Lots of topics about credit union’s priorities last week here in DC. The NAFCU caucus put their lobbying agenda on the table as they promoted the end of their independent efforts by merging with CUNA.
The continuing announcements of bank purchases, mergers and even member voting continue. Virginia Credit Union is asking members to approve management’s effort to convert to a federal vs state charter to “simplify” its regulatory oversight.
In these events and other well covered forums and leadership updates, one topic is missing from the discussions: Is the credit union cooperative model still relevant?
Some credit unions still embrace their member-centered purpose. The focus on member control follows. But the actions of others suggest it is time to shelve that model. The goal is to move on to some other understanding of the functions of a tax-exempt financial firm in a market economy. As more credit unions embrace the tactics of their institutional competitors focusing on expansion and corporate success, does the coop’s role need to be rethought?
If one looks across the economy the needs of folk of modest means has not diminished. It has actually grown. The allocation of financial resources between the haves and have nots continues ever wider.
Cooperative design facilitates multiple business models, asset sizes, community roles and creative initiatives. When an institution’s priorities become the center of effort versus the member-owners well-being, then is the model being disconnected from its primary purpose?
If we don’t discuss this situation openly, others will raise it for us. Last week’s WSJ article Credit Unions Stray Far from Their Mission, was a well written hit job. It included two supposedly academic articles to prove their point.
I would hope the concern is how can credit unions become better cooperatives for serving members, not debating competitors. That member-focused discussion is one we would all tune in for.
From Randy Karnes:
Unique systems, such as credit unions, require an honest differential and set of practitioners.
What has incentivized and steered our future away from the cooperative path?
1. GAAP – the move to equate balance sheet accounting between cooperative CU’s and banks. We accepted the exchange value to convert COOP’s to Profit that rewarded agents to our system’s decline.
2. Reserves through the P&L – we reframed the arguments that a board could set funding aside via a “regular reserve” for their investments for futures.
3. Accepting merger accounting as part of two organizations working together and using speculative future trading concepts from the professional agents and their self-serving lesser angels.
4. We let the world corrupt what was a COOP virtual world ALWAYS owned cooperatively, so that the world saw agents of the ownership as the owners of a CU’s future.
Proactive agents (professionals and board members) counted and count on both the trust of some members and the apathy of others while excising member power to simply leverage billons of dollars away from its purpose.
We are not suffering from a changing membership perspective. Rather, from a world where ethics are driving a system of unique values and execution into the hands of bank model wannabees.