Credit unions are subject to virtually the same safety and soundness, regulatory enforcement, and consumer protection rules as banks and thrifts. The study thus puts the lie to the bankers claim that credit unions are less regulated than banks. In fact, many of the regulations credit unions are subject to are more severe than those faced by banks.
Credit unions have more limited powers than banks and thrifts.
The study notes that federal credit unions face stricter limits on business lending and unlike banks may only offer certain services such as trust accounts and securities activities indirectly. In addition, credit union membership is limited, while banks may serve the general public. When the limits on credit union powers are viewed together with other credit union rules, credit unions are more heavily regulated than banks and thrifts. Consistent with President Bush s support for credit unions tax exemption, as well as that of the previous Administration, the study does not recommend taxing credit unions. Paying taxes would result in lower after-tax earnings, which would lower the rate at which credit unions retained earnings.