Bank Transfer Day, Populism, and the Strategy of the Credit Union Movement

After 27 year-old LA gallery owner Kristen Christian created the virally spreading "Bank Transfer Day" Facebook event in early October as a response to some infuriating experiences with her bank, a fascinating conversation has been taking place within the credit union movement. On the one hand, many are quite excited to see the burst of positive media attention that the event instigated. They eagerly hope that, in the short term, the tens of thousands of people who have RSVPed on Facebook will follow through on their intentions and deliver a wave of new members to credit unions. From a longer, more strategic perspective, the aspiration is that, by spreading awareness of the credit union model, the event will contribute to fundamentally and positively advancing the movement's place in the world of financial services.

Credit Unions and the Wall Street Occupation

My first real awareness of and appreciation for the credit union movement was a direct outgrowth of the 2008 financial crisis. Like many Americans, I was deeply shocked by both the fraudulent excesses of the banking industry and the collusion of government regulators which combined to plunge our economy into a recession from which we've yet to extricate ourselves. In order to try and better understand what had happened, I began reading widely in economics, and, in the process, stumbled upon the powerful alternative to the current financial order that is the credit union idea.

The thing that initially fascinated me about credit unions in the context of the financial crisis was the fact that they were, on average, far less negatively impacted by it than for-profit banks. Sure, they struggled as the economy turned sour and a few failed, but their woes were nothing compared to the apocalyptic crisis that engulfed the for-profit banking sector.

After a fair amount of research, I came to the conclusion that this advantageous outcome can be largely attributed to credit unions' cooperative ownership structure. In a for-profit bank, the depositors and the shareholders are two different groups of people. The shareholders, who legally have an absolute say in the direction of the company, generally want their bank to take risks which have the potential to pay off in the short term. On the other hand, depositors generally prioritize safety over returns, but, because they have no say in a for-profit bank, the banks took on too much risk for their own good, which ultimately led to the massive Federal bailout.

Book Review - Debt: The First 5,000 Years by David Graeber

Upon the recommendation of several people, I recently acquired David Graeber's new book Debt: The First 5,000 Years. With a title like that, I assumed that it'd be a conventional and somewhat tedious work of economic history. However, since debt is ultimately at the root of the whole credit union project, I figured that getting a long historical view of the phenomenon would be worth the slog. As such, I brewed up a cup of tea, hefted the substantial tome, and began to read.

Within the first twenty pages, my expectations of a dry economic history narrative were completely blown out of the water. Graeber, it turns out, is an anthropologist, not an economist, and that perspective is powerfully evident throughout the text. Instead of accepting the commonly held assumptions of economists and lay people on the origins of money and debt, he uses his encyclopedic knowledge of human cultures to refute many of those premises with hard, specific evidence, and offers an interesting new lens through which to view the development and role of debt in both the historical development and the lived reality of human societies. Indeed, Graeber's insightful argument covers so much terrain that it would be virtually impossible to do it full justice in a short book review. As such, I'll limit my observations to a few key points and their implications for credit unionism.

Book Review - Cooperative Banking: A Credit Union Book by Roy F. Bergengren

Not to be confused with his unimaginatively titled later work Credit Union: A Cooperative Banking Book (1931), Roy Bergengren's Cooperative Banking: A Credit Union Book (1923) was his first full length publication. Having been hired by Edward Filene a mere three years earlier to direct the project of promoting credit union development first in Massachusetts and then nation-wide, Cooperative Banking is a fascinating reflection of both the state of the credit union movement and Bergengren's thinking near the beginning of his long career as a credit union champion.

The most apparent difference between Cooperative Banking and many of Bergengren's subsequent works is his focus on international examples of credit unionism. In his later books, the bulk of Bergengren's writing draws upon his experiences with an enormous variety of domestic credit unions for evidence and emphasis. However, the pool of domestic examples from which he could draw in 1923 was fairly small given the fact that only a handful of states had passed credit union enabling legislation, and even the Massachusetts movement (the strongest and most organized at the time) boasted a total membership of less than fifty thousand. As such, instead of leading with a description of the sparse credit union development in America, Bergengren first introduces the readers of Cooperative Banking to the promise of the credit union idea by providing an overview of the success of cooperative banking in Germany under the leadership of Friedrich Raiffeisen and Hermann Schulze-Delitzsch. After outlining the process by which the movements founded by these two men grew to an enormous scale and helped to ameliorate many social problems, Bergengren argues that the two models of credit union development that had emerged over the previous decade and a half in America were not unprecedented new socio-economic experiments. Rather, they represented the spread of successful systems that had been subject to continuous refinement for more than half a century before reaching the United States.

Social History and Credit Unions

For much of its long existence, the primary focus of the field of history was on the "great men" who were believed to be the driving force behind historical change. Little could be gained, it was thought, by understanding the life of a French peasant in 1780 or a fisherman in Nova Scotia in 1890. Instead, the idea was that good history should be populated by world-changing geniuses, powerful princes, cunning statesmen, and intrepid explorers.

The Unique Importance of Co-op Histories

While working on an institutional history of the Association of Vermont Credit Unions over the past few months, I've been giving the reason for writing such narratives a lot of thought. Particularly, I've come to the conclusion that, as a result of their unique ownership structure, histories of cooperatives serve fundamentally different purposes than do those of for-profit companies.

In the case of the latter, institutional history is commonly treated as a marketing tool. By crafting a narrative that puts the organization's best foot forward, a corporate history (whether in the form of a short blurb on a website or a full-length book) is generally driven by the goal of elevating the stature of its subject by providing it with ennobling historical roots. That objective, in turn, provides a powerful incentive to minimize (or overlook entirely) the conflicts and questionable moments that inevitably litter an organization's past.

At the root of this corporate tendency to whitewash their histories when presented for public consumption is the fact that their relationship with their customers is adversarial. As consumers are fickle and can often change which business they patronize with relative ease, it would be profoundly irrational for a corporation to actively promulgate an historical vision of itself which might damage its bottom line by scaring off its patrons. As a result, official corporate histories are notoriously unreliable and incomplete, which has, in turn, sparked a whole cottage industry of critical historical writing devoted to exposing the skeletons in corporate closets.

By contrast, the relationship of cooperatives (and consumer cooperatives in particular) to their histories is very different. Since the customers of such firms are, by definition, also their owners, the corporate concern over losing customers as a result of a warts-and-all portrayal of their history has little relevance to the cooperative context. Instead, such histories actually function to strengthen co-ops, since they provide the members and leaders of organizations with a clear sense of which paths have been taken or avoided in the past, and why. As a result, much of the institutional memory which is too often lost when a veteran board member or employee leaves can be preserved and used to inform future decisions without fear (as exists in a corporate environment) that its public exposure would cause great organizational harm. By maintaining a "long memory," cooperatives can cultivate an institutional culture (which their corporate competitors are structurally incapable of emulating) in which decisions can be based upon a deep and rational understanding of, and engagement with, past choices.

As philosophers from Francis Bacon to Michel Foucault have long recognized, the possession of knowledge is a source of great power. In the hierarchical, authoritarian cultures of many corporations, this fact is reflected in tireless efforts to obscure their pasts so as to deny their customers the power over them that knowledge of their history would provide. By contrast, at the core of the cooperative idea is the democratic dispersal of power: every member has an equal stake in the organization and an equal vote for the board of directors. However, such rights mean little if co-op members lack the information necessary to make truly informed decisions about how to wield their influence. As such, a corollary of dispersal of power to co-op members must be an equal dispersal of knowledge about the organization. Though such knowledge takes many forms (accurate annual reports, etc.), a comprehensive and well balanced institutional history is a vital tool of member empowerment that no cooperative should be without.

Book Review: We the People by Roy Bergengren

Reading through the works of credit union pioneer Roy F. Bergengren, it quickly becomes apparent that his books fall into two categories. The first consists of his "Credit Union Books" which, as the name suggests, were written for the benefit of the movement in a narrow sense. Containing practical guides to starting and running a credit union, the contact information of important people in the movement, and updates as to its status both nationally and in various locales, these books were primarily intended to be aids to credit unionists across North America as they struggled to build the movement from the ground up.

Although such texts make up the bulk of Bergengren's oeuvre, he also penned three works in response to contemporary events that take a much broader perspective. His memoirs can be seen in this light as a philosophical reflection upon his career as a co-operative organizer, and I Speak for Joe Doakes, written in 1944, is a call for international and economic co-operation as a way to prevent yet another world war from decimating yet another generation. However, the most involved and comprehensive of these books is We The People: Being an Impudent Dissertation on Certain National and International Matters.