NCUA recently released a white paper on alternative capital. The question most people ask is whether credit unions will ever get alternative capital. I think the more interesting question is whether credit unions can make alternative capital work in a member-owned cooperative. I would say the answer is that alternative capital is so foreign to the concept of mutuality that it will never work.

In the white paper, the NCUA described three forms of alternative capital: voluntary patronage capital, mandatory membership capital and subordinated debt.

All three forms of alternative capital described in the white paper have significant drawbacks. The voluntary patronage capital has a 20-year term, no voting rights, no early redemption and no secondary market, and it absorbs losses after retained earnings are exhausted but before shareholders take any losses. I can't imagine that very many investors would want to invest in voluntary patronage capital.