Republican candidate Newt Gingrich may not have all the right facts when it comes to credit unions. During a December 15 Fox News debate Gingrich likened credit unions to “government sponsored enterprises” (GSE), which includes disgraced Freddie Mac -- the mortgage giant from which he received $1.6 million in consulting fees in 2002.
The government seized Freddie Mac and Fannie Mae in 2008 and placed both under conservatorship.
According to the White House budget, GSEs include Fannie Mae, Freddie Mac, Agricultural Credit Bank, Farm Credit Banks, Federal Home Loan Banks and the Federal Agricultural Mortgage Corporation. Credit unions (and also electric co-ops, which Gingrich referred to during the debate as a GSE) are not on the list.
Why is it important that the record be set straight? His actual comment came when moderator Chris Wallace asked Gingrich about his $1.6 million in consulting fees from Freddie Mac in 2002 and his appreciation of the “GSE model.”
In response, Gingrich first discussed how at the time he was a private citizen, engaged in helping people buy houses (with regard to his involvement with Freddie Mac). He then launched into how the country should hold onto the goal of helping as many Americans become homeowners, which led him into commenting, “And when you look for example at electric membership co-ops, and you look at credit unions, there are a lot of government sponsored enterprises that are awfully important and do an awfully good job."
Wasn't the former Speaker of the House actually trying to say that credit unions were a good thing? Perhaps his intention was to support the credit union industry, but his comments implied that credit unions were government sponsored enterprises--a comment that couldn’t be further from the truth.
Some credit union officials are concerned that public comments like this coming from a potential presidential candidate can be harmful for the industry. In fact John Berlau, policy director with the Competitive Enterprise Institute expressed in an email that "credit union officials I have talked to are fearful that Gingrich's false claim that they are a type of GSE may unjustly harm their image among the public and legislators."
However, Mark Wolff, Senior Vice President of Communications from the Credit Union National Association (CUNA) says in an email that, “There's no evidence his comment has had any significant impact.” In fact Wolff points out that, “Newt Gingrich has a long and positive relationship with credit unions going back to his earliest days as a Congressman from Georgia.”
Investopedia defines a GSE as “Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers and homeowners.”
Does that sound like a credit union? To create a GSE it takes an Act of Congress in order to provide capital to a certain industry such as the housing or agricultural market.
Credit unions, on the other hand are defined in Investopedia as a, “Member-owned financial co-operative. These institutions are created and operated by its members and profits are shared amongst the owners.” The first U.S. credit union was created in 1908 when a New Hampshire priest extended credit to factory workers in textile mills--doesn’t really sound anything remotely like a GSE.
A few facts everyone (including Newt Gingrich) should know about credit unions:
Ready to join a credit union, but aren’t sure where to start? Find a credit union today and become part of the movement.By Gina Ragusa