What Credit Unions and the Protesters Have in Common

by: Henry Meier, Associate General Counsel, Credit Union Association of New York

The protesters occupying Wall Street are on to something.  In fact, they are reacting to some of the same impulses that gave birth to our industry and are the key to its continued vitality.

Just so you know where this is coming from, I have been accused of being a man of the 90s…..the 1890s.  Finance certainly has a vital role to play in the American economy and I’m glad that talented people choose to work in and around Wall Street.  But that doesn’t mean the protesters should be written off as students panicked about loans or mimicking protests half a world away.  After all, student loans and government upheaval are nothing new, but the occupation of Wall Street is.

What the protesters are reacting to is a visceral sense that fairness and accountability have taken a back seat to greed and obfuscation.  The simple truth is that over the last four years, they have seen an American economy crippled by gross financial mismanagement and a political system incapable or unwilling to hold any institutions to account.  In contrast to banks, credit unions have a structural commitment to fairness, consensus building and accountability, precisely the values that Americans of all political stripes are yearning to see reflected in their institutions.  The Great Depression led to the federal charter and the Great Recession has people finding out that we are more than just smaller banks.

The nation’s reaction to the Great Recession is the mirror image of its reaction to the Great Depression.  Congress reacted to the Great Depression by authorizing federally chartered credit unions, prohibiting commercial banks from engaging in investment banking, forming the SEC and insuring bank accounts.  In contrast, virtually every major aspect of federal reform passed in reaction to The Great Recession is still being debated. The Senate won’t appoint a director to the CFPB, and the initial hostility to the Volker Rule shows that, far from being chastised, bankers are still defending the virtues of some of the very practices that got us into this mess in the first place.  In the 1930s, the Senate passed Glass-Steagall without a dissenting voice:  today the bill would be filibustered.  Credit unions were given a federal charter not just because there was a need to help people of modest means, but because people had to have the means to help themselves.

Today, the concept of risk and reward seems to have been turned on its head.  For years, CEO bonuses would make athletes blush and most of them can’t hit a fast ball.  We were told that these payouts were the reward for their risk-taking entrepreneurship – only to see them run to the government for a bailout because certain banks were too big to fail.  Far from being ashamed, the captains of finance paid back their government bailouts just in time to collect their bonuses.

Contrast this behavior with credit unions. The movement refused to take TARP money and is repaying the Treasury out of its own earnings for the costs of corporate credit union bankruptcies.

The media has scrambled to find leaders of the protest, but a generation raised on social networking values consensus where everyone has a voice. These are the people we need at annual meetings.  After all, everyone has one vote no matter how much money they have in a credit union.  As an added protection, we don’t even let our Boards have the final say over which members get to run.

Most importantly, we reflect an ethic of fairness. The only way you loose your right to take out loans in your credit union is if you have caused your credit union a loss.  Again, contrast this sense of fairness with the banking industry where banks charge customers a $5.00 fee if they use their debit card.

All of this gives us an opening to gain a foothold with the next generation, which we desperately need to attract.  The average age of credit union members is 47 and as of 2005, Filene estimated that only 6 percent of membership was under 40 years of age.  Let’s use this opportunity to not only extol the virtue of our lower fees and better service, but to explain the core beliefs from which the credit union movement began and with which these kids have so much in common.

How are we going to do this? At the Credit Union Association of New York, we have a Young Professionals Commission specifically designed to mentor  employees under 35 and help prepare  them for leadership positions.  Already their presence has improved events ranging from chapter meetings to the annual convention.  I would challenge every credit union reading this today to commit itself to hiring at least one college-age student this year and looking into opening a school branch.

I will return to my quasi 1890’s roots by quoting Churchill for pointing out that “If you are young and not liberal, then you have no heart; but if you are old and not conservative, then you have no brain.”  He may have overstated the case, but this industry is structured for the person idealistic enough to believe that fair play and common decency are not out- dated virtues.

Henry Meier is the Associate General Counsel at the Credit Union Association of New York where he prepares the New York’s State of Mind Blog, available at http://newyorksstateofmind.wordpress.com/.