A Multi-Party System?

Several months ago, I tweeted the seemingly random comment: “credit unions should go to a two-party system.” One person responded “What are you proposing? The Credit Union Civil War?” Others wondered if I was joking.

Quite the opposite, actually.

Turns out, this was an issue that had been bugging me for some time. Not all credit unions share the same operational philosophy. Sure, we are all not-for-profit financial cooperatives, guided by democratically-elected volunteer directors, that return earnings to member-owners. This basic structure leaves a lot of room for interpretation, however.

How does your credit union empower member-owners to control their credit union’s operations? How are earnings returned to members? How does your credit union cooperate with other credit unions? The community? The credit union system? How does your credit union stand on the idea of growth? When is growth bad? What’s your position on risk-based pricing? Tiered deposit rates? When is profit from product offerings, even profit that is returned to members, bad profit?

The ways credit unions answer these questions can vary widely...but I’ve always wondered if we could generally put credit unions into two or more distinct, and official, categories.

Let me explain.

The Tampa Bay Devil Rays decided a few seasons ago that they would build their team around speed and defense. They started assembling young talent to fit this mold, and put their plan into action. While most teams were stocking up on proven power hitters and veteran pitchers, the Devil Rays were creating a style of their own. It was still baseball, and it was not to be considered better or worse that the prevalent model, but it was a distinct approach to the game.

Credit unions use distinct approaches as well. Increasingly, there seems to be a divide between a few general approaches to the way credit unions do business. Our reactions to the Corporate Stabilization issue give a unique insight to my point. Many credit unions adamantly opposed a taxpayer-funded solution to the problem. Others saw access to TARP as being a responsible solution. It was a healthy debate (that doesn’t need to be rehashed in this post), and very telling about what we have become as a movement.

Disagreement among credit unions is natural, but how do we balance our individual credit unions’ stances on the issues with the overall consumer view of credit unions? More specifically, how do credit unions organize amongst ourselves into political-type parties? How does a consumer know how an individual credit union stands on important philosophical issues? Not all democrats think alike, and not all republicans think alike. Generally, however, we can pretty much know how each will approach a decision.

“How’s the U.S. two-party political system working out for you these days?” you are no doubt murmuring.

Well, you make an excellent point. It’s dysfunctional. But it’s no more dysfunctional than confusing the marketplace with differing views on credit union philosophy. If our core principles are our keys to differentiation, shouldn’t consumers know generally how you implement those principles?

So, here’s the idea.

Organize a group of credit unions to spell out certain philosophical principles that member credit unions within the group must abide by. Credit unions could voluntarily join the group based on their general belief in that framework. Multiple groups could emerge, and each would present a distinct alternative to how credit unions should operate. Consumers would then know exactly what a credit union stands for before joining, and would more easily decide which values he/she aligns with.

For example. A group of credit unions could decide that their soul focus should be on democratic control, member ownership, and organic growth within the individual credit union. This would totally change this group’s approach to an important issue such as credit union to bank charter conversions. It would also dictate how those credit unions attract members. Want an equity stake in a credit union? This is your model.

Maybe another group emerges that says “to heck with individual credit unions, our goal is to make the movement as a whole bigger.” This group would truly believe in the notion that we are a cooperative of cooperatives. How would that affect this group’s stance on corporate credit union bailouts? Inter-credit union competition?

Another group could emerge that believes credit unions are purely social service organizations. Outreach, consumer education, advocacy, and development would clearly drive these credit unions. How would this change how this group approaches pricing? Would members of these credit unions then choose to receive lower returns on their deposits or higher loan rates in the name of philanthropy?

The number of philosophical divisions could be endless, but I would imagine that you could generally develop a small enough group of subsets that it isn’t overwhelming for the audience. Imagine the democratically-elected leaders of these divisions being at the table when our trade associations or regulators assess their positions on a matter.

The intention is not to create disunion within the movement. Instead, it’s a way to create better debate within the movement about key issues. While I truly believe credit unions need to speak with a unified voice, I also know that the reality is that we simply don’t have that consensus. Maybe this structure would allow us to better reach agreements on transformative issues? Maybe it will allow credit union boards to do some soul searching about what it is they are here to do? Maybe this exercise will simplify complex ideas like national branding campaigns, specific legislation, or opportunities for collaboration?

Maybe it won’t.

Why I Support Filene and Obama (not a typo)

Take away his fortune, fame, success, leadership, entrepreneurial achievement, philanthropic accomplishment and charming good looks, and I would consider myself a modern-day Edward Filene. OK...it's obviously a stretch. But let me explain.

Filene was a man who put philosophy into action. So am I. Filene believed in consumerism, capitalism, and the power (good and bad) of marketing. So do I.

He believed that one of the most important obligations that an American has is to his/her job - with hard work, dedication, innovation, and passion for creating satisfied customers being imperative. I believe that too. Filene also believed that in return for these qualities, workers should be taken care of by their employers. I couldn't agree more.

He believed in the power of self-help - that people, at the end of the day, must take responsibility for their own betterment. Amen, brother. He believed in cooperative self-help - that by electing to cooperatively tackle a problem, people had a better chance of allowing each other to help themselves. Preach it, Ed!

He hated usury, and believed that there is nothing more important than delivering the best possible product at the best possible price to consumers. Anything outside of that was inefficient and unsustainable on both macro and micro levels. My philosophy exactly.

He believed in credit unions. He believed that democratically owned and operated, not-for-profit financial cooperatives could play a vital role in providing low-cost access to credit to individuals who, outside of the credit union structure, seemed doomed to inefficient bank usury. You see, Filene knew that a democratically-operated financial institution had no choice but to serve its members. They are the shareholders. Thus, any earnings, profits, gains, etc. directly improved the lives of member-owners. So, what you have is this system in which members dictate the financial services they receive - from pricing, to products offered, to fee structure. Essentially, then, members are receiving the best possible products and services at the best possible prices. How cool is that?

Bad organizational decisions, when made, are made in good faith. At the end of the day, though, all decisions in such democracies are the will of the people: the members. I take comfort in that.

That takes me to my point (finally, I know). Anyone that knows me knows that I am a conservative. I believe in small government, low taxes, and a strong national defense. I believe that in America all people of all walks of life enjoy the promises of our Declaration of Independence: life, liberty, and the pursuit of happiness. I believe in the greatness of people - that at the end of the day truly free people are compelled to be good to one another.

I believe in less laws, not more laws. I believe that being successful in America should result in national praise, not punitive actions. I believe that in most cases hard work and a little luck are all it takes to succeed in the land of the free. And I believe that the combination of free markets and democracy, while imperfect, are the secrets to sustained economic and social greatness.

I did not vote for Barack Obama.

I happened to be in San Francisco on election night. What amazed me was the palpable feeling in the air. Aside from the dancing in the streets, horn honking, and pedestrian cheers, you could just see a sense of happiness on people's faces when Obama was announced as the winner. People were downright giddy - like kids on Christmas morning. Granted, this may have totally been a function of being in one of America's most liberal cities. But, the sense that I got was that America had spoken. I take comfort in that.

Democracy doesn't mean your "side" always wins. It means that, collectively, the people win. My political views will likely never allow me to vote for Barack Obama, but my patriotism and belief in American democracy requires that I respect and support the will of the people.

So, my vow to you is this: you will never hear me bash Barack Obama, the President. His election is the will of the people. And even though I know that many Americans did not afford this luxury to President Bush, I pledge my support, despite our dramatic disagreements, to Obama and his remarkable story. I must now trust that he will hold true to his word and be a representative of all of our people - no matter how we voted.

Filene and I could totally support that.