By Gary Easterling, CCE
In an earlier post, "Main Street in Crisis–The Credit Union Difference," I shared an action plan for capitalizing on our difference from other financial institutions and coming together to help members and the economy out of this recession, while at the same time building market share and gaining expanded powers from our regulators. As we begin this new year, I see even greater urgency for CU leaders to take action, to build on—maybe even preserve—our credit union difference.
What is the CU difference? It is our ownership structure that drives credit union profits back to the consumers they serve.
It is our governance structure of unpaid volunteers who focus on the long-term benefits of the credit union cooperative rather than near-term return for the board and shareholders. It is our focus on Main Street need rather than Wall Street greed.
What is our response for 2009? Our voice must be consistent if we are to preserve the credit union value option. Our message must be focused as we address increased regulatory burden from NCUA and Congressional action. Our vision must be clear as we honestly address the challenges in financial services and within the credit union movement.
Our voice should shout out, "Let every citizen have the option of credit union value. The credit union value proposition can help stimulate our economy." Seeking increased latitude in field of membership is a means to bring credit union value to more people.
Our message should declare, "Legislative and regulatory responses must focus on those who were motivated by greed." Regulation is most needed where profit-motive exists. To borrow a phrase from Bob Barbera, chief economist for ITG, "The invisible hand of capitalism is not infallible." The asset bubble that burst was inflated with profit-motivated greed without an eye toward risk, safety and soundness.
Increased regulation for those who want to play dangerously is appropriate; but throwing another web of regulatory compliance across the entire industry is counter-productive. We need to assist our policy makers in surgical precision rather than mass prescription as they search for solutions.
Our vision should acknowledge, "We have collateral damage in our industry and we will have casualties." We must avoid the temptation to weaken the strong in an attempt to strengthen the weak. Every economic downturn creates casualties.
From my vantage point, most struggling credit unions are victims of asset devaluation. Many are looking to partner with stronger credit unions to preserve the franchise; however current rules and regulations create barriers to voluntary partnerships, unless the struggling franchise is in imminent danger of failure. Our industry needs to promote mergers and consolidation to allow franchises with synergies to come together to preserve the franchise value for the members.
What is my hope for 2009?
I hope our industry can respond to its specific needs without following the for-profit solution set. Preserving the number of credit unions is not a victory, if the credit unions being preserved are on taxpayer life support. Seeking bailout money places the tax-exempt argument at risk, blurs the line of distinction between the for-profit and not-for-profit sector, and accelerates Treasury's "Blueprint for a Modernized Financial Regulatory Structure," which calls for one financial institution regulator and insurance fund.
The New Year will bring change. Our leadership will determine what kind of industry, if any, the credit union movement will be in 2010. Our focus must be on the value proposition to the members we serve, even if it means the franchise changes. If we lose our focus on the member-owner, there is no credit union difference to preserve.
Gary Easterling, CCE, a CUES member, is president/CEO of $845 million United Federal Credit Union, St. Joseph, Mich.
Read another post by Gary.
