Martin Luther King, Jr., Credit Unionist

While reading Paul Thompson's historical novel The Credit Union Woman a while back, I was struck by an aside about how, during the Montgomery Bus Boycott, an attempt was made to form a credit union. Since then, I've been wondering about what came of that initiative, and today being Martin Luther King Day felt like a good reason to do a bit of research on the topic.

The boycott itself persisted from December 1, 1955, when Rosa Parks refused to give up her seat, until December 20th, 1956, when the Supreme Court ruling ending bus segregation took effect. In that time, African Americans in Montgomery got intensely organized under the umbrella of the newly formed Montgomery Improvement Association (MIA), which held regular mass meetings and brought together leaders from a broad cross-section of the community. While the impetus for that organization's establishment was handling the logistics of the boycott, it also became a vehicle for advancing other civil-rights related projects, one of which was a credit union.

The first mention I could find of the MIA advancing the idea of forming a financial institution is in a May 24th, 1956 document entitled "Recommendations to MIA Executive Board," in which King lays out a series of restructuring suggestions for the organization. Among these ideas, which were approved by the Executive Board on May 30th, includes the recommendation that:

In order to valuably utilize the present relaxed phase of the bus situation and capitalize on the prevailing enthusiasm and amazing togetherness of the people, a strong emphasis shall be placed on ... increasing our economic power through the establishment of a bank. ... The Banking Committee [co-chaired by Ralph David Abernathy] shall meet immediately and make application for a charter through the Federal Home Loan Bank in Greensboro, North Carolina. If the charter is denied at this level a committee shall be immediately sent to Washington to appeal for a charter through the head office of all savings and loan banks. The program committee shall be requested to allot more time in the mass meeting to the voting and banking committees for purposes of the idea over to the people.

In the months that followed the idea of forming black-owned financial institutions apparently continued to percolate. In an essay written immediately following the Supreme Court decision that ended legal racial segregation on the buses in December, King expressed that two of the MIA's six "continuing goals" had to do with finance:

1. To establish the first bank in Montgomery to be owned and operated by Negroes. We have found that in the present situation many Negroes who are active in the protests have been unable to secure loans from the existing banks.

2. To organize a credit union. As a result of the protest, there is a strong desire among the Negroes to pool their money for great cooperative economic programs. We are anxious to demonstrate that cooperation rather than competition is the way to meet problems.

 According to a footnote in the May 24th document, the MIA abandoned the idea of chartering a bank shortly thereafter, having learned that they would be required to front $400,000 to obtain a charter. The credit union project continued apace, however, and on February 24th, 1957, a widely circulated Associated Press article reported that "Rev. Harold Clement[s], chairman of the MIA's credit union committee, said an application has been filed for a federal charter and 'we expect to get approval in two weeks or so.'"

Unfortunately, Clements was overly optimistic, and their application was rejected by the Bureau of Federal Credit Unions in 1957, and again in 1959 due to, according to another footnote, "policies prohibiting charters for civic groups." Despite these setbacks, however, King's interest in the credit union model remained strong. When he took up as pastor of Atlanta's Ebeneezer Baptist Church in 1960, he made the following recommendation to the congregation:

In order to instill the idea of thrift in our members and reveal the concern of the Church for the economic life of man, a committee shall be appointed to organize a Credit Union. [emphasis in original] This Committee will immediately seek to secure a federal charter. It is hoped that every member will become associated with this Credit Union, and that it will become a powerful economic agency in the community. The need for such an institution in our Church is unquestioned. It will serve as a channel through which members can save money, and it prevents them from having to go to downtown finance companies to make loans for exploitative interest rates. Actually when the individual makes a loan from the Credit Union of which he is a member, he is borrowing from himself.

The project apparently didn't come together immediately, King's father and co-pastor reiterated the call in his recommendations for the 1968-1969 year, stating that "in order to instill the ideas of thrift in our members and reveal the concern of the church for the economic life of man, a committee shall be appointed to organize a credit union." As a result, the Ebeneezer Credit Union was established in 1971 as part of a wave of Black Church Credit Unions that took root in that era.

In any case, the above was about what I was able to track down with Google and an afternoon's work, so there's much left that I'm curious to learn more about, especially where the papers of the MIA's Credit Union Committee might be housed, and what happened to the Ebeneezer Credit Union. Fortunately, I will hopefully have a chance to find some answers on my coming trip in March, when I plan to take a train across the South conducting oral history interviews with African American credit union elders. If you, dear reader, happen to have any relevant information as to sources (or interviewees) please leave a comment or otherwise get in touch!

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.