Not for profit, but for service

I attended my first credit union conference in 1975, and I remember hearing then about how much banks hate credit unions. Some things never change.

Even today, bankers continue to lobby their friends in Congress to limit credit union growth. So why are credit unions such a thorn in their side? Why do banks spread misinformation?

We live in a capitalist economy and profits are important. Just like other businesses, credit unions must add net income (profits) to our reserves each year in order to grow and remain healthy. Credit unions are different, however, organized to maximize service to members. Profits are paid to members in the form of dividends and lower loan rates. Banks, however, are structured to maximize profits for their stockholders. This is a big difference.

In addition, a capitalist economy is based on the competition of ideas, services and products. I am confident that consumers and small businesses throughout the nation have benefited from the competition between credit unions and banks. As an example, during the recent financial crisis when banks reduced their lending to businesses and individuals by 15 percent nationally, credit unions recognized the critical need to continue supporting businesses and individuals and increased their lending by 45 percent. Thus, businesses and jobs were saved. Credit unions have been taking such action for more than 100 years. But does this fully explain the fierce resentment of banks toward credit unions?

Could it be that, deep down inside, bankers resent credit unions because of our mission of service? “Not for profit, but for service” is a powerful statement. Maybe bankers realize that servicing others is a higher calling than maximizing profits. Could it be that they understand that accumulation of great wealth in the hands of the few and concentration of power does not create a just society? Possibly knowing that thousands of credit union volunteers are serving without compensation makes it a little harder to look at themselves in the mirror each morning.

I’m sure there are some examples of credit unions that have lost their way. With the temptation of personal gain and greed, a few have put self-interest ahead of their memberships. I encourage these credit unions to change their charters and become banks. On the other hand, if a community bank is truly committed to service and believes it has an unfair disadvantage in the marketplace, please join us by converting to a credit union.

Credit unions are not-for-profit financial cooperatives. As democratically owned and controlled institutions, credit unions take pride in their “people helping people” philosophy. Members elect their credit unions’ boards of directors and each member has an equal vote, regardless of how much he or she has on deposit. Credit unions have no outside stockholders, so after reserves are set aside, earnings are returned to members in the form of dividends on savings, lower loan rates or additional services. And just as importantly, credit unions don’t speculate with members’ money.

An important vote will be scheduled soon in the U.S. Senate. The bill, S. 2231, allows credit unions greater ability to lend to small businesses. It will be very interesting to see if Congress votes for more service for members or more profits for banks.

Al Strawn is CEO of Matanuska Valley Federal Credit Union.