Saturday, December 3, 2011

Occupy and Credit Unions: Next Steps


As readers of this blog are well aware, I've been actively advocating a synergistic relationship between the Occupy and credit union movements ever since since the former kicked off in Zuccotti Park on September 17th, and the developments since that date have been truly exciting. Beginning in early October, "Bank Transfer Day" spread widely through the Occupy movement's networks, which not only resulted in hundreds of thousands of people moving their money from commercial banks to credit unions, but was also critical in making activists aware of the basic differences between banks and credit unions. This awareness has fed activism that continued long after November 5th, with Occupiers across the country supporting the credit union model with teach-ins, pro-credit union pickets of banks branches, and using credit unions almost exclusively as the institution where movement funds are kept.

Given all of this, a recent development in San Francisco has been framed by many as the logical next step: members of the Occupy movement there have decided to establish their own credit union. Called the Peoples Reserve Credit Union, the founders stated that the "goal of this project is to encourage San Francisco residents, businesses, as well as nonprofit and city agencies to keep their money out of the big banks and to redistribute that money locally. Initial services will include micro-loans for the working poor and homeless, and subsidized student loans at low interest rates." After starting with 500 members, the founders aspire to have over 2,000 within a year.

While it is incredibly exhilarating to see an Occupy group embrace the credit union model to this extent, I believe that their plan has two fundamental, interrelated flaws. First, it reflects a lack of understanding of one of the most powerful trends in the credit union movement in the last 40+ years: consolidation. While membership rolls and assets have both grown robustly, the number of credit unions in the United States has declined every year since 1969. This has been the case for a number of reasons that are beyond the scope of this essay, but, at its core, the trend towards fewer and larger institutions has been driven by economies of scale. In order to best deliver the services that members require (debit cards, on-line banking, etc.) while also providing more affordable rates than for-profit banks, studies have shown that credit unions optimally need a minimum of a few hundred million dollars in assets. Even in its founders' sanguine scenario, the Peoples Reserve CU would only reach a fraction of that size, and would thus face the slew of issues that small credit unions are struggling with across America.

Second, the Peoples Reserve plan appears to be based upon the faulty premise that the best way for the Occupy movement to have a credit union reflect its values is to found one. This is the logic of the for-profit economy; if you don't like a business, you start a competitor. However, credit unions are not for-profit businesses, but rather democratic co-operatives in which each member has one vote. As such, instead of trying to reinvent the wheel by founding a new credit union, I believe that the Occupy movement in both San Francisco and across the country should instead use the democratic process to reshape existing credit unions in ways that align with the movement's values.

Doing so would be a relatively simple process. First, the movement would need to draw up a list of changes that it would like to see in credit union policies and practices. This could include (but is in no way limited to) such things as increasing opportunities for democratic decision-making by the membership as a whole (for instance, see the proposal at the end of this essay), promoting member participation at annual meetings by making them social events with free food and entertainment, instituting p2p lending, and creating lending programs that actively support the development of co-operative businesses.

Once such a "platform" is drawn up, the next step is to find people in the Occupy movement who are willing to run for the board of directors of a local credit union. As a result of the aforementioned trend of consolidation, the sense of community that used to characterize credit unions has profoundly degraded, which means that, at many credit unions, only a handful of people show up to the annual meetings. This means that, by simply organizing a few dozen Occupiers (who are members of the credit union and thus entitled to a vote) to attend the annual meeting, the Occupy candidates could easily unseat the incumbents. If successful, this strategy would mean that, in a relatively short amount of time, Occupy-sympathetic people could be at the helm of institutions with hundreds of millions of dollars in assets and well-trained staffs, rather than struggling to get a tiny institution off the ground.1

The people who founded the credit union movement in the early twentieth century were very explicit about what they were creating: democratic financial institutions. Indeed, Roy Bergengren, who established upwards of 3,000 credit unions as well as the Credit Union National Association over the course of his life, entitled his memoirs Crusade: The Fight for Economic Democracy. The democratic structures by which credit unions are governed are a hard-won inheritance that previous generations of credit union activists have passed down to us. We should honor their efforts by using these precious tools to help ensure that credit unions continue to stand as tall as they possibly can as an inspiring and socially just alternative to the corruption and greed of the Wall Street model.

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1One thing to keep in mind, however, is that credit union bylaws often prohibit nominations from the floor, so, if you want to run for the board, you have to collect a petition with a certain number of signatures by a certain date. Check your credit union's by-laws for exact details on this matter.

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