Musings from the CU Suite

Written by Anthony Demangone

With the fiscal cliff looming, the issue of taxation and credit unions is getting more attention.

I'm a firm believer that Congress was pretty smart back in the day.  They conferred the tax exemption on our industry, while placing us under a set of checks and balances that tip the scales away from profit and toward consumers.  I wrote about our corporate governance before.  It is a bit long-winded of an explanation, but I believe it rings true. 

NAFCU also commissioned a study that highlights the value of the credit union tax exemption.  It is chock full of numbers and statistics.  It isn't the easiest of reading, but again, I think it rings true. 

But thank goodness for the Washington Post.  I read an article recently that concisely sums up the differences between credit unions and for-profit financial institutions. 

Citigroup said Wednesday that it will cut 11,000 jobs, a bold early move by new CEO Michael Corbat.

The cuts amount to about 4 percent of Citi’s workforce. The bulk of them, about 6,200 jobs, will come from Citi’s consumer banking unit, which handles everyday functions like branches and checking accounts.

Citi said that it will sell or scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay and focus on 150 cities around the world “that have the highest growth potential in consumer banking.”

The bank, the third-largest in the country by assets, did not say how many jobs it will cut in the United States.

Wait for it...wait for it.

Investors appeared to like the move. They sent Citi stock up $2.17, or 6.3 percent, to close at $36.46 Wednesday.

There you have it. A for profit bank is shifting operations away from consumers operations, and focusing its attention in the areas of the world where it can make the most money.  And its investors cheered.

Citi isn't wrong.  Citi isn't bad.  Citi is just different from credit unions.  Their corporate governance demands that they do things like this.  They answer to their investors, and to a certain degree, to their stock price. 

If you tweak the tax structure of credit unions, you'll change our corporate governance.  And that corporate governance is the reason credit unions are different from entities like Citi.  So I guess it boils down to this...

Does Congress want credit unions to behave more like Citi?  Or do they wish more financial institutions behaved like credit unions?  

It isn't a difficult question.