Awakening From The Deep Sleep: The Real Cost of Cooperation

The Renaissance Commission experience led me to ask some fundamental questions. Given the incredible 65-year history of credit unions serving our country and its people from sea to shining sea, why do we have so many needs and why is it so difficult and costly to build and rally around a legislative and regulatory reform package?

 
 

IBM MidAmerica FCU, is a member of the Renaissance Commis-sion. The Renaissance Commission was created by CUNA’s Board to explore credit unions’ role in the 21st Century and determine the legislative and regulatory changes needed to enhance that role in the future. The Renaissance Commision submitted their report in October 2001. IBM Mid-America Employees Federal Credit Union is an $800 million credit union located in Rochester, Minnesota. Paul can be contacted via email at phorgen@ibmcu.com.

The Renaissance Commission experience led me to ask some fundamental questions. Given the incredible 65-year history of credit unions serving our country and its people from sea to shining sea, why do we have so many needs and why is it so difficult and costly to build and rally around a legislative and regulatory reform package?

The questions: First, what now, is a credit union? The owner-user cooperative represents a truly different way for members to achieve their financial solutions. A credit union is a community of interest and therein, is the organizational advantage. Yet, has the advantage disapated or just retreated to our history books?

Credit unions began in the Depression era as a cooperative movement. At the time, banking was exclusive and commercially oriented, and the Depression further reduced opportunities for the average citizen to receive financing or financial services. All credit unions had the same goal: provide a source of credit for the hardworking, everyday American. Over the last 70 years, an astounding number, about 40,000 credit unions have come and gone.

However, some credit unions have grown to be not only successful credit unions, but also successful businesses by any standard. They have the resources to compete head-to-head with the very industry that inspired the founders. Of the 10,000 or so credit unions that exist today, almost 1,000 of them have assets over $100 million. These growth-oriented credit unions typically present their members with a wide array of financial products and services. By and large, they are legitimate competitors in their markets in all objective measurements: rate, service quality, product line, delivery systems, and convenience. Some have developed quickly, others over spans of time; all are over-achievers.

The other 9,000 credit unions are no less legitimate, but they survive largely by the will of their members. Their principles drive them to succeed. While they do not have the resources to compete with banks and brokerages, they have one thing that their competitors don't have - an undying cooperative spirit.

Placed in either group, all credit unions got where they are by choice. The group of 1,000 owns 90% of the assets and 95% of the capital. The group of 9,000 may own 90% of the political capital. So, together we play a game of Prisoners Dilemma.

We are an industry that has been bisected by choice. On one side, we have the credit unions, and on the other side, we have what may be called the "growth-oriented" credit unions. While the distinction does not indicate a philosophical difference, the truth is that these two types of credit unions need different levels of support from their members, their communities, and their government regulatory agencies.

In short, the industry has seen so much success that it has begun to fragment itself; what was once a collection of similar organizations, is now a larger collection of different types of credit unions each with different strategies for the future.

Around the world, the fight is on. Many fight for justice, some fight for food, others for freedom and the future of freedom. We have another choice, we can continue to split ourselves apart and reduce our significance. Or, we can do something truly unique. like fight for each other. It's called cooperation. It should ring a bell.

 

 

 

Jan. 28, 2002


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