Join a Credit Union, good for your finances -- good for the economy

What do these two pictures have in common? The “leaf litter,” the uppermost layer of soil, represents nature’s credit union.  The fallen leaves in the photo represent a savings deposit made by nearby oak and tulip trees. A host of creatures turn the leaves into organic rich humus that replenishes the nutrient content, beneficial structure and the capacity of soil to hold water. These “savings” will payoff in subsequent growing seasons. This is just one of the many economic lessons that ecosystems have to offer. The lesson here – put your savings in something that helps to build the community, like the Wisconsin Credit Union shown in the second photo. The mega-banks on the other hand provide mega-profits to absentee investors and mega-bonuses to the executives.                        

Why should we join credit unions? We have started to shift our family and business finances to a credit union.  Here’s why. Unlike banks, credit owners are owned by their members (savers and borrowers); as non-profits credit unions are exempt from taxes. As non-profits they can payer higher rates on savings and charge lower rates on loans than commercial banks. They also pay dividends to their members – members of the community. There are other advantages to cooperative financial institutions. Our family has its home mortgage with a non-profit lender, Colonial Farm Credit, a non-profit lender that provides loans for both farms and homes. Like a credit union, the FCT is owned by the members, in this case the borrowers. Not only do we get a good (constant) rate, but we get on the order of $2000 per year in dividends.

Credit Unions: good for small, local businesses, good for jobs: Henry S. Cole & Associates, Inc. (my company) has had a Bank of America Small Business Credit Card for more than a decade; we have paid our bills on time. Both the company and my family have numerous accounts with Bank of America. Despite the long term relationship, I recently received a letter from Bank of America stating that my company’s credit line was cut from $20,000 down to $1700 (just $200 over my balance). My company is not at all unique in this regard. The major banks have virtually stopped loaning to small businesses. A number of these banks including Bank of America received billions in a tax-payer funded bailout (politely called the Troubled Asset Fund or TARP). The major bank executives who received major bonuses must be laughing all the way to the bank. But small business owners are not welcome.

So how have credit unions faired during the financial crisis and recession?

The following graphs presented by Ronald Covey, President of St. Mary’s Bank Credit Union in his testimony to the House Small Business and Financial Services Committee this past week. He spoke on behalf of CUNA the Credit Union National Association. Not only have credit unions increased their lending to businesses, but have done so with less risk than banks for all sorts of loans. (Second graph bars show lost loans). 

Congress needs to act: The potential role of credit unions in spurring economic recovery is limited by federal restrictions on the share of a credit union's available funds that can be loaned to businesses. 

Major credit unions and their associations are 

lobbying to lift the cap. Sen. Mark Udall (D-Colo.) introduced legislation in December that would lift the lending cap to 25 percent. A similar bill is pending in the House. Not surprisingly, banks against the lifting these important bills. The Obama  Administration, despite its effort to increase loans to small businesses seems to be blind to the potential of credit unions to further expand its loans to job generating local businesses. 
Bottom Line: Tell your members of Congress to support this bill .... and join a credit union!