Opinion from Bill Brooks - activist leader and CEO in credit unions, NCUA regulator, and credit union trade associations
The credit union model had been around for quite some time before it reached the United States. Credit unions were pretty much based on inter-lending amongst people you knew. The model got a big boost when Congress passed the Federal Credit Union Act in 1934 to help provide a source of credit for people of modest means.
Lending to the hoi polloi was not something that banks cared about doing. There were many loan sharks, exploiters of people down on their luck, but not much else. Credit unions were organized around common bonds based on occupation, association and well-defined communities. For about the first 50 years, the model worked. The credit unions, banks and savings and loans all had their niche.
Credit unions worked with each other and never used predatory merger strategies as a means to achieve growth. Things were simple. People had a place to go when they needed a loan and everyone knew your name. Things have changed in the last 50 years for financial institutions. Credit unions for many "rational" reasons seem to have adopted growth for growth’s sake and an abandonment of the common bond.
I have not heard any questions about whether the response is appropriate. I have never heard any public discussions about how well credit unions are fulfilling their mission of making more available to people of moderate means. I have heard chest pounding about how credit union were democratically controlled, cooperatively run organizations. The chest pounding is pure hooey! No greater fraud is put to the public than presenting yourself to be something that you are not! Credit union leadership has focused on competing with banks. No dumber strategy can be wished for.
Competing with banks and the new financial service providers is not the charge for credit unions. The drive for growth which leads to enrichment of the insiders of larger credit unions is killing the goose that laid the golden egg. Providing goods and services that are reciprocal to what banks offer makes you irrelevant. Authorities are beginning to realize that credit unions are different from their public image. The powers that be will come to realize that they have vested powers in people of general goodwill, but not necessarily good sense to direct the affairs of credit unions.
HOW DO YOU RATE SUCCESS?
Credit unions were a strategic solution to problems faced by people of modest means. Not sure they are the strategic solution to today’s problems?The focus on A and B paper loans may or may not expand the loan pool for people of modest means. For them, the more things change, the more they remain the same.
