It's ironic yet also true that the worst fallout of an election season is it can sour so many people on democracy. So let's have a thunderous round of applause for the restorative power of the democracy seen in action at Tech Credit Union in San Jose, Calif.
As you should be aware, members there rejected by an overwhelming margin a bid by management and the board of Tech CU to turn it into a bank. In cases like this you often hear it was the "credit union" that attempted to convert. That's a mistake. A CU is nothing but a group of people who have come together for a common purpose, and when 77% of members give a big, swollen thumbs down to something one group of members is attempting, it's clear it's not the "credit union" that's doing anything, and that that purpose has been forgotten by some.
In this case it was a group of insiders who stood to profit if that bank charter were ever obtained, although, funny, that part was never really mentioned when it was listing the reasons why "credit union" needed to be scraped off the building. Why do we continue to be amazed by what happens when you ask the people who are in that credit union and who like the idea of extending credit to one another just what they think of the concept?
A Happy Loss
I'll also make an admission here. Had Vegas opened a betting line on the outcome of the Tech CU conversion, I would have very reluctantly placed a couple of bucks on "Will Convert." I wasn't alone, and I'm not sure any of us have been happier to be wrong.
It's not that so many lack faith in the average member, it's just that the conversion process so favors the board and management. Credit union charter conversions are primers straight out of the Vladimir Putin School of Democracy. The credit union completely controls the information given members (they control the press). They publicly preach democracy while privately practicing anything but. And if that isn't enough to cement the deal, they control the ballot.
I've written here before every time a charter conversion has been attempted that my issue isn't as much with the conversion as it is with the process, the complete lack of transparency and the misinformation. Tech CU told members it needed a bank charter to serve the community, for instance, never mentioning that it could have easily applied for a a community charter. It told members becoming a mutual bank is hardly a change at all, since mutuals are also "owned by and operated in a manner similar to that of a credit union," never mentioning that one teensy change would mean the ownership model would change to one dollar, one vote.
Some 20 years ago credit unions marched on Washington (where the D.C. increasingly stands for Dollars and Cents) as part of "Operation Grassroots." The objective was to send a message that grassroots America was where the real strength in this democracy lies, and that credit unions represent those grassroots. A microcosm of that message was on display at Tech CU.
Initially, it was just a few blades of grass, and their courage and persistence and belief in the CU business model (even when the board that supposedly represents them had given up all faith in the same) that helped stop the conversion bid. What allows so many Americans to be apathetic about the democratic process are those few among us who knock on doors and ask questions at public meetings and give their time and money when they don't have to. Tech CU may have 69,000 members, but it was just Robert Marinace and Carlos Rodriguez, who did research on conversions, didn't like what they learned, and launched a website and used social media to rally others to the cause.
Another member, Paul Davis, sent a one-page e-mail to every member and said he paid $1,050 out of his own pocket to reimburse what Tech CU calculated as its costs.
Marinace, Rodriguez and Davis recruited others to join them in the uncomfortable job of standing outside Tech CU branches and speaking to their fellow members about the conversion and why it should not be approved. That takes some guts.
Now that the conversion plan has been quashed, those folks aren't taking their signs and going home, and instead plan to pursue a board recall. "How could (the board) not hear the shouts?" asked Rodriguez.
The group also wants more info on the $1.5 million Tech CU said was spent on the conversion. And that's another raw point when it comes to these conversions; the consultants and lawyers walk away with a big chunk of the members' money, regardless of the outcome. I'd like to see these same individuals take these cases on contingency.
Floods & Landslides
Also after the vote, Alan Theriault, of Maine-based CU Financial Solutions, which specializes in charter conversions, told American Banker the vote was NCUA's fault, and if it weren't for the agency there would be a "flood" of conversions.
NCUA has taken some well-deserved lumps in recent years, but here's one case where it has done something right. It has required more transparency and demanded that more members be involved in such votes; charter changes can't just be decided by a small group of insiders who show up at a little-publicized, almost secret meeting.
There's a word for when 77% of people vote for something: Landslide. The Tech CU vote was also a landslide lesson in the power of democracy. Thanks for the reminder.
Frank J. Diekmann can be reached at email@example.com.