Down-To-Earth Problems, Outer Space Themes, & Global Issues

Should the credit unions that have been reporting losses for the fourth quarter be required to disclose that promptly to their members?

As Credit Union Journal has been the first to report in both this issue and several recent issues, a number of credit unions, many of them very large and very prominent, have reported some troubling numbers, and that’s not just the Norlarcos (a name soon to disappear and join the ranks of other troubled CUs and companies that are now just memories and case studies) and Huron River Area FCUs of the world.

In most cases the negative numbers reflect an increase in loan-loss reserves and are a mirror to the markets many of these CUs serve, especially in California and Florida and Texas, where these days if you offer to buy a condo the developers will throw in a sweetener, like two more condos.

But regardless of the reasons, do members have a right to be informed of the balance sheet hits their respective credit unions are taking? They are informed, some of you will respond. It will be right there in the 2007 Annual Report when we publish it later this year. Right. As we all know, most members couldn’t tell you much about their own credit score or checkbook balance, and aren’t much prone to delving into the detail of the financials in the annual report.

So, should the quarterly financials be reported (and clearly at that) in the credit union’s newsletter and/or on the website? Some will object that reporting a quarterly loss could be misconstrued by members who don’t understand an overly cautious loan-loss reserves transfer doesn’t mean those losses will actually be realized. Others will object that one or two quarters does not a fiscal year make, while still others will note that this is why capital and reserves exist. Reporting all of this to an audience that may not see the bigger picture will only lead to a decline in growth and confidence, precisely just what a credit union doesn’t need at such a time.

Ironically, were credit unions publicly traded banks, this information would be available to every customer and likely widely reported as analysts and the market itself comments on what the prognosis is for the institution. Recent reports of losses at numerous banks hasn’t led to deposit runs and frightened masses.

What do you think? I look forward to hearing your views.

* The Texas Credit Union League’s annual meeting this year will be in Houston April 15-18. The league is using NASA’s presence in Houston in some clever marketing efforts, including taglines such as “Houston…We Have A Solution,” a graphic designed to look like a shuttle mission patch, and a countdown clock to the meeting’s dates on its website at www.tcul.org.

* Professor Muhammad Yunus won the Nobel Peace Prize in 2006 for his work in some of the world’s most poverty stricken regions, particularly in founding the Grameen Bank, which was the co-winner of the Prize. Dr. Yunus’ is a passionate advocate of the benefits of micro-credit, and at the time he won the Prize it was difficult not to respond to much of the news coverage he received with a “that’s what credit unions do.” In Bangladesh, where Grameen Bank operates, it has underwritten projects like handloom enterprises and fisheries and, most astoundingly, has made loans to more than five million borrowers.

But despite the similarities in business models, there is no relationship between Dr. Yunus, Grameen Bank and the world’s credit union movement. That’s in large part because Dr. Yunus, who has authored a book titled “Creating A World Without Poverty” and who was named by Business Week as one of the “Greatest Entrepreneurs of all Time,” believes Grameen Bank and credit unions are two different business models. That being said, here’s the news: Dr. Yunus has expressed interest in founding a credit union in the United States.

Credit for this scoop goes to Jamie Chase, formerly of the Washington league and now with JayRay, a Seattle-based consultancy. Chase spoke with Dr. Yunus during his recent visit to the city and posted the interview with him on the blog at www.CreditUnionDifference.com

When he was asked why he would consider starting a CU in the U.S., Dr. Yunus said it wasn’t because he thinks credit unions are the best model, but because credit unions are the “closest fit to the social business enterprise” that is Grameen Bank.

For details, visit the blog or go to www.grameen-info.org.

Don’t forget to make sure you’re on hand for the CU Journal’s Grow Show for strategies on growing your CU. Visit www.cujournal.com for details and the agenda.

Frank J. Diekmann can be reached at fdiekmann@cujournal.com. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com