Stop Apologizing and Start Advocating
It is time that we remember who we are as credit unions and what we stand for. It is time to revisit our core principles and value and advocate how credit unions have made America and Americans financially stronger. It is time to stop apologizing for our desire to grow credit unions and give more people the opportunity to join credit unions.
If you listen to how bankers describe credit unions you hear that credit unions have an unfair tax advantage and credit unions are cheating when it comes to creating new ways to qualify members. Bankers argue that credit unions were created to serve the financially disadvantaged. When told over and over again, some of the press and Congress adopt this view of credit unions. We respond defensively and create new regulations that inhibit membership growth so we will be criticized less.
In my judgment, the best way to protect credit unions from unhelpful and unnecessary legislation is to be unapologetic about our mission and value. As an industry we need to communicate certain truths widely and often so credit unions define themselves.
- The American economy and the personal finances of everyday Americans are safer as a result of having financial institutions that have both a for-profit bank model and a non-profit cooperative credit union model. The financial crisis proved that non-profit cooperative financial institutions are an excellent hedge when for-profit financial institutions fail. When the securities markets froze and banks stopped lending due to excessive loan losses, credit unions continued to lend and helped borrowers and the economy weather the crises. Most of the losses in the financial crisis occurred due to individuals taking unreasonable risks in anticipation of huge personal profits. The non- profit credit union model does not encourage reckless risk taking because credit unions are not structured to personally reward staff for windfall profits. Credit unions are organized and motivated to serve members/owners, not shareholders and highly paid executives. No matter what new regulations are passed, I have faith that greed will find a way of repeating bank losses someday in the future. We want to have healthy credit unions there to aid in the
- Every American deserves to be able to use a bank or a credit union of their choice. If we still believe in choice and competition in this country, let us promote those principles by making it a right for every American to have a choice in financial institutions. I personally think the field of membership is a relic of the past and should be retired as a Every American should be able to choose a financial institution without restriction but if we have to have field of membership rules, they should be as liberal and expansive as possible.
- The cooperative model flourishes best in a non-profit tax model. Bankers say that they want a “level playing field”. In other words they want credit unions to pay taxes without the ability to raise capital in the markets. Won’t that be a nice outcome for them?
Credit unions are the means for people to collectively organize their finances in a cooperative and to provide themselves with financial services at reasonable rates. Credit unions are a living example of the American concept of pulling together a community for a common cause. Credit unions are not in the business of making a profit for shareholders. Yes some credit unions are large but the model and the purpose of a credit union remain the same. There is no finer example of a credit union serving its members than Navy Federal Credit Union.
Credit unions have traditionally aspired to a net interest margin of no less than 100 basis points. If a bank had earnings that low, the bank’s management would be in danger of losing their jobs. Now only the credit union peer group that is in excess of $500 Billion in assets has net interest margins in excess of 100 basis points. The credit union peer groups with fewer assets are struggling. Without the non-profit tax status, most of the smaller credit unions would soon cease to exist. Credit unions need the non-profit tax status to remain healthy.
- No one can seriously state that credit unions pose a threat to the viability of banks and the banking Credit unions are but a 6% market share blip in the financial marketplace and offer no meaningful competition to banks. Well-run banks do not have any problem making money in a market shared with credit unions. If credit unions go away, the competitive pressures on banks would lessen and who knows how high the fees to consumers may climb?
The credit union story is compelling but it is not self-evident. Tell the story with passion and often. Let’s take control of the narrative.
Guy Messick is in the private practice of law with Messick & Lauer PC in Media, PA.
Originally posted June 5, 2015