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Today the CU Journal reports that “House leaders agreed yesterday to add a provision to the Troubled Asset Relief Program that would allow credit unions to obtain cash infusions under TARP…”

Cash infusion = taxpayer bailout.

It goes on to say “The credit union provision would allow credit unions to accept TARP cash – like banks – and count it as net worth, or capital, something they are barred from doing under current law.”

Why does our law say NO to taxpayer bailout money?? Um, because we are a financial COOPERATIVE!

Folks – we really need to find a better way to help our troubled credit unions. This is historic…..think of the long term implications. We WILL have to change our bylaws. Beginning with field of membership, and it’ll read something like this:

“The field of membership for Generico FCU will include anyone who lives, works or worships in blah blah blah counties AND the Federal Government (who now sits on our board of directors and tells us what to do.)”

I read with much disappointment an article in the CU Journal that you are spearheading another effort to access TARP money for credit unions.

Credit Unions cannot, under any circumstances cost taxpayers money. Not only will this jeopardize our tax exempt status and separate insurance fund it is absolutely in oppositon of the seven principles of cooperatives, which we hope to remain, a financial cooperative.

Credit Unions were offered taxpayer money after the Great Depression and although Edward Filene was in favor of it, Roy Bergengren (first president of CUNA) opposed it saying
(a quote from CUNA’s website):

“To him, it meant destroying the vital principle of the whole movement by converting a community enterprise into an agency of the government. To teach people how to help themselves was more important by far in times of depression than at any other time.”

That’s what we HAVE to do. Figure out a way to help each other. I understand that many credit unions in the California and Nevada Leagues’ (your former employer) membership are hurting. One solution, of course is merger and another would be for them to convert to a Mutual Savings Bank to gain easy access to TARP.

CUNA’s National Brand Campaign states “Where People are Worth More Than Money.”

If we take TAXPAYER money to bail out a few COOPERATIVES what does that say about CUNA?

Credit Unions celebrated their 100th birthday recently, I for one am proud to have devoted the last 28 years of my life to furthering the movement. I’d hate to see your name in the history books as the one that helped destroy it.

Picked up a copy of it at the airport because the cover was NOT about Baby Bumps or President Elects. In fact, no pictures at all. Just the title “Why America Needs an Economic Strategy.”

Michael E. Porter from the Harvard Business School states:

“The stark truth is that the U.S. has no long-term economic strategy – no coherent set of policies to ensure competitiveness over the long haul.”

He goes on to say:

“Strategy addresses what to do, but also what NOT to do.”

And so we have to decide. What are credit unions GOING to do and what are we NOT going to do in this economic crisis. As long as there’s the phrase “bail out” in our vernacular, we won’t give it all we got, IMHO.

Credit Union Journal the same week reported: Momentum is Beginning to Build For A CU-Specific Bailout Package.

“With increasing portions of the $700-billion bailout package being earmarked for banks, credit unions are looking to develop a rescue plan of their own.”

There are two scenarios, but this is the one to adopt. The one that has clear strategy for the long haul and protects our 100 years of reputation:

Credit Unions would fund their own program by a special assessment on their 1% NCUSIF deposit. That way, the plan would be credit union-financed and credit unions could continue to assert they have never been the beneficiaries of a taxpayer bailout, helping to bolster their argument for continuation of the tax exemption.

Number two, NCUSIF could accept funds under the Treasury’s program and direct them to needy programs.

As Dan Mica is fond of saying, “Credit Unions are part of the solution.” Welllll…….if that IS our strategy, option two cannot be considered. This is the what NOT to do. According to the article “NAFCU is still focusing on ensuring that credit unions get to fully participate in the sale of troubled mortgage assets sales to the Treasury.” Thankfully Paulson took care of that option this week – not gonna happen for anyone.

NAFCU and CUNA need to get on the same page. I know there’s been talk of merging these two groups so we have ONE lobbying body. We don’t need the distraction of merger on paper – let’s merge in our minds and hearts and values and do the paperwork later.

disney-chicken-little-sky-fallingI’m hearing stories from credit unions who stayed completely out of subprime lending but are seeing losses creep up.

People stop spending, interchange income goes down.
People lose jobs, voluntary repos go up.
The company goes on strike, delinquencies go up.
Gas prices go up. People stop buying cars. Loan volume goes down.

The ripple effect of a weak economy. It happens.

I don’t mean to sound callous, but this is a cycle, albeit a big bad ugly horrific cycle, but to abandon our values completely and look for taxpayers to bail us out will, in the short term help, but in the long-term cause irreparable harm. Here are just a few things that come to mind:

1. We will be taxed. You walk like a duck, quack like a duck, use bail-out money like a duck. You’re a duck. Tax the duck!
2. NCUSIF* will most likely be combined with FDIC into one big fat government agency that regulates everyone – all the ducks.
3. 100 years of reputation – of member-owned financial cooperatives screeches to a halt.
4. Credit unions as we know them today, will begin to disappear.

*NCUSIF was voluntarily capitalized by credit unions in 1985 and has never
received taxpayer dollars. If the government combines the agencies, what happens to our capitalization? Do we lose it?”

Speaking of capital – that’s what it’s there for – a rainy day. It’s pouring right now, so get out that credit union umbrella and use it.

SIDEBAR: Just a thought. If a credit union seriously needs taxpayer money to stay alive, and cannot find a merger partner, then they should consider converting to a Mutual Savings Bank first. That way the credit union brand remains in tact, not costing taxpayer’s money.

imagesCUNA launched the campaign oh so many years ago. I remember because I had to present it at a league meeting to a bunch of marketers. They picked apart the logo, some didn’t “get it” and some flat out refused to use it.

“Credit union growth has been stagnant for more than a decade. From the early 1990s to the present, credit union market share has stayed steady at 6% of total assets. Banks, on the other hand, are gaining billions in new assets every year.
Many would argue that now, more than ever before, credit unions need to aggressively market the credit union difference—individually and collectively.”

Mark Crawford, CUNA Marketing Council wrote this in 2006.

Almost one year ago the folks at Trabian set a record with comments on the topic of a National Brand Campaign.

Nothing like a good old fashioned economic crisis to dust off the National Brand Campaign kits and pledge our allegiance to the credit union difference.

I’ve always felt a tag line is a promise. A promise that should be delivered 100% of the time. The problem with most tag lines, they are lies.

The airlines were a great example. Remember United’s? Fly the Friendly Skies? Took on a whole new meaning after 9/11. Or Delta, “We’re ready when YOU are.” American West (when they were still in business) “What We Fly is YOU!” Not necessarily your luggage.

0846_mz_wamuAnd what was WaMu thinking unveiling “Whoo Hooo” when they HAD to know they were on the brink of failure. Maybe that was their marketing departments point…..

So when CUNA came up with “Where People are Worth More than Money” many thought, well, okay. But what’s our REAL difference?

Today that tag line can become a powerful statement IF credit unions word together to stay out of the TARP trough.

Gary Easterling, CEO of United Federal Credit Union was a guest blogger on CUES Skybox this week. He said it best:

Our banking cousins are “paying” for their obscene profits from recent years by squealing up to the TARP trough, allowing the taxpayer to pick up the tab for their greed. Credit unions have the opportunity to live our difference—meeting the needs of our members, our communities, and our country.
Banks have not expanded lending, even while accessing government funds. They repair their balance sheets, seek mergers and acquisitions, focusing on Wall Street performance, rather than Main Street need.

I for one, am proudly using the America’s Credit Unions logo. Won’t you join me?

I was doing some research this morning for the webinar Mark Sadowski and I are hosting on Thursday (shameless plug) and I ran across this:

As the Great Depression set in the Reconstruction Finance Corporation under President Hoover sought to stimulate the economy with soft loans targeted to banks, railways and large companies. Filene favoured asking for $100 million in reconstruction credits to be pumped into credit unions. Bergengren strongly opposed this position, and his view prevailed this time.

“To him, it meant destroying the vital principle of the whole movement by converting a community enterprise into an agency of the government. To teach people how to help themselves was more important by far in times of depression than at any other time.

Wow. Makes sense. Credit unions survived the depression. We actually thrived after the depression years – why? Because our values were in tact.

Now more than ever we need to follow the example of our forefathers and stay OUT of the government welfare line that is called the TARP.

I think this is a mistake. A huge mistake. Today in the CU Journal is an article titled Treasury Bailout: CUs Want Coverage Under The TARP.

Here’s an excerpt: 

John Annaloro, president of the Washington CU League, noted that after Treasury infused $125 billion into the nation’s nine largest banks, it has agreed to invest another $35 billion into an additional 20 regional banks, with more funds promised for troubled banks. “It’s my contention that credit unions should be eligible for some of those funds,” Annaloro told The Credit Union Journal yesterday

Especially concerning for Washington credit unions, said Annaloro, was news that Washington Federal Savings is receiving $230 million in new capital under the Treasury program. “Our credit unions are worried about how that might affect their ability to compete, with rates on loans, rates on deposits, and all of that.”

I don’t know about you but this article reads like, “Why does HE get to crash the car and I don’t?” 

Um, because crashing the car is not a great idea. It’ll leave a mark – on YOU and the car.

Thoughts?

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