The Feb. 4, 2015 issue of Credit Union Times, both in Sarah Snell Cooke's editorial and a letter from Tom O'Shea she quoted, echoed themes we heard in the early 1980s: We're too constrained, we can't grow the way we want, we need broader powers.
Such issues under the administration of the late Edgar Callahan some 30 years ago led to the power to add SEGs, select employee groups which had no obvious common bond with an established credit union, but had their own common bond. This led, of course, to the addition of hundreds of SEGs by ambitious, expansion-minded credit unions. The core rationale, for which Callahan argued, was that in the face of economic contraction, mergers and the disappearance of many companies which had served as the sponsors of credit unions, diversification of the membership base was required for the survival of hundreds of credit unions.
And it worked. True, there were and are fewer and fewer institutions – down from about 20,000 in 1980 to less than 7,000 today. But membership in credit unions grew to more than 100 million today.
Does anyone remember CUNA's Operation Moonshot in the early 90s that proclaimed that goal? Well, 20 years later, we're here. Finally.
As to the common bond? Well, we might as well admit it's little more than a fiction, at least as far as mutual ties among credit union members based on much more than common affiliation with the credit union. (Not that there's anything wrong with that.) It's a useful fiction, maybe even a necessary one that underlies the historical continuity of what a credit union is.
But let's face it: The mutual solidarity that binds a million-member credit union bears little resemblance to the 19th-century cooperatives of rural Germany, or, say, a local postal workers credit union of the 1930s.
So, field of membership/common bond is a fiction and a farce, maintained only because it would be too hard to change it in the face of bank opposition.
Let me be clear: The desire to have affordable financial services, a place where you are treated with respect and just might find an understanding lender even if you have a sub-par credit score, a place where you can join others who want to build cooperatively owned wealth and not enrich stock owners – that's enough of a common bond for me.
These days, among my consulting clients are a couple of groups working very hard to start new credit unions. Could they join existing ones? Well, probably. And in fact, for years now I've advised community groups not to start new credit unions if they could help it. The fact is, it's just too damned hard. Three new federal credit unions were chartered in the USA last year. And that's not in a bad year; in some years, none are chartered.
The aspiring credit unions I work with do in fact have a strong sense of shared values and purpose, whether it's neighborhood improvement, financial access for struggling local micro entrepreneurs or interest in new energy-conserving technologies. But often, they must struggle with the arcane patchwork of NCUA regulatory definitions of what is, or isn't, a common bond. In one recent dialogue, a regulator questioned whether the applicant, which included a cooperative association, could be considered to have a suitable common bond – because after all, the members were customers of the co-op who were trying to get good prices or reduce costs.
We worked through that. The NCUA staff does try to help. But consider the absurdity of the dilemma: As members of a consumer cooperative, you could not be automatically presumed to have enough of a common bond to form … another cooperative, namely a credit union.
So, what's my vision statement for the credit union movement? I envision a future where credit unions in the U.S. are open cooperatives, available to all who want to join and will abide by credit union principles. A future where any person can join any credit union she likes. No FOM or common bond regulatory requirements to serve as barriers to starting new credit unions. There is more than enough for regulators to do by focusing on their core function: Ensuring safety and soundness.
Universal, open membership in cooperatives exists elsewhere in the world. Why not here?
Clifford Rosenthal is a Brooklyn, N.Y.-based consultant. He can be reached at 917-903-1927 or Cliffcdcu1@gmail.com.
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