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Beauty May Be In The Eye Of The Beholder, But Is The Future?

When the cliché "Beauty is in the eye of the beholder" comes to mind, it is inevitably used in the context of something visual: modern art (the collector vs. the Average Joe); a purple house (Prince vs. his neighbors), or Lyle Lovett (Julia Roberts vs. most of the rest of the world).

The lead story in this issue of the Credit Union Journal, however, turns that observation around a bit by focusing on the latter half of the cliché, the "beholder." As part of the Journal's redesign this year in conjunction with our 10th anniversary, we have refocused our editorial coverage on the kinds of thought-provoking reporting that readers have been asking for more of. In this case, Managing Editor Lisa Freeman follows up on a poll the Credit Union Journal conducted online at cujournal.com that essentially asks how credit union leaders view the future of the credit union community (log on now and participate in this week's poll).

Frankly, the reason we probed for the kind of forecast credit union leaders have for their very livelihoods didn't require a whole lot of investigative reporting-mergers, charter conversions, and now, so-called "hostile takeovers" have filled these pages. In the process, some, perhaps many, have gotten discouraged over just where the "movement" has moved to, and who could blame them?

We asked the question: How do you view the future of credit unions as cooperatives? CU Journal readers answered this way: Very worried, 34%; concerned but not overly worried, 29%; CUs have a bright future, 37%. It's worth noting that a nearly equal number are at each end of the spectrum. But overall, 63% are either very worried or concerned, and let's not forget these numbers are coming at a time when the overall health of credit unions is generally good, even though there are plenty struggling with growth and anemic ROA.

There's another important point that must be made here, and that is to understand the entire question. We didn't ask "What do you think about the future of credit unions." We asked, "What do you think about the future of credit unions as cooperatives." It's a critical distinction, because it really gets to the crux of the matter. There may be a future for the credit union as a financial institution, but is it as a cooperative? And therein we get to the "beholder" piece of this puzzle.

What is the value of a cooperative structure? There are some folks out there making some big bucks off charter conversions who argue there is no longer any value in being a cooperative, and they say member votes in favor of converting to banks bear out their point. But what about the votes against such conversions? What about member-level efforts to recall boards that have attempted to convert? Why do "beholders" at the latter credit unions see value that "beholders" at the former do not?

The big reason is a lot like that modern art example cited above. Often, beholders have to have the beauty pointed out to them. At credit unions such as Think FCU in Minnesota (where members clearly didn't, by the way), there was only semi-organized communication among opponents to its planned conversion, and now Think is on its way to becoming a bank. (If I were a credit union in the Minneapolis/St. Paul market right now, I'd be salivating at the opportunity to run some campaigns targeted at the 48% of Think members who voted against converting and themed, "THINK what's about to happen to your fees and rates!) At credit unions such as Lake Michigan CU and Dearborn Financial and Lafayette FCU, some of the beholders got organized and helped inform the unenlightened beholders on just what it would mean when that cooperative structure disappears.

Over the past few years I've been lucky enough to speak to a number of league and association meetings and talk about why something that doesn't appear on the balance sheet-cooperative structure-has more value than any other line item. And over that time I've certainly had some people tell me (sometimes there's a finger jab involved) that I'm wrong, and the credit union cooperative structure is like the fax machine, great in its time, but now obsolete. I could not disagree more, and was pleased to see Chip Filson of Callahan & Associates observe in this issue, "I believe the fact that credit unions are not-for-profit organizations being managed in the members' best interests really resonates with people. They are looking for someone they can trust after all that has happened with credit cards, student loans, everything starting with the 0% auto loans, that were misleading and exploitive."

In a few weeks I'll be moderating a session during CUNA Mutual's Discovery Conference in Nashville that asks, "What do people think of credit unions-if they think of them at all?" It should be a great-and sobering-discussion.

Is the future bright for credit unions, as 37% of our readers say it is? It may well be-but only if you tell the beholders.

Frank J. Diekmann is Publisher of the Credit Union Journal and can be reached at fdiekmann<at>cujournal.com.

IT'S YOUR TURN!

What Do You Think About the Future of Credit Unions?

Take a moment and visit www.cujournal.com, click on the "Letters to the Editor" link, and share your thoughts.

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