Certainly by now we are all at least somewhat familiar with conflict between corporate and main street America. Most people would think about family farms versus corporate hog confinements. There is a new conflict emerging, one that may have a direct impact on your money. Recently, banking organizations have targeted credit unions, challenging them on the matter of their non-profit status.

The issue erupted after the University of Iowa Community Credit Union (UICCU), located in Iowa City, attempted to purchase Hawkeye State Bank, a small local bank also located in Iowa City. While this proposal was turned down by Iowa Superintendent of Credit Unions James Forney, this attempt by a non-profit institution to buy a commercial one ignited an assault from corporate banking institutions.

The banking establishment is now airing radio ads in an attempt to gear up public support for the taxation of credit unions. The ad that I heard accused credit unions of hoarding money, characterizing this as profit, which deserves taxation.

“Iowa’s five largest credit unions have over 25 million dollars in surplus funds they are not using to lower rates for customers,” the ad stated. First of all, this is not exactly a technical description of these funds’ purpose. According to Patrick Jury, Iowa Credit Union League Vice President, credit unions are limited to raising capital only by reserving earnings. So how does the ISU Community Credit Union (now the Greater Iowa Credit Union) raise money to purchase ATMs and build local branches? By saving earnings. Until the actual purchase or construction, these funds would appear as “profit” to the accounting-illiterate person, or be a convenient tool for an attack on credit unions.

The ad attempts to stir up emotions to make consumers feel as though credit unions are not taxed as businesses and individuals are. “Tell the legislature that credit unions need to pay their fair share.”

Commercial banks want you to feel somehow victimized by credit unions. “You and I pay taxes,” the ad states, suggesting that credit unions do not. Despite these corporate organizations attempting to cloud the facts, credit unions behave differently than banks, and are therefore subject to a different tax code. Even so, as the tax code regarding non-profit lending institutions stands now, credit unions do pay taxes on many monies in the course of operations. Jury explains, “Just like banks, our state-chartered credit unions pay property, sales, and employer-related taxes. State law requires [credit unions] to pay a tax on reserves known as a ‘monies and credits’ tax, while banks pay a franchise tax on their net income.”

A simple assessment of the situation reveals a very different picture than that which is painted in the banking ads. If you compare CD, savings, and checking interest rates, you will notice a trend. Commercial banks have consistently lower interest rates on investment. If you compare auto loan and mortgage rates, commercial banks have consistently higher interest rates for lending. They have more service fees and convenience charges. Since it became legal to charge ATM fees, have you ever noticed the institutions charging you those fees here in Ames? The only no-fee ATMs that I have noticed are those owned by ISU Credit Union (Greater Iowa). This is not a coincidence.

Credit Unions are owned by their members. Dividends are issued to members at credit unions, while commercial banks need to use these funds for high CEO pay and stock options. And since the “earnings” that credit unions manage are either used to increase services or are returned directly to the members, credit unions boast better rates all around.

Taking this information into consideration, which institution focuses on people rather than profits? The banking industry would like you to think they are lobbying for fair tax principles, but this attack on non-profit lending institutions is merely an attempt to increase profits. If credit unions go out of business, commercial banks can increase their market share and therefore, revenue. Without this competition in the market, there is little incentive for banks to maintain reasonable rates. The banking industry is no different than any other commercial entity. This effort to gut credit unions is in the bankers’ self interest.

Competition is part of capitalism, and banks need the rivalry of customer-oriented institutions. Eliminating the competition certainly does not achieve this notion.