conservatorship.

Cred- it unions benefit from taxpayer resources when times are rough, but they do not contribute when they are profitable.

This is an affront to teixpayers and to the com- munity banks that sustain their communities and the Nation with hard-earned tax dollars.

The case for repealing the exemption stands on its own merits as a deficit reduc- tion measure.

When considered in the context of the current effort by credit unions to expand their business lending powers and become the equivalent of banks, link- ing expanded lending powers to repeal of the tax exemption is a matter of fairness and free market principle.

If credit unions seek to have no distinct business model verses commercial banks than Congress must tax them under any equitable teix sys- tem. Credit Unions Could Convert to Mutual Thrifts The implicit reason for expansion of member business lending proposed in S. However, ICBA believes that there is a far more appropriate alternative for them. If they need bank powers to better serve their customers, they should be encouraged to convert to a Federal savings associa- tion charter. Over 30 credit unions have taken advantage of this option, despite the substantial Florida installment loans no credit check roadblocks that the National Credit Union Administration has put in the way of credit union-to-thrift conversions.

Conclusion Thank you again for convening this important hearing. ICBA strongly urges this Committee to reject calls for new powers for the tax- subsidized credit union industry that will not, despite assertions to the contrary, ex- pand small business credit or create jobs. Credit unions should be granted no new powers as long as they remain tax exempt and are not even meeting their statutory mission to serve individuals of modest means.

Thank you for this opportunity to testify and express the views of the community banking sector. PREPARED STATEMENT OF MICHAEL LUSSIER President and Chief Executive Officer, Webster First Federal Credit Union, ON BEHALF OF THE NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS June 16, 2011 Introduction Good morning. Chairman Johnson, Ranking Member Shelby, and Members of the Committee. My name is Mike Lussier and I am testif 3 dng today on behalf of the National Association of Federal Credit Unions (NAFCU) where I currently serve as Chairman of the Board of Directors. I appreciate the opportunity to share my views with the Committee on credit unions and member business lending.

Founded as a Polish-ethnic credit union in January of 1928, Webster First changed to a community credit union in 1956 and became feder- ally chartered in 1995. Throughout my career, I have been active in the credit union community. Prior to my chairmanship, I served on the Executive Committee of the NAFCU Board.

Ad- 85 ditionally, I have been a member of the Small Business Loan Review Board, was a Director for the Credit Union League of Massachusetts Insurance Agency, and served as Chairman of the Massachusetts Share Insurance Corporation Board. NAFCU is comprised of nearly 800 member owned and operated Federal credit unions. NAFCU member credit unions collectively account for approximately 62 percent of the assets of federally chartered credit unions.

NAFCU and the entire credit union community appreciate the opportunity to participate in this discussion regarding member busi- ness lending and allowing credit unions to further assist in the economic recovery. Historically, credit unions have served a unique function in the delivery of nec- essary financial services to Americans. Established by an act of Congress in 1934, the Federal credit union system was created, and has been recognized, as a way to promote thrift and to make financial services available to all Americans, many of whom would otherwise have limited access to financial services. Congress estab- lished credit unions as an alternative to banks and to fill a precise public need — a niche that credit unions fill today for nearly 93 million Americans. Credit unions exist solely for the purpose of pro- viding financial services to their members — while banks aim to make a profit for a limited number of shareholders. These singular rights extend all the way from making basic operating decisions to electing the board of directors — something unheard Florida installment loans no credit check of among for-profit, stock-owned banks. Credit unions continue to play a very important role in the lives of millions of Americans from all walks of life. Credit unions are second to none in providing their members with quality per- sonal service at the lowest possible cost.