Welcome to 2011!

A look at credit union history yields insight to what should be a prosperous future.


Welcome to 2011! The 12 months ahead should be a time of big opportunities. But to avoid driving blindly through the present, it’s helpful to understand the critical junctures of credit union history.

To begin the discussion, consider these two points.

1. Credit unions were created as outsiders. They are not additions to existing financial options. They represent a different, member-owned approach. This difference in design is an important factor in their dual purpose of stimulating consumer demand and providing a more effective source for consumer credit.

2. The build-out of the credit union system (leagues, CUSOs, corporates) has always been a credit-union initiated effort marked by discussion and collaboration.

The 1934 Founding Legacy
When Congress passed the Federal Credit Union Act in 1934, it was part of a New Deal. Credit unions, organized and funded by members, had succeeded for 25 years at the state level. In the midst of the Depression, they were seen as a way to stimulate economic demand because they provided consumer credit more effectively than existing institutions. 

The cooperative structure empowered consumers and transformed the relationship between the user and the institution. Credit unions were not chartered to replace other financial institutions. They were chartered as a separate, progressive, and innovative public policy option (with tax exemption) that put the needs of members first.  

The FDIC, Federal Reserve, and the Treasury all initially opposed passage of the Federal Credit Union Act. None of the existing banking regulators wanted any involvement with these people-owned institutions. Credit unions’ first federal regulator was in the Department of Agriculture, which was a supporter of other cooperative initiatives. 

Building a Cooperative System
Over the decades, credit unions developed their own financial infrastructure. Initially, this evolution involved intra-industry support groups such as chapters, leagues, and national associations. Credit unions’ immediate focus was creating new charters. Self-help in the form of state stabilization funds and state-chartered share insurance systems were created in the ’60s and ’70s.  

Credit unions added a federal share insurance option in 1970, more than 70 years after the first credit union charter. This was not because of safety and soundness concerns; rather, the federal share insurance option provided members’ assurance that their system was as reliable as FDIC-insured accounts.   

As credit unions added members and services, they created a complementary set of organizations that supported their evolution, including the corporate network, multiple local and national CUSOs, and a diverse mixture of trade groups.

Credit unions designed and passed the legislation that gave birth to the cooperative regulatory structure of the three-person NCUA board (from a single administrator) to the Central Liquidity Facility (a mixed ownership corporation designed to work in partnership with the corporate network and be the industry’s lender of unfailing reliability).  

In 1984, credit unions studied and supported the capitalization of the NCUSIF using the financial model of the state-charted, cooperatively insured funds.

The Lessons of History for Today
None of these changes came quickly or were inevitable. Leaders with vision believed in the cooperative model. The system must gain support from the public and legislators. Unanimity rarely exists.  

Moving beyond the present to a better future is a challenge, but credit unions have done this time and again. Often, fundamental reforms came at a time of economic uncertainty. The success of these changes reminds us of the strength, character, and values of those who built this movement of 90 million members and more than 7,000 institutions.

These changes were made in a collaborative manner. Today, as the system attempts to establish its priorities, past successes illuminate a path into the future. Great reforms are possible; the needs of members are as great as ever. 

Make no little plans for 2011. Resources are in place; change is coming, and as in 1934, cooperatives can be leaders. Credit unions have always been outsiders to traditional financial solutions. That is the progressive, New Deal tradition. That is not just our heritage; it is the hope and promise for 2011 and beyond.


Jan. 3, 2011


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  • Chip! I haven't seen you since the late 80's, when you were at Sierra Central CU with Callahan. I am glad to see that you are still touting the traditional CU solutions & reminding us that we are a part of a great industry. This is a great article. Our CU industry values, traditions, strength, & financial solutions are all founded on these cooperative charters. I would encourage all CU managers to share this article & mentor your employees in these historic & solid ideals. They have worked for many years & are founded with membership in mind. Let's not allow this to change. Thank you! Joyce
    Joyce Thompson
  • Chip, well stated, the cooperative philosphy and history of credit unions is something we should be extremely proud of. It is what truly makes us special. We have an excellent opportunity to come out of this economic downturn truly wearing the White Hats. Steve Ahlness, GMCU
    Steve Ahlness
  • Chip,

    As ususal, you hit the nail on the head. As another who is long in the tooth, I fear that credit union philosophy is very ill. The NCUA staff certainly don't get it; the state examiners don't either. There is a disturbing lack of appreciation for how different credit unions are, and their mission, and the economic crisis has buried those attributes deeper.
    Tom Randle