The years 1970 to 2010 saw accelerating change for the U.S. credit union movement-bringing credit unions into the mainstream of financial services and greatly expanding their reach.
In the process, they themselves were transformed from small, largely volunteer-run organizations into much larger, professionally operated businesses.
Before this period, a credit union with a million dollars in assets was considered a large credit union, worthy of inclusion in a league's "million dollar club." NCUA's recent decision to change the designation of "small credit union" from one having under $10 million in assets to one having under $50 million in assets demonstrates how times have changed.
The change has not been without headaches, heartaches, and controversies. At each step of the way, new responsibilities have been imposed on management and boards not always prepared for them. Many mourned what they saw as the loss of the crusading spirit and closeness to members that typified many early credit unions. But others celebrated the fact that credit unions now could serve their members more effectively.
The Miraculous Decade
The1970s might be considered the miraculous decade for U.S. credit unions. During this period, credit unions:
* Got their own independent federal agency, NCUA.
* Became eligible for federal deposit insurance.
* Received new powers (for federal CUs) that brought them into direct competition with banks and savings and loans.
* Created a more or less unified corporate credit union system with the formation of U.S. Central Credit Union.
* Began offering a range of new services, including share drafts, share certificates, ATMs, and credit cards.
The net result of these developments was to trigger consolidation of the movement as NCUA refused deposit insurance to the smallest, weakest credit unions and tightened requirements for forming new federal credit unions.
One of the single most important NCUA actions came in the early 1980s as a severe recession forced sponsor bankruptcies and layoffs. Under Chairman Ed Callahan, the agency permitted federal credit unions to admit select employee groups. This helped protect them against sponsor failure and made it easier to merge with other credit unions. But this also accelerated consolidation, and mergers have reduced the number of credit unions by around two-thirds, to some 7,300 today.
Another accomplishment of the Callahan administration was to have credit unions recharge the dwindling federal share insurance fund through depositing an amount equal to 1% of their insured deposits.
The Callahan administration also loosened regulatory requirements and made the CU board responsible for such tasks as setting rates on savings. This encouraged boards and management to become more knowledgeable and self-directed. Wendell (Bucky) Sebastian, who was executive director of the agency under Callahan and who is now executive director of the National Credit Union Foundation, believes that deregulation "allowed the best and the brightest and the most outstanding to thrive."
Credit Unions & The 1980s
The 1980s saw more deregulation as part of a congressional effort to solve the problems of the savings and loan industry. A major threat for credit unions was getting entangled in S&L problems. The failure of two private savings and loan insurance funds triggered action among states to shut down all private insurance funds, including those covering credit unions. Only a few of the funds survived.
Congress bailed out the thrift industry in 1989, but it looked like credit unions could lose their independent federal regulator and their one-percent insurance deposit as Congress gathered in 1991 to consider further legislation. Banks were eager to rein in their competitors.
The year began under a cloud with the failure of one of the remaining credit union private insurance funds, in Rhode Island. Despite this, Operation Grassroots, which gathered 15,000 credit unionists to rally before the Capitol and bring a million petition signatures asking lawmakers to let credit unions alone, was successful.
Credit Unions In The 1990s
The 1990s saw increasing conflicts between banks and credit unions, culminating in a banker court case that overturned NCUA's policy on select employee groups. The threat brought CUNA and NAFCU into partnership in the Campaign for Consumer Choice that persuaded Congress in 1998 to reverse the court decision and saved the credit union movement.
The decade of 2000-2010 could be termed the Decade of Disasters that shook American society, from the tragedy of 9/11 to the flooding of New Orleans to the Great Recession that forced restructuring of the corporate credit union system.
The movement survived it all, thanks to many inherent strengths-including cooperation and mutual assistance among credit unions and focus not on profit but service to members. It seems likely that credit unions will continue to survive and thrive for decades to come.
Paul Thompson is a former CUNA staffer and author of the book "Development of the Modern U.S. Credit Union Movement 1970-2010." It is available at www.lulu.com.