Why George Bailey Quit: A sequel to “It’s a wonderful Life”

To: George Potter V. Chairman, Board of Directors of the Bailey credit union

From: George Bailey IV

Reason: I Quit

I am writing this letter, with a little encouragement from my friend Jack Daniels, to explain why, effective immediately; I am ending my employment with the Bailey Federal Credit Union.  For the first time in more than 100 years, the examiners won’t have a Bailey to kick around anymore.

As many of you know, my family has long been committed to providing needed loans at reasonable rates to the good people of Bedford Falls.   In the mid-1950s, we even converted from a savings and loan to a credit union because we believed that it’s not-for-profit cooperative structure was more consistent with the goal of an institution dedicated to providing banking services to a community desperately in need of them instead of a for-profit institution ultimately more responsive to its shareholders than customer needs.

For a while it worked.  But try as we might, as the community lost manufacturing jobs to plants overseas and some of our best kids went away to college and never returned, the community has been losing its footing for several decades now.  I tried to get my service area expanded, but getting approval to add communities is about as fun as a root canal without novacain.  You wouldn’t think the credit union bureaucracy would make it difficult to provide financial services, but banks are looking to sue anyone who wants to help people so long as they didn’t dot all the “I’s” and cross all the “T’s.”  (What is it Shakespeare said about killing all the lawyers?)

And let’s be honest, people aren’t quite as loyal to the credit union’s brand as they once were. Going into the branch with your father and opening up your first account used to be a big deal and it was all the marketing we needed. Now, anyone under forty does almost all of their banking online. Just the other day one of Sam Wainwright’s  grandkids accused me of ripping him off because our car loans are more expensive than the ones offered by some bank he found online that I had never even heard of.  I felt like slugging the kid, but all I need is for a video of me slugging a member to show up on YouTube.

I know all this stuff comes with the territory and I heard my sainted grandfather’s stories about bank runs and single-handedly keeping the institution going during the Great Depression. (Come to think of it, I think most of you were on the board then) But the difference is that in the old days my grandfather was rewarded by being one of the most respected and trusted men in the community. Today more and more people think that the guy with the most money has the most character.

Legend has it that one Christmas Eve my grandfather’s uncle Billy drank too much before lunch and lost a good chunk of the savings and loans’ money. The town responded to the news with a fundraiser and one hell of a Christmas party!  Why, if I lost that much money the inevitable fine would be frontpage news and I would be sued by some law firm in New York City within two hours of the news breaking.

But the final straw came the other day when some examiner, who looks like he graduated from college three days ago, told me what you folks would be hearing in the exit interview.  He said that the credit union is not adequately assessing the interest rate risks caused by its “excessive reliance” on mortgage lending, and has to update its policies to insure that it is making lending decisions in compliance with Regulation B. The boy wonder didn’t tell me where else I was supposed to get a decent return on my member’s funds or dispute the fact  that no one has ever accused a Bailey of not being fair, but the loan files say otherwise.

My grandfather used to make lending decisions based on a person’s character.  Today he would be accused of making sub-prime loans and written up for violating or ignoring just about every housing law and regulation of the last 30 years.

That same day I started skimming about 4,500 pages of lending proposals. Mortgage lending is getting too complicated and too expensive for all but the biggest banks. Trying to prepare for all these new regulations about what constitutes a qualified residential mortgage or preparing for the new integrated mortgage disclosures is just too much work even with a compliance officer.  The only thing these regulations are good for is as a cure for insomnia!

The reality is that only the Potter Bank down the street has the resources to cope with the cost of complying with these regulations.  (Incidentally, it’s too bad we don’t live in Vermont, we could ban banks like Potter’s from referring to themselves as “Bedford Fall’s hometown bank” even though they sold the bank to one of those behemoth regional banks about a decade ago).

So there you have it: too much regulation; too much overhead, changing member attitudes and tougher examiners have conspired against four generations of Bailey’s. It is getting too expensive to treat our members fairly and this just isn’t fun anymore.

I’m going to my condo in Florida. Have a Merry Christmas.

Henry Meier

Henry Meier

As General Counsel for the New York Credit Union Association, Henry is actively involved in all legislative, regulatory and legal issues impacting New York credit unions. Whether he’s joining ... Web: www.nycua.org Details