Let's Not Confuse Bigger With Better

In response to Henry Wirz's May 3 column in Credit Union Journal, "One Option to Consider: No Corporates At All," I agree with his statement that a future without corporates would be a bad thing. But I disagree with his view that smaller corporates, because of their size, provide less value to credit unions.

Throughout my 20 years of serving the credit union community-11 years as CEO at a smaller corporate-I have seen that bigger doesn't automatically equal efficient, despite what some may repeatedly claim.

Larger corporates were never particularly efficient, often keeping duplicate resources and staff following mergers. And even if their expenses had been reduced to zero, it would not have had any material impact on the capital losses assessed to credit unions. That was due to the poor credit risk management of...larger corporates, such as WesCorp and U.S. Central. To assert that efficiency was a root issue in the current financial crisis is simply wrong. The efficiency argument is a "red herring" designed to detract from the real causes and culpability of the investment losses. It is an insult to the intelligence of natural-person credit union management, and an underestimate of their financial literacy.

Proposing fewer, but bigger corporates for the sake of efficiency presents the real danger of leaving the very people and organizations that caused the losses in sole control of the restructured corporate system. And following similar logic, the next argument would be for fewer natural-person credit unions. This is code for rapid consolidation of the natural-person credit union system.

Those of us speaking for the corporate system, whether a CEO of a smaller corporate or a former chairman of the nation's largest corporate, must speak carefully. Let's not underestimate or slight the intelligence and financial literacy of natural-person credit unions, especially when we have done little to qualify us to preach on matters of efficiency.

David A. Savoie is President/CEO of Louisiana Corporate CU, Metairie, La.