Washington, D.C. — In a town not known for its candor, Chairman Norman E. D’Amours of the National Credit Union Administration (NCUA) told an assemblage of credit union professionals from around the country that “credit unionism in the U.S. seems to be drifting toward becoming a not-for-profit banking sector like mutual banks.”
D’Amours, a former Congressman and now the chief regulator of federal credit unions, reminded them of the “historical, philosophical and statutory mission” of these credit union cooperatives — namely “to reach out to people of small means.”
Ever since Alphonse Desjardins journeyed from Quebec to New Hampshire in 1906 to help establish the first credit union in the U.S. the credit union movement has reached out to people of modest incomes including those in rural areas. Over seventy-one million Americans now belong to credit unions with total assets well over $351 billion.
But as they grew and prospered, these cooperatives experienced what other cooperatives went through — a decline in the participation and control of the member volunteers and an increase in the policy role and power of the paid professionals and managers.
So credit unions, especially the larger ones, are pulled to become more like the banks than the other way around. Historically, the early credit unions curbed some of the greed, gouging and arrogance of the commercial banks by providing this “consumer sovereign” alternative, often right at the workplace.
Now, with the big banks getting bigger, backed by the federal government’s implicit guarantee against failure or overextension, and new technologies requiring new ways of doing business, and new attacks on credit unions by the banks, especially on membership eligibility, the managers meet the daily pressures without sufficiently embracing the vision behind their reason for being non-profit, tax-exempt, cooperative institutions.
With very few exceptions, credit unions were not corrupted by excesses of the Eighties, as were about 1000 Savings and Loans. Credit unions did not require a bailout by the taxpayer of half a trillion dollars as did the Savings and Loans. Credit unions are very prosperous these days, but D’Amours noted that “professionals” are “in control of policy…especially…in the big decision-making processes that affect the direction of the national credit union movement. These processes tend to be controlled by trade group professionals with not nearly enough meaningful input from true volunteers.”
The founders of the credit union movement wanted the all volunteer Boards of Directors and the members to control the decision-making function to keep it as removed as possible from economic self-interest or the drive for profit. D’Amours illustrated how distant the ideal is from the reality when he observed that The Board of CUNA (the national association of credit unions) does not have a “single true volunteer” among its many members.
He warned his audience that if they lose sight of their social mission — bringing in people “who are financially underserved in order to help bring themselves into the financial mainstream”, they will lose public and consumer support in their titanic battle with the banks who dislike competition by cooperatives.
To root his criticism, D’Amours quoted former CUNA leaders, Ralph Swoboda and Al Williams who cautioned their colleagues not to lose their commitment to credit union ideals and philosophy.
He then drove his point home about the neglected overall missions of credit unions by asking three rhetorical questions: “If credit unions do not preserve their social mission of empowerment, what financial sector will be fully committed to giving all of America’s citizens a fair chance to meaningfully participate in the American economic system? What financial system will dedicate itself to providing all Americans with a fair chance at becoming the masters of their economic destinies? What financial institutions will reach out to liberate people of small means from the depressing burdens of unmanageable debt?”
The speech was more disliked than liked by the audience of credit union professionals. Some were even outraged. But D’Amours’ calls for more control and participation by the tens of thousands of credit union volunteers will have to be communicated to them by these professionals. We shall see how this is done, since the main financial press virtually shut out any coverage the following day (February 24th).
Maybe D’Amours’ next speech on the subject should inquire why the volunteers cannot or will not take more charge. There is a passivity problem that cannot be ignored.