There it was in black and white: The real difference between credit unions and banks.
Among nine “superpriorities” of the American Bankers Association listed in a recent ABA Banking Journal column by the group’s chairman, “strongly oppose credit unions” is No. 3.
In fact, the opposition to credit unions outranked such high-minded goals as “pursue legislation and regulation that keeps banks at the top of the heap of the payments system” and “work with Congress and regulators to keep everybody else (like Wal- Mart) out of the banking business.”
On the other hand, the goal of opposing credit unions, according to the bankers, is subordinate to only two other lofty aims: Fight terrorist financing, and resist the “regulatory burden” on community banks.
Well, it was close–but they just could not resist more self interest at the very height of their “superpriorities.”
Neither could the bankers figure out a way to include among ANY of their top objectives some way of helping out consumers. Here is what was not listed anywhere among the other eight “superpriorities”:
* A commitment to stanch the downward-spiral of the housing market in the wake of the subprime mortgage crisis (which, some say, was caused by the greed of bankers themselves in the first place).
* A pledge that, in the face of a worsening economy, to use some of the astronomical profits of the banking industry to assist in keeping lines of credit open, particularly to consumers and small businesses, as a bridge in the harder economic times;
* A dedication to help raise financial literacy among consumers.
* … or any of a number of other things that would serve consumers to become more successful, wealthy or secure.
But what really caught my eye in all of this is the direct, stark contrast between banks and credit unions–something we at CUNA attempt to clarify whenever possible, and something the banks work at blurring at all costs.
And yet, here in their own “superpriorities,” the banks have accomplished our goal and failed at their own. The irony is thick and juicy.
What You Must Remember
This next week, when thousands of credit union representatives descend on Washington for our annual Governmental Affairs Conference (GAC), it might well be worth everyone’s while to remember what it is the bankers want, and how their interests stand at odds with our consumer-owned and directed financial cooperatives.
Here’s a key example: Other financials are wringing their hands over a faltering economy, laying off workers and stifling credit in order to protect their profit margins.
But while credit unions will need, of course, to be careful in the current environment, they are very well-positioned to not have to back away from serving member needs.
Banks and other for-profits cannot, for the most part, avail themselves of this opportunity. As our economics team pointed out in a recent paper (“The U.S. Mortgage Crisis: Causes, Effects and Outlook Including Suggested Credit Union Responses”), for many in this sector the economy’s sluggishness will be worse than for credit unions.
As written by our Chief Economist, Bill Hampel, along with senior economists Mike Schenk and Steve Rick: “First, many banks and their subsidiaries were involved in making troublesome subprime loans. The negative effects on their operations will therefore be greater than for credit unions.
“Second, as for-profit institutions that have to report quarterly earnings to stockholders, even very well-capitalized banks will not be able to let their profits fall for a while, as we are suggesting for credit unions.
“In the short run they will have to embark on customer-alienating actions such as service cutbacks, fee increases and offering less attractive rates on both sides of the balance sheet.”
For evidence, the economists point to the recent increases by banks in ATM fees–now $3 and sometimes more.
Saving For That Rainy Day
The difference is clear: Credit unions have saved, on behalf of their members, for a rainy day. As Bill Hampel likes to say, now that the rain of the economic slowdown has begun, it’s time to open the umbrellas of rainy day reserves–and keep serving your members.
This is the ultimate difference between a credit union and a for-profit institution: That credit unions exist to provide services to their members (all of them), particularly when those services are most needed.
It is not something the bankers like to talk about, and probably do not understand anyway. Instead, bankers throw up a smoke screen, saying they are dedicated to opposing efforts by credit unions to “expand into the banking business.”
Well, of course they are. Bankers are dedicated to roping off financial services entirely to themselves, on their own terms.
But that is not the issue at all. The issue is whether credit unions are serving their members by providing to them financial services as not-for-profit, volunteer-led, financial cooperatives. That is their core mission.
So, this week, when credit union representatives are visiting their lawmakers, it is vital that a clear message be delivered.
First, there really is a difference between credit unions and other financial institutions (banks included).
Second, for proof, just look at the ABA’s “superpriorities,” and carefully determine if the banks are pledging to do anything that shows any interest in providing service to consumers.
Third, note how credit unions are in business solely for providing services to their members–all of them–and that is your “superpriority.”
The difference will be clear.
Dan Mica is president and CEO of CUNA.
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