Abandoned Mission

It made sense in the 1930s for the government to subsidize credit unions by letting them off the hook from paying federal income taxes. Back then, they helped at-risk communities survive hard times by expanding access to credit to those who needed it most. Large credit unions have long abandoned that mission, and today are seeking membership growth—by targeting rich people.

Abandoned mission icon

Expert Views

Erica York, Tax Foundation
“Given the change in the financial sector over the last several decades, it would be useful for lawmakers to reexamine the extent to which credit unions currently fulfill their original purpose. If they have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities.” 
— Tax Foundation, 2018
Karen Shaw Petrou, Federal Financial Analytics, Inc.
“About half of all credit unions are allowed to use ‘secondary’ capital instruments generally barred for banks. Credit unions that issue this capital fail at a rate that is 362 percent greater than conservative institutions. Proposals to expand the use of these instruments thus may increase overall solvency risk in the credit-union sector, exposing members and the broader economy to risk.” 
— Federal Financial Analytics, 2019
Aaron Klein, The Brookings Institute
“But if your word is your bond, does everyone who speaks share a common bond? In that case, the concept of a common bond is meaningless. That is the direction that the nation’s credit union movement, including its federal regulator, appears to be moving — and that’s something the public and policymakers need to stop and think about.” 
— The Brookings Institution, 2017

Large Credit Unions Have Abandoned Their Mission

Recent News and Insights


In December 2022, over 200 credit union lobbyists descended on Charleston, South Carolina, to plot their advocacy strategy for the year ahead. Participants made clear that the credit union industry plans to continue paying lip service to serving low- and moderate-income (LMI) communities, while directing its efforts toward expanding into new affluent markets.


As the regulatory regime for credit unions becomes more relaxed, complex credit unions have become indistinguishable from community banks. Their ability to raise investor capital with 30-year horizons facilitates growth that goes well beyond credit unions’ original purpose.  


To borrow from the great line purportedly uttered by late Sen. Everett Dirksen about spending in Washington – “a billion here, a billion there, and pretty soon you’re talking about real money” – credit unions are taking huge advantage of their regulator’s relaxed position on the highly profitable not-for-profits by raising hundreds of millions of dollars a quarter from hedge funds and other for-profit investors in the form of subordinated debt.

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