There is some precedent to this already in the Nationwide FCU case. Members there are receiving a premium on their capital. In the credit union's own example, a member with $1,000 on deposit receives a $150 cash payout, not bad at all.

Some view the Nationwide deal as the model for the potential takeovers of credit unions. Nationwide was a very unique case and I don't want to rehash that here. CEO Paula Edwards is one of the true good credit union people and had little choice in that deal. The reasons behind it can be thrown out, but what can't be thrown out is the premium on capital Nationwide Bank was willing to pay, that's the potential model going forward.

Would it make sense for banks to do this? With banks, that means it must make bottomline sense. Some credit union leaders say they wouldn't do it because there are obvious pitfalls. The acquisition could force a mass exodus of members, making it less attractive. Maybe, maybe not. Maybe the credit union members who just received a nice cash payout from the acquiring bank won't be so quick to leave after receiving that extra money. Also, it is so difficult to attract new customers today, that getting access to a dedicated group like a credit union's membership is mouthwatering for banks, and they may accept some attrition.

Let's try to shoot more holes in it. When banks acquire banks, branch networks are often one of the most valued parts of a deal. Credit unions don't have nearly the branch networks banks do. But hold on, some do. Think of Mr. Puritan Credit Union himself, Jim Blaine, down in North Carolina. He's got over 1,100 reasons (200 branches, 900 ATMs) for a big bank to get excited. SECU is big in the credit union world, but Bank of America would barely hiccup in acquiring it.

And there are other credit unions with solid branch networks in their regions. So maybe this takeover potential is most dangerous for the big credit unions. Small CUs are already disappearing very quickly–start knocking off some big CUs, and the industry as a whole has trouble.

I know there are a lot of people out there who think this is a long shot, and that's what scares me. I'll never forget calling the trade associations some seven years ago when a small Wisconsin CU was up for conversion. The trades weren't worried at all, saying conversions are a rarity. Look where we are today. The conversion issue is now one of the biggest threats to credit unions.

Are takeovers really a long shot? We've already seen opportunistic investors joining CUs that look to be conversion candidates in hopes of a payoff. In fact, one credit union that failed in its conversion attempt saw millions of dollars withdrawn after it was clear it would not convert. Investors? Can't be proven, but what do you think?

Instead of burying their heads in the sand hoping bankers or investors don't pick up on this or won't see the value, credit union leaders should get ahead of the game in finding a solution. The trade associations need to position it to their membership as a different threat than conversions because believe it or not credit union leaders are divided right down the middle on the conversion issue.

With all the conversion hoopla, it seems obvious that the trade associations' No.1 priority should be to increase the voting participation requirements on conversions to deter them. Make it a majority of members, 30%, or some higher number. This should be a priority, but it isn't because their member credit unions don't want it–they want the potential exit strategy that a conversion offers. I don't get it. Credit union leaders say they want the exit strategy in case credit unions are taxed. I would argue that if credit unions are taxed it's a moot point because at that point they stop being credit unions.

Large credit union CEOs should worry about takeovers. All of a sudden their secure jobs aren't so secure. CEOs without acquisition clauses in their contracts, for those few that even have contracts, can be wiped out after the deal is done.

Credit union leaders need to lay the groundwork with NCUA on a fix to prevent the capitalistic model from butting heads with the cooperative model. They're very different, and Congress surely intended that when creating credit unions. Start now, not after it happens. –Comments? E-mail [email protected]