Mike Welch's column of July 6 takes NCUA Board Member Debbie Matz to task for remarking that community development credit unions (CDCUs) "represent not only the past, but the future of credit unions." He notes that this is a "pretty tall order for those little, often struggling folks." Well, yes – it is a tall order. Not as tall as that faced by last century's pioneers of the credit union movement, seeking to create a movement serving "people of modest means," but tall enough. It is also true, as Mike Welch asserts, that some CDCUs do not survive. But his underlying assumptions, observations, and conclusions demand scrutiny. The Federation recently prepared an analysis of trends in the CDCU movement reflected in year-end 2004 data. We found that by many measures, CDCUs actually outpaced "mainstream" federally insured credit unions. In particular, CDCUs showed the following increases: *assets up 13% for the year (all FICUS: +6%) *membership up 8% (all FICUs: +1.5%) *loans outstanding up 15% (all FICUs: up 10%) Return on assets was very similar to other FICUs, and net worth was slightly less, but still, on average, in the "well-capitalized" range. Welch asserts that CDCUs can't survive by concentrating on serving the underserved, hence other credit unions certainly could not. The healthy numbers for many CDCUs undermine his assertion. It's time to discard the tired, old chestnut cited by Welch that "poverty is not a common bond." It was misleading in the 1960s; given the success of many CDCUs, it is even more misleading today. Today, no one has to sign a poverty oath to join a CDCU. Most CDCUs are, in fact, succeeding (their median age is more than 30 years). Often it is because of an informal 80/20 rule: 80% of their members may be low-income, but a crucial 20% of their members are moderate or middle income. We don't advocate this formula for all credit unions. Perhaps a 20/80 rule would work for them: 20% low-income, 80% other. It is true that the last year has been a difficult one for many CDCUs. It was a difficult one for small credit unions of all types, reflected in disproportionately high rates of mergers and liquidations: 8.4% of all credit unions with less than $10 million disappeared in 2004-05. Welch may well be right that the 80/20 rule will give way to the 90/10, or 95/5 rule, for concentration of credit union assets and members. But premature burial of small credit unions is not necessarily the answer. Clifford N. Rosenthal Executive Director National Federation of Community Development Credit Unions New York

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