Where do credit unions stand on the inequality debate?

One of the things that most frustrates me about the credit union industry is that it does a great job of explaining what credit unions are – not-for-profit member owned cooperatives — but a lousy job of explaining to consumers and legislators why they should care about this fact when deciding whether or not to get a car loan or explaining why this matters when considering what laws to pass.

We are missing another golden opportunity to differentiate the credit union brand by standing on the sidelines in the growing national debate about income inequality and what should be done about it.  So much of what we stand for would resonate with people on both sides of the debate if only we would be willing to more forcefully tell our story.

First, let me define my terms.  By the inequality debate, I mean the debate among those who argue that income disparities have become so extreme in this country that Government policies should affirmatively address this inequality; those who argue that inequality is code for a redistribution of wealth away from people whose monetary success benefits all of us; and a middle ground of agnostics who believe that social mobility and not income should be the focal point of reform efforts.

To be sure, all three sides have some good talking points.  For the inequality has gotten out of control crowd  there is the fact that in America as of 2012 the share of national income going to the 0.1% of households  had risen from 1 percent in 1980 to 5% in 2012 – a larger concentration of wealth than was witnessed in the Gilded age.  If you think that social mobility, not inequality should be the focus of policy makers then you can point to mounting evidence that, even though the U.S. prides itself as the home of the self-made man, a European has a better chance of moving up the social ladder than does an American.  And if you believe that inequality is the inevitable price worth paying for a country run by business and not government, then all you have to do is compare Amazon, which executes millions of on-line sales a day with the Government’s rollout of HealthCare.Gov to demonstrate that business should be run by businesses  .

However no matter where you stand in this debate, if you work for a credit union you have a story that can unite all of these factions in a way that demonstrates that while we certainly need traditional banks  we also need the unique financial service options that only credit unions are positioned to provide.

Let’s say you believe that social mobility and not equality is the key to this country’s dynamism.  Well, we need credit unions because a bank account is the most basic tool to climbing the economic ladder that I can think of.   Credit unions didn’t take hold on the state and national level because people believed in equality of outcome but because of a recognition that open access to financial services  is the key to equality of opportunity.  Anyone with a share has a right to access basic loans that enable the immigrant to buy a taxi, the first kid in the family to go to college a fair deal on his student loans and the first time homebuyer a commitment to keeping them in a house they can actually afford.

In contrast, if you don’t have at least $100,000 in assets. the big banks would rather not bother with you.  Don’t take my word for it, take theirs. http://www.bloomberg.com/news/2012-02-28/jpmorgan-views-clients-with-less-than-100-000-to-invest-as-unprofitable.html

Let’s say you belong in the camp that believes that with achievement deservedly come rewards.  Government shouldn’t be in the business of robbing Peter to pay Paul.  Credit unions are all about accountability.  When you don’t pay back your loans, you are reneging on your neighbors and coworkers.  The result is an ethic that rewards hard work and accountability.  It’s not a coincidence that credit unions were are the only industry that repaid the government for its assistance during the Mortgage Meltdown without using taxpayer funds.   The Industry’s relatively strong performance over the last five years demonstrates what happens when lenders are responsible for the consequences of their actions.

In contrast, the Board of Directors of JP Morgan recently gave a huge pay raise to Jamie Dimon following a year of deferred prosecutions and huge out-of-court settlements. People don’t mind that Bill Gates makes a lot of money: they know what he’s done and that his company’s innovations help almost everyone every day. They do mind that the putative Captains of Capitalism have created   “A heads I win tails you lose system” that justifies paying executives huge salaries in the name of free enterprise but then has the American taxpayer bail it out  when those same Titans mess up.

Let’s say you’re a proud card carrying member of the occupy Wall Street crowd.  You’ve read   economist Joseph Stiglitz’s  book “The Price of inequality”  and agree with his contention that as our “economic system is seen to fail for most citizens and our political system is captured by moneyed interests confidence in our democracy and our market economy will erode.”

Proudly point out that by competing against banks credit unions provide cheaper products at a time when every dollar really does count for many citizens. Also point out that since credit unions are not obligated to maximize their profits they have demonstrated that it is possible to provide financial products that help people without exploiting them.  After all credit unions were  making sure people really could afford their mortgages long before Congress decided to force banks to do the same.(What a concept!)

Finally   If you are talking to someone who argues that all too often financial  institutions are run by well- paid board members with financial interests aligned  to the very officials they oversee   point out that at credit unions the poorest and richest members have equal rights to vote out unresponsive boards.

In short, as the country debates inequality and its causes, let’s not be afraid to point out the importance of a financial charter that democratizes finance and helps everybody get ahead.  As you  meet with legislators and educate new and potential  members  point out that credit unions  are much more than t not-for-profit financial institutions “United for Good”-Whatever that means? With more flexibility to make business loans, grow with secondary capital and hold retailers accountable for their portion of the bill for cybercrime credit unions could do even more for members