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Thirteen million unemployed. Automobile production decimated. An 80% reduction in home building. Daily news of failing banks and investment funds. The descriptions sound familiar, but the year is 1932.In the penurious 1930′s, food, power and financial cooperatives became an economic and social backstop as investor-owned and private companies failed to bring affordable necessities to the masses. When private companies couldn’t sell to the people, they also failed to employ them. Responding to the crisis, a Boston millionaire named Edward A. Filene crisscrossed the country preaching the benefits of cooperative ownership. His legacy is the credit union movement.Edward Filene-at the Filene Research Institute, we affectionately call him Ed and hope he doesn’t mind-was not a financier or a banker by trade. He was a merchant. He made his millions selling slacks, shirts, shawls and underpants to New Englanders from a successful chain of Filene department stores. His professional life saw the unfolding of the industrial revolution in America, the panic of 1893, the financial excesses of the 1920s and the privations first of World War I and then the Great Depression. Alive today and confronting this new year of recession and worry, he might have agreed with Norman Cousin’s dictum: “History is a vast early warning system.”Ed skipped a formal education to help manage his father’s store, which he grew into one of the most successful in the nation. The main Filene store passed to Federated and eventually to Macy’s. Filene’s Basement, built on an exceptionally profitable discount model, is still opening new stores and can be found from Boston to Miami.“I think shopkeeping is like sin-first you endure it, then you embrace it,” Ed said. “I found out that although one may not become as learned in shopkeeping as by going through Harvard University, one may become wiser than some of the men who go through Harvard, if wisdom means having the things you know or have learned permeated with love and sympathy and understanding for your fellow men.”So Ed is rightly remembered as an altruist and in his later years as a philanthropist. But Ed was also a pragmatist, an unabashed capitalist, and a profound democrat, in the original sense of that word. He knew that his stores would flourish only if the riveter, the street sweep and the housewife flourished first. “If business in general is to be prosperous, we cannot permit any industry to be laggard…for if coal miners and textile workers cannot buy automobiles and radio sets, the automobile and radio industries will surely languish, and all other mass production industries will tend to depression,” he told a group of business students at the University of Buffalo in 1936.Also in 1936 Ed asked a group of sales executives a question eerily prescient for today’s credit unions: “Are we trying to perpetuate the system which has made it possible for us to thrive? Or may we not be seeking only to perpetuate our position in that system-our individual business, our established ways of doing business-even appealing to government, perhaps, to defend our present holdings against the normal hazards of capitalism itself? We can’t do both of these things.”For years, credit unions have been partly defined by their structure, their regulatory treatment and their tax exemption. The treatment and the exemption are valuable and certainly worth fighting to maintain, but there is concern that they may disappear in the coming year’s rush to re-engineer the government’s oversight and tax structure. If they do and if credit unions suddenly share all the freedoms and all the restraints of a commercial bank, how should cooperatives differentiate themselves?Speaking to us from the eye of a former storm, Ed shared three cooperative imperatives.Research and development. The cooperative ownership model frees credit unions from the demands of quarter-to-quarter earning pressure. Such freedom allows credit unions, especially those with pent-up capital, to bring new products and new ideas to their membership. “Consumer cooperatives…if they are to succeed, are under the same compulsion as any other business to do better and better. If they don’t, they will lose their membership, quite as definitely as any standstill store will lose its customers. They must employ the most extensive fact-finding research for they can no more afford to operate according to the notions of their well-meaning but inexperienced idealists than business can afford to continue operation according to the old, inherited business traditions,” Ed said.Saving. Ed actually argued for consumer spending to spur economic recovery during the Great Depression. But he also encouraged his listeners to consider the facts. Today the facts show that Americans have taken on inordinate debt, spending on average 19 cents of every earned dollar on debt payments. Financially strapped Americans spend much more. So, while credit unions should continue to lend responsibly, they should also make it worthwhile, even compelling, for members, especially at-risk groups like young adults, recent immigrants and low-income families to save before they spend.Social responsibility. In the rush to recover from 2008′s financial meltdown, banks of all stripes are scrambling to become friendlier, cuddlier and more socially aware than before. Savvy banks will go beyond CRA requirements in an attempt to tap consumers’ desire to patronize firms that safeguard the community, the customer and the environment not just the bottom line. Credit unions have a head-start: credit unions haven’t been part of the problem, and by considering members’ best interests first, credit unions are already part of the solution. “We must concentrate on the job of raising the standard of living throughout America, especially among the lower-income groups,” Ed said.Cooperatives that define themselves around these three things would make Ed proud.

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Peter Westerman

Credit Union Times

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