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Hey, You're 100 Years Old. It's Time to Start Acting Your Age

Democracy forever teases us with the contrast between its ideals and its realities, between its heroic possibilities and its sorry achievements.

— Agnes Repplier

Credit unions aren't children, but often they aren't above acting that way. What an opportunity they have right now to show just what a mature movement they have become.

For all the noble history and sincere sacrifices made in the name of helping people to improve their financial lots in life, the institutions themselves can occasionally act in ways that hurt the CU community. For all the gutting it out when they've fallen behind in the game and fought to regain the lead, some never suck it up and instead threaten to take their ball and run home. For all the fees and loan interest saved members over the past century, there has been the cost of collaborations never executed because of petty politics.

The Best & Worst Part

Now the credit union community has one of the biggest challenges it has ever had in front of it in the form of what is to become of the future of at least some of the corporate credit unions. Will credit unions respond with a thoughtful, effective, by-the-bootstraps solution that is not just in keeping with but is a manifestation of what is being celebrated during this 100th Anniversary year?

Or will they revert to some of the low moments from the past century when opportunities were lost and the narrow-minded few led to broad consequences for the many?

Here's the best and worst part: It's up to you!

As Credit Union Journal reported, last week a task force comprised of representatives from both major trade associations released their recommendations. You have to give them credit: its members didn't disguise what they set out to do, having named their effort the "Corporate Credit Union Restructure Policy Task Force." "Restructure" may be a softer word for "change," but a wise choice, too, given how often change is readily embraced. But change it will be, and while NCUA hasn't tipped its hand very much in terms of what it has in mind (its currently operating the two largest corporates, U.S. Central and WesCorp), there will be plenty among senior leadership at credit unions who will oppose the agency's final plan and claim they have been left out of the process.

The task force's report is an acknowledgement of two things: 1) change-whoops, sorry-restructuring needs to occur, and 2) it's better to be at the table trying to get a word in than outside the room and left out.

As the task force's report's introduction notes, " … future design of the corporate system, the interests of natural-person credit unions (NPCUs), including those that choose to use a corporate and those which do not, are paramount. There is significant value to NPCUs in the corporate system, and it will be beneficial to preserve that value in the future. However, that value is only worth preserving if the system is so structured that the recent losses to NPCUs, both individually and systemically, will not reoccur."

The authors then add their most critical point: "The goal for the future is a corporate system that credit unions will willingly capitalize and use."

I've seen the e-mails. Heard the rumors. Had my ear bent at conferences. Read the CEO blogs. When it comes to what has happened with the corporate CUs, many CEOs are justifiably frustrated, even angry. In the wake of the special assessment from NCUA, the losses piled up by corporates, and the Lehman Bros. exit packages certain corporate execs took home, some CEOs have threatened that they will have no part of recapitalizing the corporates.

Others have suggested they might convert their charters, apparently believing someone needs to be punished, so why not their members-and if you read between the lines, they use the former (recapitalization) as a pretext to justify the latter (becoming a bank).

As an aside, there have been 90 bank failures this year and the FDIC is most certainly about to assess another premium, so let's all be prepared for some pretty interesting rationales when it comes to justifying "escaping" the credit union charter.

Noise Vs. Progress

For all its wonders, democracy can be pretty frustrating. The corporates were credit union-owned, their boards elected by the very CUs that belonged to them. Those who are stomping their feet and threatening to go home tend to make only noise, not progress.

Bill Vaughan, the former newspaper columnist, once observed, "A citizen of America will cross the ocean to fight for democracy, but won't cross the street to vote in a national election." Credit unions line up to testify on Capitol Hill, but can remain hands-off on so many internal matters. Angry? Frustrated? You should be. So get off your hands and lend one. Co-op can stand for co-operate, too.

That is, after all, the one benefit of being 100-years old and not a child: having wisdom, often learned from mistakes, and applying it.

Frank J. Diekmann can be reached at fdiekmann@cujournal.com.

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