The Prom - a guest post

An admirer of this sight wanted to see if I would post "anonymously " for him/her.  Well, I do that myself as a matter of course, so I thought - "why not?"  While I don't agree 100% with all the statements made... the point is well taken.   ENJOY!

The Prom”

Credit Unions are based on a simple, cooperative principle:  the whole is bigger than the sum of its parts.  Hence, the movement was formed to provide the undeserved an alternative to the predatory practices and cold shoulders of banks.  The movement provided an opportunity to share the risks and benefits of financial services among the “owners” of the credit union. 

So what’s that got to do with “The Prom”?

In today’s credit union merger environment, one has to ask the question “At what size does a credit union get so big as to lose sight of its roots?”  Granted the regulatory environment, we currently find ourselves buried in forced mergers to gain the economies of scale to survive. 

This culture of Big Brother poking at the inner workings of the cooperatives isn’t about to change soon.  The NCUA mantra of “We know better!”, “Manage your Risk (the way we tell you to)!”, and “We’ll Examine you Until There’s Nothing Left to Examine and Then We’ll Decide How and When You’ll Merge” isn’t about to change anytime soon.

Anyone who understands risk knows you can’t reduce it to zero.  But that is just what the regulators are trying to force credit unions to do.  As a result, many Credit Union loans today are based purely on computer generated credit scores.  Whatever happened to a credit union knowing its members and working to provide for their needs as individuals? Whatever happened to lending based on character, a name, and a handshake?—People Helping People! 

Imagine for a minute a group of fishermen, oyster men, shrimpers, charter captains, ecology tour guides, and associated tourist and seafood industry people in Apalachicola, Florida, a small fishing town in the Florida Panhandle.  The three community banks that existed last year all failed or were bought out by other banks that subsequently failed.  What remains are two branches of large nationwide bank headquartered in Arkansas, which will soon consolidate.  This out of state bank that purports to be a community bank services the people we want to study.  Service has declined significantly. 

Suppose our handful of individuals in these industry groups got together and decided to form a credit union.  What would be the result?  My prediction:  Nothing.  No credit union could ever form.  The rules directing capital ratios, the rules delineating risk management, and the rules of governance will all conspire to prevent a credit union ever developing a viable charter.  After all, how many have been chartered in the last 10 years?  But that doesn’t mean there isn’t a need, and in other areas besides Apalachicola.

Yes the need for People Helping People has never been greater, especially in many smaller communities in these troubled economic times.

I’m afraid, however, that the NCUA has gotten so political it has lost touch with its owners—the credit unions.  You know, the ones who pay their bills.

As the old saying goes, “Remember who brung ya to the Prom!”

“People Helping People.”