What is a credit union membership worth? Can you put a price on it?
I didn’t think you could, but Nationwide did. They even found the right number. As a result of converting to Nationwide Bank, they have paid out 15.26% of total deposit account balances as of March 31, 2006 in one lump sum to the former members of Nationwide FCU in exchange for the members surrendering of their cooperative ownership. The credit union has merged into Nationwide’s bank, and the former members are now customers.
The member must have thought 15% on their money is an acceptable price for giving up their ownership? I didn’t, but I wasn’t eligible to vote.
One trouble with discussing the price of a membership is that the very act of discussion implies there is an acceptable price. If not 15%, then what about 25%, or 75% or 375%? All you have to do is keep jumping the numbers until someone says “Yes.” As the saying goes, everyone has his price.
But if that is the case, then credit unions are as good as finished. All you have to do is gather up enough money to buy out all the members. Cooperative financial institutions: Gone.
Can’t Do the Math
Nationwide’s offer boiled down to this: Take this money now and give up any benefits you would enjoy from membership/ownership in the future. Such an offer is always tempting. It’s present value versus future value. How many lottery winners have you heard of who say, “No I don’t want the money in a lump sum; I’ll take the payout as you suggest over 20 years”? It doesn’t happen. Human nature says I want what I deserve now.
At least with the case of lottery winners, if they care to, they can do the math. They can calculate a total payout if offered over 20 years. The more sophisticated of them will be able to calculate future value based on estimated inflation. Maybe the more diligent of them will forego a lump sum payout and select the annuity.
But credit union members should not do this. Arguably you could calculate a value of below-bank loans and above-bank savings rates. You could do the same with credit cards, and with free checking, and lower fees.
But what is the monetary value of excellent service? Or of management making your financial well-being its top priority? Or of working with people to help other people?
These are intangibles, but they compose a good deal of value a person receives as a member/owner.
Our Best Defense
Our best defense -- should we see more of Nationwide-like offers -- is an ironclad demonstration of the value principle we sometimes talk about but often skirt. We have to demonstrate to ourselves and to our members that being a member/owner in a credit union is, in fact, priceless, that no amount of money could replace it.
Everyone has to consider: If there is a buyout price, then the whole movement could be bought out. If that is the case, then there is no cooperative, self-help, democratic, not-for-profit financial services industry. It will all be gone over to making money for the stockholders; any pronouncement of concern for the customer will merely be a cynical appeal meant merely to get them in the door and a hand in their pockets.
Credit union members lose; non-credit union members lose; America and the world lose.
But these are intangibles in an increasingly hard-nosed world. What can we do to help us through these troubling times?
First, if credit unions are to be absorbed, credit unions should be leading the charge. We need to have a way to buy our own children back.
Second, we ought to consider a super credit union holding company. It would acquire credit unions and then let them operate as they see fit, but out of danger of purchase by private entities.
Third, we should think about a new Federal Credit Union Act. If we can’t defend ourselves from outside buyers, what does that say about our charter? We can’t raise capital, though others can. That might have been all right when the wolves were kept out of the pasture, but now the gates are open.
Our first and best defense is an informed membership that values its ownership and participation above a fist full of money. Our second ought to be some mechanisms by which we can fend off purchase and save the cooperative financial services industry for future generations.
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