I'm passing this story on as a follow-up to my post of Oct. 31. Mark Holbrook is president of a credit union that specializes in making mortgages to churches. Holbrook says the credit union is sound, and I hope that in fact it weathers the current real estate downturn.
I am writing about the Evangelical Christian Credit Union here not because I want to go into the intricacies of mortgage lending, but because I want to raise another point. What role does our faith play in determining whether we are competing fairly in our line of work?
I know a lot of people who work in banks who would say that no credit union should be making billions of dollars in mortgages. The argument is that Congress created the credit union charter so that groups of people could band together for the purpose of extending credit to one another. These people were supposed to share similarities or some form of common bond. And credit unions were supposed to be small; they were never intended to be big businesses. In the early part of the 20th century, banks didn't really serve individuals, so credit unions were an important way for typical consumers to save money and borrow for vacations, household appliances and other big ticket items. Because of their limited business scope, Congress exempted credit unions from paying federal income taxes.
Today, credit unions still exist, but banks now serve individuals. In fact, there is virtually no difference between the services offered by a credit union and a bank. An important difference, however, is that banks do pay federal income taxes. Since credit unions are still exempt from federal income tax, they can pay a little more on savings accounts and charge a little less on loans than banks. It is a competitive advantage that bankers overlook for credit unions that remain small and dedicate themselves to serving their defined group.
But when credit unions began serving businesses, bankers cried foul. This was outside the original purpose of credit unions. Congress limited a credit union's ability to lend to commercial interests to 12.25 percent. But as you read in this article, ECCU is one of 123 credit unions that has been granted an exemption from that cap. ECCU has 83 percent of its assets in mortgages, which are essentially commercial loans. These credit unions compete directly with banks, the only difference is credit unions still don't pay federal income taxes. This advantage clearly helps credit unions make loans available more economically than a bank can. The inequity is bothersome to people who study tax policy.
I am not saying ECCU is wrong for focusing on mortgages and for seeking an exemption to the commercial loan cap. As a taxpayer, though, I think if regulators are going to grant the exception, they should then subject them to the same taxation that everyone else in that business faces.
Credit union taxation has become an increasingly controversial issue over the last several years. I have been covering the debate for decades. Years ago few people cared about the issue, as it was typically seen as nothing more than griping on the part of bankers. But in the last year, with everything in flux in the financial services industry and a growing need for tax revenue, policy makers are looking at this more closely.
So do employees have a responsibility to understand the competitive landscape of their industry? Is it important for them to know where they are on that landscape? It certainly makes sense to say that employees who understand their business well make better employees than those who don't. But how might that affect your ability to bring God to your job? What if your company's actions are perfectly legal, but nonetheless unfair? Who gets to make that determination? Should an employee attempt to make it, or should that be left up to the boss, or perhaps even to an elected official? These are all points to ponder. As you find answers, consider what it might mean about you future and your ability to build a relationship with God through your career.
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