The following message was written by our President Marc Schaefer.
Far-fetched? Perhaps so, but bank consolidation since the financial crisis of 2008-2009 has continued unabated.
In 2008, prior to the banking crisis, there were 7,137 commercial banks in the United States. The number by February of 2017 had shrunk to 5,141, a total decline since 2008 of 1,996 banks, or 28%. During the same period, total bank assets increased from just over $11 trillion to more than $16 trillion, an increase of almost 46%.
Meanwhile, the average U.S. bank’s total assets have more than doubled since 2008. The largest banks, some that were culpable in the financial crisis through their activities and were bailed out by you, the U.S. taxpayer, have been rewarded by growing in size and profitability.
Credit unions have consolidated too, but for different reasons. Some reasons include just maintaining the size and scale needed to keep up with the significant regulatory burden (mostly undeserved for credit unions), as a reaction to the financial crisis, and as embedded in the Dodd-Frank financial industry reform legislation. Keeping up with the rapid pace of technology to serve consumers’ needs, and the rising cost of hiring and retaining the best talent also favors credit unions, like Truliant, that are large enough to be viable and relevant to their members. Still, credit unions only account for about 7% of all of the deposits and loans of U.S. depository institutions.
Notably, the top 10 U.S. credit unions account for only 15% of the credit union market, whereas the top 10 banks control about 57% of the banking market.
Sadly, in spite of their virtually owning the field, the banking industry and their trade associations are still targeting the elimination of credit unions serving the U.S. population in any meaningful way by misrepresenting our purpose, structure and tax status. In spite of helping themselves to over $245 billion in taxpayer bailouts, they are starting to feel emboldened enough to attack credit unions that put the well-being of over 110 million Americans ahead of shareholder profits. In an attempt to take advantage of the recent review of the U.S. tax code, they’ve placed misleading and contrived communications (as opposed to credit union grassroots, member initiated ones) in newspaper opinion sections across the U.S.
Fortunately, members recognize that credit unions are looking out for their best interests. About 65% of Truliant members responded that we “had their best interest at heart” in a recent survey. In addition, it is estimated that credit unions in North Carolina alone saved consumers $45 million in fewer and lower fees in 2016-17 — as a part of $429 million in overall benefits — over for-profit, stock-holder-owned banks. The average credit union car loan in the state saves a member $703.
Credit unions are of, by and for their members. We pay property taxes, payroll taxes and most notably, we “pass through” dividends to you, the member, on which you then pay ordinary income tax (not unlike the many Subchapter S banks in the U.S.). We don’t merge, acquire and consolidate to make investors wealthy like banks do (which are appropriately taxed). We exist to improve our members’ lives by providing convenient access to affordable financial services, while offering helpful guidance that assists in reaching their goals.
We don’t expect the banker trade associations to stop trying to eliminate credit unions as a viable option for the majority of U.S. consumers, but we do believe the old adage “fool me once, shame on you; fool me twice, shame on me,” will keep the credit union option open for many years to come.
Sources: Seeking Alpha: Why You Should Expect Further Bank Consolidation in 2017, Feb. 8, 2017; Banking Trends. Federal Reserve Bank of Philadelphia Research Dept. First Quarter 2017; Charlotte Observer: Taxing Credit Unions Would Just Help Big Banks. Oct. 24, 2017.