Organized Money by Keith Mestrich

Author:Keith Mestrich
Language: eng
Format: epub
Publisher: The New Press
Published: 2019-01-23T16:00:00+00:00

From LICUs to the largest, most prosperous credit unions—Navy Federal CU is the largest, with assets totaling more than $55 billion22—the legal structure and public responsibilities ensure that they remain public-purpose institutions.

The first modern credit union emerged in Europe in 1850 as a way for farmers to pool resources on a cooperative basis after a crop crisis caused a spike in the cost of loans and other financial products.23 Drawing on cooperative principles established in England a century earlier around what we now would consider lending circles (see below), credit unions put their profits back into their institutions to benefit their members. Each member has a single vote without regard to how much money they deposit or invest—a direct contrast to equity and stock markets, which tie voting rights to investment amounts. The members elect credit union boards that govern the business; board members often volunteer their services to keep costs down. Credit unions are profitable but not all are profit maximizing.

Every credit union in the United States today has a field of membership—a clearly defined reason for working together cooperatively. The field of membership might be geographic, faith-based, employment-based, or some other organizing idea.

Credit unions came to North America in 1900 as La Caisse Populaire de Lévis in Quebec and in 1909 as St. Mary’s Cooperative Credit Association in Manchester, New Hampshire.24 By the 1920s, the U.S. credit union sector was growing from the opportunity created when banks showed little interest in making small-dollar consumer loans for things like cars and home appliances.

In Massachusetts, retail magnate Edward Filene (best known as the owner of Filene’s, a department store) took up the cause of credit unions. “One hundred individuals, saving their money individually, could not provide themselves with much protection,” he explained, “But let them organize a credit union and their opportunity to help themselves was multiplied.”25

With the assistance of a lawyer named Roy Bergengren, workers organized and Massachusetts charted nineteen new credit unions in 1920. They took the organizing effort national. Within five years, twenty-six states had passed laws to charter credit unions, leading to some 1,100 in thirty-two states by 1930. Congress passed and President Franklin Roosevelt signed the National Credit Union Act in 1934, resulting in more than 10,000 credit unions with more than 6 million members in the United States by 1960.26

Credit unions anchored a national cooperative movement supported by “systemic” cooperatives (known as wholesale corporate credit unions) instead of big banks, investment banks, and other conventional financial institutions. Credit unions today remain constructively interdependent and work closely with the broader cooperative movement of retailers, manufacturers, distributors, and consumers. The cooperative movement, Filene believed, “is warmly, humanly passionate; and it is demanding day-by-day that there is more real satisfaction and more business success in working together for the common ground.”

The financial implosion of 2007 and 2008 hit credit unions—including the wholesale corporate ones—hard. Before the crisis, there were 8,268 credit unions operating, one-third more than today.27 The U.S. credit union system today, like the banking industry, is much smaller in number of institutions than it used to be.

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