The McCarthyite Roots of the Campaign to Tax Credit Unions.

While working my way through Dorfman's masterful history of the credit union movement in Pennsylvania, I came across the following passage, which I think provides some useful historical context to the current political scrape over the tax-exempt status of credit unions:

Through the early 1950s, CUNA ... faced two major legislative issues. Most critical was an attack on the tax-exempt status of credit unions led by various private groups that opposed cooperatives in general and tax-exempt cooperatives in particular. Simultaneously, many state and local governments looked at credit unions as potential sources of additional tax income.

Attempts to repeal the tax exemption of federal credit unions were made in 1951 and 1953. This campaign may have been related to the general "red scare" of McCarthyism that swept the nation during and after the Korean confrontation. In any case, the two bills attacking the tax-exempt status of federal credit unions introduced in the 82nd Congress were not successful. (315)

This narrative seems to lay bare the hypocrisy of the present American Bankers Association campaign to tax credit unions. At the moment, the primary banker argument is that the tax exemption is "outdated" and was originally intended to benefit small credit unions, so they have been proposing that only mid-to-large asset-size credit unions should be taxed. However, back in 1951, when the credit union movement was made up almost entirely of the former type of small-scale organizations, the bankers not only wanted them taxed, but were willing to stoop to McCarthyist demagoguery to advance that goal.

This fact that bankers have been gunning for the credit union tax exemption since the days when most credit union "staff" were volunteers and a "branch" was more likely to be a lock-box in a church basement than a brick-and-mortar store-front belies the lip service they've recently been paying to small credit unions in their attacks on the movement. For several generations, it seems, a major goal of the banking lobby has been to maximize their shareholders' profits by hobbling the spread of the democratic, cooperative model of finance. They were able to bring the mutual savings banks to heel by the 1950s, and the 1980s saw the demise of the S&Ls, but credit unions not only survived, but are growing, and now provide 96 million Americans with a direct stake in their financial institution. As such, the above quote demonstrates that most recent banker campaign should not simply be understood as an isolated controversy primarily driven by the needs of the moment, but it should rather be seen as the latest skirmish between the forces of economic oligarchy and economic democracy in a conflict over the structure of the financial system that is more than a century old.

Edward Filene Speaks to the Radical Purpose of Credit Unionism

Edward Filene

Timely excerpt from an article by credit union pioneer Edward Filene on page 7 of the February, 1936 issue of The Credit Union Bridge (now Credit Union Magazine) entitled "Of the People, By the People and For the People":

...But do the Credit Unionists of America recognize their own historic part in this never-ending movement toward true democracy? Toward the liberation of humanity, and its rise to yet undreamed of heights, not by destroying great and useful powers which are used to oppress it, but by discovering how to use those powers for the common good.

As we celebrate the birthdays of Washington and of Lincoln, it is my hope that Credit Unionists at least will not be content with the mere recital of victories won. These are the two greatest names in our National history; but they are great because they dared to look forward, and it is dishonoring, not honoring such names, to celebrate their birthdays merely by looking back.

May each of us Credit Unionists remember, then, that he is not merely one of a little local group, which has discovered a convenient way of meeting certain little credit problems. We are enlisted units, rather, in a great and growing army of liberation, destined not to destroy the money power or even quarrel with it, but to discover how this power which necessarily controls the lives of people in this machine age may be used most effectively by the people for the people's interests.

To discover that, it was necessary to begin with the little local circle. Until we learned the first lessons, we could not go into the higher grades. But money is power only when it is used. To use it most effectively, we must use it constantly; and as our resources grow, we must learn how to deploy them in ever greater and more comprehensive ways. ...

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.