As Cooperation Erodes, Time to Reaffirm Our Connectivity and Reliance
On his 10th anniversary within the credit union movement, I find it interesting that Fred Becker mentions his observation of the erosion of cooperation among credit unions. As one who passed that same milestone back in July, I'm very inclined to agree. Competition with other lenders and external pressures have helped to drive a fissure into the cooperative philosophy of the credit union industry. This is moving in the wrong direction.
Right now, when lending is depressed and ROA is in a slump industrywide is when credit unions need each other the most. Certainly, there are some credit unions that are doing extraordinarily well in these rough economic times, so as cooperatives these institutions should be sharing their success stories to nurture replication and strengthen the system as a whole. Even if you're not inclined to mushy sentiment about the credit union movement and philosophy, just examine the NCUSIF. The last year has demonstrated how much all credit unions are interconnected. The impact on participants in the deposit insurance funds is not just reserved for federally insured credit unions; just look at the situation of the FDIC-insured banks and the premiums leveled against ASI clients as well. There is no escaping some of the interconnectivity of credit unions without escaping the charter, and different, yet similar, problems await there.
In the pages of Credit Union Times, we like to promote discussion and provide a variety of points of view relevant to credit unions. Recently, we have run comments from Marv Umholtz and Alan Theriault that, in essence, state that credit unions are dead and they should become banks. It is every credit union's duty to at least look at whether that would be best for members. Call it an exercise in reaffirmation because if true due diligence is performed, credit unions will discover that conversion would not be in the member-owners' best interests.
So, OmniAmerican, the converted credit union which in fairness remained a mutual entity for several years after converting from a credit union for various reasons, began trading on the NASDAQ late last month. The credit union did not take the usual route by forming a mutual holding company to maintain a controlling share of the bank but went straight to 100% stock ownership. I don't know how much more plainly one could illustrate that the move is anticooperative and insider enrichment. Unfortunately for the instigators of the credit union conversion, it took so long some weren't able to cash in.
One of the many things that credit unions need to get their act together on is a cooperative multimedia advertising campaign to let American consumers know that they exist and why. Time is of the essence. If credit unions don't get something going soon, like the next six months, they could lose the angry consumer tide against big banks forever.
Similarly, credit unions should not assume that this recession is going to make all the member accounts they've been adding or increasing stick. Credit unions must proactively grab this opportunity to provide financial education to members and nonmembers in hopes of not only making them members, but at least more fiscally knowledgeable-it's for the greater good. A combination of on-location classes that are interesting and online tools like Debt in Focus and other items are necessary for reaching members in the manner they want to be reached. As the economy recovers and people begin borrowing again, you want them to be wise in their savings and use of credit and not only your own as the housing bubble burst demonstrated. As President Obama said in the State of the Union address, "In the 21st century, the best antipoverty program around is a world-class education." And that has to include financial education.
This circles back to demonstrate interconnectivity and the fact that it's not just a phenomenon of the credit union movement. Credit unions should learn to balance their founding philosophies with some of the practices for-profit businesses around them. While credit unions and banks have different motives, they have many similar processes that banks, because of their profit motive, may have made more efficient. Use that because the savings go back to members in one form or another. It doesn't even have to be a financial institution. Look at other similarly sized businesses around you. What are they doing that you could adapt to your processes or even products? I recently participated in a CU Water Cooler Liquid Lunch blog talk radio show discussing the topic of free versus paid content. I hadn't thought about credit unions, trade groups and others being interested in that beyond being consumers of information.
We're all connected and reliant on each other. Credit unions rely on members to save and borrow. Members rely on their jobs to be able to save and borrow. Members' employers rely on large banks to lend the money to run the business. Those large banks rely on investments and loans to fund the borrowing. You get the point: If your neighbor's house is foreclosed upon, everyone's property value goes down. Sharing a little of what you have-your know-how-can go a long way to supporting an entire industry.
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