Large credit unions remind one of the classic video game Pac-Man, moving quickly and eating up as many banks as possible as their regulator remains as ethereal as the bad ghosts chasing dear old Pac. Unfortunately, the only people with a stack of quarters to keep the game going are American taxpayers as more and more banks leave the federal tax roll when they are subsumed by large, tax-exempt credit unions.
Of course, this disturbing trend is no 1980s video game, but a real-life scheme with more and more banks purchased by credit unions, which are using their tax-paying status – or, rather, their not-tax-paying status – to fuel their buying spree.
The latest, and one of the largest ever credit union acquisitions of a bank was announced earlier this month when Florida-based behemoth VyStar Credit Union, which has $10 billion in assets, reached an agreement to buy $1.5 billion Heritage Southeast Bank of Jonesboro, Ga., for a whopping $189 million. (A price that was an eye-popping 80 percent premium over Heritage’s share price when the deal was announced.)
Explore Credit Unions has written many times about the troubling lack of oversight by the National Credit Union Administration (NCUA) when it comes to large credit unions buying banks. But this one is worth noting not only because of the size of the transaction and the enormous assets of the entities involved, but because of the prickly response VyStar’s CEO, Brian Wolfburg, issued when others in the financial industry dared to question the propriety of the deal.
Pressed on why VyStar – like all credit unions – does not pay its fair share in federal income taxes, Wolfburg does what CU leaders do well: He waltzed around a direct answer.
“We at VyStar, along with other credit unions, pay a variety of taxes including payroll, property and sales tax while also focusing on giving back to our members and communities in the form of more favorable rates, lower fees and excellent service while choosing to support charitable, civic and nonprofit organizations,” said the Jacksonville, Fla. credit union’s CEO.
Sure, the same tired song-and-dance we have heard from credit unions for decades, but what about federal income taxes? Nary a mention from our $10 billion behemoth. Just more pulp fiction from VyStar, like so many other large credit unions before it.
Then VyStar cranked up the editorial cliché machine deep into the red zone by trumpeting so-called community benefits of the merger.
“Our partnership with HSB, will create one of the country’s greatest member-owned, not-for-profit financial cooperatives. Everyone involved—members, employees and communities will benefit from the best that both our organizations offer,” the CEO touted without a mention of how removing a $1.5 billion institution from the ranks of tax-paying banks might impact one other group: American taxpayers.
Indignation can be an effective communications strategy, for sure. In this case, VyStar seems to have deployed the old-fashioned “deny, deny, counter-attack” strategy. As usual, large credit unions defend their rabid desire for growth at all costs by hiding behind the veil of the historic purpose of the credit union charter, which doesn’t come close to resembling how they use the charter.
So, to return to Pac-Man. Congress and the NCUA need to stop giving large credit unions endless rolls of quarters financed by the American taxpayer and put an end to this ridiculous game.
- Make large credit unions pay their fair share in federal income taxes.
- End the ceaseless message machine touting without any substantive evidence of how credit unions help their communities.
- Treat large credit unions as the sophisticated financial institutions they are instead of allowing them to hide behind cloak of the original purpose of the charter.
Large credit unions need reform, and they need it now. The latest bank-grab is evidence of an industry out of control.