A number of sources are at the heart of economic stability.
Even the sturdiest table requires at least three legs to stand. The decisive Federal guarantees and TARP funds carried a heavy load in supporting Wall Street and the broader economy during the economic turmoil of the past two years, but two other institutional pillars have also been at work throughout the recovery.
America’s premier capitalist, Warren Buffet, offered an insightful Op Ed commentary in an article for the New York Times entitled “Pretty Good for Government Work.” However, his analysis of the pieces at play in the recovery overlook a critically understated factor.
“Dear Uncle Sam,” Buffet begins. “My mother told me to send thank-you notes promptly. I’ve been remiss.”
“Many of our largest industrial companies, dependent on commercial paper financing that had disappeared, were weeks away from exhausting their cash resources. Indeed, all of corporate America’s dominoes were lined up, ready to topple at lightning speed. My own company, Berkshire Hathaway, might have been the last to fall, but that distinction provided little solace,” Buffet says.
“Nor was it just business that was in peril: 300 million Americans were in the domino line as well. Just days before, the jobs, income, 401(k)’s and money-market funds of these citizens had seemed secure. Then, virtually overnight, everything began to turn into pumpkins and mice. There was no hiding place. A destructive economic force unlike any seen for generations had been unleashed.”
Buffet continues, “Only one counterforce was available, and that was you, Uncle Sam. Yes, you are often clumsy, even inept. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction. And when our citizens are losing trust by the hour in institutions they once revered; only you can restore calm.”
A small amendment is required in this gracious thank you note. Buffett’s own $21 billion of timely, targeted assistance to some of America’s bluest chip firms was also a critically important confidence factor. However, a third institutional system supporting America in the darkest days of the crisis was that of the credit unions. These 7,550 member-owned institutions in 2008 and 2009 originated $525 billion in loans to 39 million member-borrowers. In 2009 alone, credit unions originated a record total $272 billion, up 7% over the previous year.
Town by town and state by state, credit unions made sure the 300 million Americans who faced precarious circumstances and shaken confidence in the darkest days of the recession did not face them alone. Member-funded, these cooperatives’ intensely local focus supported Main Street America just as Uncle Sam and Warren Buffett’s timely actions stabilized Wall Street and the pillars of the national economy.
Now, credit unions are originating more than $1 billion dollars in loans per business day, with competitive rates that provide a lifeline for recovering members.
These local institutions are demonstrating daily what can happen when people work together. So, Mr. Buffet, may we also tip our hat to the 90 million members who have joined the credit union movement, as the system’s “common wealth” is an essential component of America’s economic strength and vitality.