August 5, 1998
Contact: Lew Harris
NASHVILLE, Tenn. - Recent congressional legislation that undoes a Supreme Court ruling and continues a federal tax exemption for credit unions gives them an unfair advantage over banks, says Ronald W. Masulis, a professor at Vanderbilt University's Owen Graduate School of Management and an authority on financial institutions.
"I find it hard to understand why we want to subsidize this particular banking institution (credit unions) in this day and age," Masulis said. "Certainly in terms of the tax exemption, that's an advantage that no other institution has that offers the same spectrum of services. It strikes me that it's a fairly unique government-mandated advantage that has little justification in the current financial environment."
The bill passed by Congress Tuesday will also allow more people to join credit unions, undoing a Supreme Court ruling that had restricted credit union membership. Under the legislation, all current union members will be allowed to remain with their institutions, and federally chartered credit unions can continue to include more than one group in their memberships, as long as each group doesn't exceed 3,000 people.
President Clinton has indicated that he will sign the measure, even though it lacks a key provision requiring credit unions to abide by fair-lending rules that banks already must follow.
The Federal Credit Union Act of 1934 said membership should be by people with a common occupation, employment with the same company or residency in the same community. The National Credit Union Administration,
which oversees credit unions, gave its permission in 1982 for credit unions to
accept members from different types of businesses and places. Some have grown to be multibillion-dollar operations that offer many of the same services as banks, including automatic teller machines and credit cards.
Five months ago, the Supreme Court struck down many of the privileges that credit unions enjoyed but Tuesday's legislation reinstated them.
Before joining the faculty at Owen, Masulis served with such governmental agencies as the Federal Savings and Loan Insurance Corporation, the Federal Home Loan Bank Board and the Securities and Exchange Commission.
Writers who would like to speak with Masulis should call Lew Harris at (615) 322-2706.
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