Credit Union History

Book Review - Comme D'Or: The First Fifty Years of Holy Rosary Credit Union by Michael Behrendt

2012-02-07T11:20:00.000-05:00

At the end of my recent trip to America's Credit Union Museum in Manchester, NH, museum director Peggy Powell gave me a copy of the Michael Behrendt's recently published book Comme D'Or: The First Fifty Years of Holy Rosary Credit Union. According to Ms. Powell, the book is representative of a new trend in the historiography of credit unions. For the past few decades, when written about at all, the primary focus of credit union history has been at the level of the national and state-level movement institutions. More recently, however, Ms. Powell has encountered a number of folks working on detailed histories of individual institutions, of which Comme D'Or is an excellent example.

Self-published by Holy Rosary Credit Union of Rochester, NH to commemorate its fiftieth anniversary, Comme D'Or is accessibly written and structured in a way that reveals it's author's solid understanding of the nature of the credit union model. At a time when uncertainty about the nature of the difference between banks and credit unions is far too common, it would be quite easy for a writer coming from outside the movement to write the history of a credit union as if it were that of a bank, with the economic story taking center stage.

Fortunately, Michael Behrendt doesn't fall into this trap. The city planner of Rochester, NH by profession with a book about that city's architectural history already under his belt, Behrendt brings an enormous depth of knowledge about, and appreciation for, the social and cultural history of Rochester to Comme D'Or. As a result, while the economic aspects of Holy Rosary Credit Union's development are not neglected, people and community are (very appropriately) at the core of the narrative.

This is exemplified by the subject of the book's second chapter. After the obligatory back-story of the credit union movement as a whole, Behrendt doesn't immediately proceed to a discussion of the establishment of Holy Rosary. Instead, he takes readers on a thought-provoking detour through the development of the Catholic French-Canadian immigrant community that founded the credit union. By weaving together the macro-level trends of the mass migration of rural French Canadians to New England mill-towns in the late 19th and early 20th centuries with thumbnail biographical sketches of key personalities in Rochester's Franco-American community, Behrendt provides his readers with a solid sense of the social, cultural, and economic environment of which Holy Rosary was a product.

Such rich context serves to appreciably deepen Behrendt's subsequent discussion of the establishment and development of the credit union by it helping readers to viscerally "get" how the early credit union model humanized debt and credit. Due to the present financial and political hegemony of the corporate banking system, our contemporary culture tends to normalize the idea that debt, as a relationship between an individual and an institution, is something inherently impersonal. Whether or not one receives a loan is a statistical decision based on income rate, debt load, and credit scores, and the decision to declare bankruptcy or walk away from an"underwater" mortgage is thus not perceived to be a moral one.

However, instead of embodying this model of two rationally calculating actors acting in their own narrow best interest, Behrendt effectively demonstrates how the granting of credit at Holy Rosary was deeply embedded within the fabric of its community. While objective financial measures were not ignored, a theme that emerges again and again is how much influence one's reputation had on the decision of the credit committee. Indeed, this dynamic is reflected in the book's title; "Comme D'Or" (which roughly translates to "good as gold") was what long-time credit committee chairman Maurice Sanfacon would exclaim when he encountered a loan application from someone he deemed trustworthy.¹

The flip side of this dynamic was that, since personal honor was often all that stood as collateral, members felt deep loyalty to the organization. According to Behrendt, although "many struggled when the shoe-shops [which were major local employers] closed, but paying back the credit union was often a person's highest priority. Jim Brock, says that members do not want to let the credit union down. They know they can talk to someone if they are having a hard time."² In fact, this implicit social contract that members would pay their debts to the best of their ability while the credit union would do its best to accommodate member facing hard times meant that it was more than twenty years before the credit union attempted its first repossession. Amusingly, the seizure of a delinquent member's wrecker truck in the 1980s caused such a stink (since it was seen as a violation of this understanding) that the credit union returned it the very next day and didn't attempt a repossession for the remainder of the collections officer's tenure.³

Inherently, reputation and honor are characteristics of specific human relationships. While it is possible to have generalizing discussions of their functions using concepts like ["social capital,"] such abstractions can, at best, be only orienting since, in the real world, the full meaning of honor and reputation is always embedded in the full complexity of relationships between actual human beings. As such, to understand the development of an organization rooted in the social life of its members, it is vital to cultivate an understanding of those members' community life far beyond the boundaries of the institution itself.

Happily, Behrendt achieves just that, not only through his extensive introduction to the credit union's socio-cultural background and micro-biographies of key personalities, but also by drawing heavily on oral history sources to tease out revealing moments that highlight the complexity of the credit union's relationship to its larger community. Though there are many anecdotes sprinkled throughout the book, one that particularly caught my interest because of the way it underscores the credit union's French Canadian heritage and the small but meaningful ways it intervened positively in the lives of its members concerns an elderly woman who "came in every year to borrow $20. Nobody asked what the loan was for, but [Tom Bergeron] believes it was to play Beano (the French-Canadian equivalent of Bingo) at the Rochester Fair. Three cards cost a quarter; so, even after covering admission, she could get in a lot of Beano. The woman came into the office religiously every month to pay down her loan, until submitting another application the following fall."⁴ By paying such careful heed to the specific, human moments in the life of the credit union, Comme D'Or succeeds in distilling the fundamental character of a fascinating institution's early years.

Given his appreciation of the social character Holy Rosary's origins, Behrendt concludes his book with a very insightful discussion of way in which the credit union has attempted to navigate the challenge (which the whole credit union movement has been wrestling with for decades) of growing while maintaining a sense of community. Mixing quotes from social capital theorist Robert Putnam with insights into the present state of the credit union from contemporary volunteers and staff, it the discussion is deep treatment of the issue that contributes meaningfully to the ongoing conversation concerning credit union identity.

Overall, in spite of (or, perhaps, because of) its unorthodox structure and source material, Comme D'Or is one of the best credit union histories I've encountered. Its sympathetic and in-depth treatment of the people involved in the organization make it a must-read for anyone thinking about undertaking a similar project for their own credit union. As for the more academically-minded, the pop-history tone can sometimes come off as a bit too fluffy, but it is more than made up for by (1) the sophisticated treatment of identity issues and (2) the discussion of the Franco-American influence on the credit union. Though French Canadians get a nod in the traditional credit union narrative, their influence seems to suddenly end once Desjardins transfers the credit union idea to Filene. Hopefully, this book will be but the first installment in a larger project of describing the influence of Quebec on the American credit unionism post-1910. In sum, Comme D'Or absolutely deserves a place of pride on any credit union history nerd's book-shelf!

Notes

1109.

2110.

3103.

487.

A Primary Source Mother Lode: The St. Francis Xavier University Online Archives

2012-01-28T14:13:00.001-05:00

In the early 20th century, St. Francis Xavier, a small Catholic college in Antigonish, Nova Scotia, stood as one of North America's most innovative and active institutions working in support of cooperative development. Beginning in the mid-1930s, Roy Bergengren began corresponding with some of the leading lights at St. Francis Xavier (particularly Father Moses Coady), which led to a great deal of mutual influence between the American credit union and the "Antigonish" movements.

Given this history, I've been wanting to make a trip to Antigonish for a while now in order to dig through the Coady-Bergengren correspondence that is housed in their archives. Though such a journey remains in the realm of idle fantasy for the moment due to lack of funds, I was extremely excited today to discover that they have made a substantial chunk of their collection available to the public through an online archive!

After an hour digging through the site, I can safely say that it's a true treasure trove for credit union historians. Thus far, I've found old pictures, impossible to find pamphlets, and even some scanned versions of very rare credit union books (including one that I've been searching for fruitlessly for months: Bergengren's Soul -- expect a review in the near future :)). You can check out the full collection here; I'll conclude with a pair of choice photographs I stumbled upon in my browsing:


Roy Bergengren shows off the growth of the credit union movement, 1941

Roy Bergengren (L) receives an honorary degree from St. Francis Xavier, May, 1949

Best. Anniversary. Present. Ever.

2012-01-27T15:44:00.000-05:00

My girlfriend tried her hand at making me a t-shirt tribute to Roy Bergengren, with epic results. CU History nerds, eat your hearts out, cuz this baby's one of a kind!

Book Review - The Ownership of Enterprise by Henry Hansmann

2012-01-26T16:34:00.000-05:00

Given the almost total absence of the cooperative model from mainstream business school discourse, I was recently delighted to hear that an acquaintance was teaching an "Introduction to Cooperatives" course at a college in Connecticut. I was quite curious to see what such a course would consist of, so I went on the website and downloaded the syllabus. While the students were exposed to a diversity of readings, the core of the course seemed to be built around one book, The Ownership of Enterprise by Henry Hansmann. Intrigued, I got my hands on the text and began digging in.

As its title suggests, the purpose of Hansmann's book is, fundamentally, the investigation of the forms of ownership that are prevalent in different sectors of the economy. Using a perspective that leverages tools from both economics and political science (he understands the governance of firms to be subject to similar political dynamics that public choice theory dissects in government), Hansmann starts off by offering a general theory of ownership that relies on two key factors.

First, he argues that "all other things held equal, costs will be minimized [for a firm] if ownership is assigned to the class of patrons for whom the problems of market contracting--that is, the costs of market imperfections--are most severe."¹ Thus, if the cost of contracting with workers is higher than the cost of contracting with suppliers, customers, etc., in a particular economic sector, then his theory would predict that employee ownership would be the dominant form of ownership.

However, the story is further complicated by a second major factor: the cost of governance. The more diverse the interests of a patron group, the higher the costs of politically mediating those differences through the structure of the firm. As a result, the optimal form of ownership in an industry is, according to Hansmann's theory, "that which minimizes the sum of all of the costs of a firm's transactions. That is, it minimizes the sum of (1) the costs of market contracting for those classes of patrons that are not owners and (2) the costs of ownership for the class of patrons who own the firm."²

The Ownership of Enterprise then goes on to apply the theory to a number of diverse sectors, including worker co-ops, agricultural co-ops, condominiums, private clubs, non-profits, insurance, and even traditional corporations (which Hansmann intriguingly argues are actually a special case of capital supplier co-ops). In each case, he uses a fairly deep historical perspective to look at how changes in the relative costs of contracting and governance for different groups have influenced the dominant ownership structures over time, and the resulting insights are fascinating and compelling.

While Hansmann uncovers dynamics throughout the whole book that are of great interest to credit union people, his chapter on banking is, for obvious reasons, particularly relevant. Since the book was published in 1996, credit unions themselves get a relatively brief mention, since they'd yet to attain their present stature as the dominant form of cooperative banking in America. However, his discussion of the developmental dynamics of other forms, such as mutual banks and mutual savings and loans, touches on a number of issues that are very relevant to both the study of credit union history as well as to the contemporary movement. While it would be beyond the scope of this review to unpack all of the insights of that chapter, two stood out enough to warrant particular mention.

The first is a confirmation of the hunch that I'd developed (and [statistically demonstrated] to be at play in the most recent financial crisis) that cooperatively owned banks are safer than their investor-owned counterparts. Digging into statistics going back to the 1920s, Hansmann finds that the failure rates of cooperative banks were indeed far lower than those of corporate banks. From 1921-1928, the failure rate of the former varied between 0.04% and 0.22%, while the latter's rate hovered between 1.24% and 3.65%. The statistics from the Great Depression are even more pronounced; in 1933, 27.7% of investor-owned banks failed, while only 0.8% of mutual savings and loans and 0.01% of mutual savings banks closed their doors.³ The reason for this, Hansmann explains, is that "the managers of investor owned-firms are much more willing to speculate with their depositors' funds than are the managers of customer-owned and non-profit firms."⁴

The second point relates to a question raised by the first: if commercial banks are less safe for consumers than cooperatives, why have the former come to dominate the contemporary financial sector? Hansmann's theory suggests that a factor must have reduced the costs of contracting between depositors and their banks, and he posits a likely culprit: government regulation. As he puts it, "Effective regulation has permitted investor-owned banks to bond themselves not to exploit their customers unduly, while leaving those firms free to take advantage to [sic] their superior access to capital."⁵ Thus, according to his model, bank regulation acts as an effective subsidy to investor-owned banks by reducing one of the key competitive advantages of credit unions and other co-op financial services providers.

As good theory is an essential component of historical work, Hansmann's book is an essential read for anyone with interest in the history of the credit union movement. Indeed, I wish someone had put a copy of The Ownership of Enterprise in my hands when I started grad school; the lens that it offers would have saved me the great deal of time and work it took to come to rough approximations of many of the ideas that the book presents lucidly and succinctly.

Furthermore, I also strongly recommend it to folks working with contemporary credit unions. The book's intellectual framework offers numerous insights that are very applicable to the modern movement, whether one is considering its stance toward government regulation or the impact of falling information costs on governance costs. Though more than fifteen years old, the ideas in The Ownership of Enterprise continue to be validated by recent events, and the more credit union people come to understand its logic, the stronger our movement will be. Get your hands on a copy, pronto!

Notes

121.

222.

3256.

4263.

5264.

Occupy Your Credit Union! A Tactic for Activist Members

2012-01-24T19:49:00.001-05:00

    While the financial crisis and economic malaise of the past few years has been truly devastating, one silver lining has been the development of increased awareness of the democratic cooperative model of financial services embodied by the credit union movement. Hundred of thousands of people responded to the call to "move your money" around Bank Transfer Day, and both the rate of growth and the stature of the credit union movement is higher than it has been in a very long time.

    All of this is very exciting! However, it only represents the first step in achieving a just financial system. Being a credit union member is not basically the same as being a bank customer who gets better rates and fewer fees; rather, at its core, credit union membership means that you own your bank. With that ownership comes not simply a claim to your fair share of the profits that Bank of America would otherwise have shipped off to its shareholders, but the right to have an equal say in determining the policies and priorities of your credit union.

    For a variety of reasons, however, the mechanisms available to members for making their voices heard are weak in many credit unions. While the board of directors consists of members elected on a one-member, one vote principle, elections often consist of the board members re-nominating themselves and running unopposed, and other opportunities for meaningful member input are rare. This state of affairs (one co-op studies scholar has referred to it as the "democratic deficit") is more the result of neglect than malfeasance, but, whatever the source, it ultimately weakens the capacity of credit unions to effectively advance the interests of their members.

    As such, addressing this "democratic deficit" in our credit unions is the logical follow-up to Bank Transfer Day. Phase 1 was moving our money, which served to shift a respectable amount of resources and power out of the hands of the corporate banking system and into our cooperative one. In order to wield that power to effectively advance our interests against the plutocracy, however, requires that we push for more participatory and responsive democratic processes in our credit unions. As long as the democratic deficit remains, credit unions will remain a passive counter-balance to the excesses of the Wall Street model; once we resolve it, however, I believe credit unions have the potential to become champions that can lend an enormous amount of weight to the struggle for a just financial order.

    Though there are many possible ways to increase the empowerment of credit union members, I propose that one effective strategy would be the formation of "Credit Union Members Associations." Open to all members of a particular credit union and run on the consensus model popularized by the Occupy movement, each Members Association will initially serve as a bi-monthly forum at which members can get to know each other and discuss their the credit union. Then, as the credit union's annual meeting approaches, members of the Association will nominate a slate of "Association Delegates" from their own ranks to challenge the incumbent members of the board of directors whose seats are up for election.

    To receive the endorsement of the Members Association, prospective candidates must meet a few requirements. As in credit union board elections, they must receive the support of the majority of Association members, and, if successfully elected to the credit union board, they must pledge to fulfill several key responsibilities. First, Association Delegates will be responsible for organizing a general meeting (run on the aforementioned consensus process) open to all members of the credit union every two months at which they will report on important news and developments. Second, during such meetings, should the assembled members come to consensus on a proposal (which any member is empowered to bring before the body), the Association Delegates will be obligated to do everything in their power to push for the enactment of the policies called for by the members. Finally, the Association Delegates will commit to pushing for the incorporation of the participatory processes of the Members Association into the structure of the credit union itself, with the aim of eventually making the Association redundant.

    This final goal will likely take time, since, in most credit unions, only a third of the board seats are up for reelection each year. Nonetheless, since credit union annual meeting attendance is (for complex historical reason, and with some exceptions) abysmally low, those seats should be easy pickings for the delegates of a well organized Members Association (as long as they make sure to check the credit union's bylaws to see if you have to turn in a petition in advance to be on the ballot; many credit unions don't allow for nominations from the floor at their annual meetings). In all honesty, a committed block of 25-50 people in a credit union of 20,000+ members would likely be sufficient for success, and, with a few seats at the table, the new board members could start successfully pushing for new initiatives to increase member engagement and participation right off the bat (one such idea: democratizing community giving).

    At its core, the credit union movement offers a truly inspiring alternative to our current economic mess. The "Too Big To Fail" banks seem to operate on the assumption that the rest of society exists to serve their interests (as was most gallingly demonstrated by the bailouts). Credit unions, on the other hand, are predicated on the idea that financial institutions should exist to serve their patrons, not the other way around. By striving to make our credit unions more participatory and responsive to member needs and values through the creation of Members Associations, we will be contributing to the creation of a just financial order that reflects the values of the classic credit union motto: "Not For Profit, Not For Charity, But For Service!"

Stop SOPA/PIPA

2012-01-17T20:38:00.001-05:00

Wikipedia, that dear friend of the procrastinating history student, has declared that it will black out its website tomorrow to protest the insidious PIPA/SOPA bills that are wending their ways through Congress. Credit Union History fully supports this effort, and we will be suspending the site from 7am-7pm in solidarity. Furthermore, we encourage our readers to check out the Wikimedia Foundation's statement on the issue, call their Congresspeople to register their disapproval of this Draconian threat to the free and open exchange of ideas on the Internet, and otherwise publicly demonstrate your opposition to the bills. The Internet will not be trifled with!

Two Days in Manchester: The Tale of My Trip to America's Credit Union Museum

2012-01-15T23:25:00.002-05:00

After dreaming of taking such a trip for the better part of a year and planning it for the past few weeks, last Wednesday I finally left my home in Burlington, Vermont for a two day visit to America's Credit Union Museum in Manchester, New Hampshire. It being northern New England, nasty weather was naturally on its way, so I hit the road in the early afternoon to avoid the impending deluge of ice and snow, and arrived in time grab dinner and drinks with my New Hampshirite friend and fellow mutualist nerd Julia Riber-Pitt.

After some good beer and interesting conversation at Jillians (a local restaurant and pool hall), my mile-long stroll back to the hotel was livened by a parade of gorgeous old historical buildings. Manchester is a classic 19th-century New England industrial town, with enormous, long red-brick mills (now repurposed for a variety of functions) lining both sides of the river that flows through the center of the city. Indeed, America's first credit union, the original site of which is now occupied by the museum, was established to serve the French Canadian immigrants who worked in those mills, and many of the houses that lined my path were built in that era as well.

By the time I reached my hotel, I was having so much fun with my self-guided historical tour that I made the fateful decide to continue walking for a bit. I'd barely made it a block past the hotel, however, when a police car swung in front of me with lights flashing and parked at a forty-five degree angle. A Manchester cop hopped out with one hand on his radio and the other on his gun, and I was quickly barraged by a series of questions about where I was going, what I was doing, and, when I unthinkingly put my hand in my pocket (it was cold!), I was gruffly told to "keep your hands where I can see them!" The officer asked to see my pape... er... "identification," and then radioed my driver's license information to the dispatcher.

We waited in awkward silence for a minute or two before I inquired as to why I'd been stopped. The cop replied with the fishy story that there'd been a bank robbery earlier in the day and that I "fit the description of the suspect." "Well, at least they didn't rob a credit union," I almost quipped back, but then thought better of mouthing off to a cop who clearly didn't have any compunction stopping and demanding the ID of someone for the suspicious act of walking on a side-walk at ten at night.

What was actually going on was clearly a form of the "stop and frisk" practices that have been the target of a great deal of protest in NYC. Essentially, a police officer sees someone they view, for whatever reason (in New York, "walking while black" is a big one), as suspicious, and will stop and interrogate them, then demand to see ID. Though the legality of such prying stops of people not actually suspected of a crime is pretty hazy, cops can easily cover their asses by making up a generic story such as the one I was told, while the real reason for the stop is to check to see if there are any outstanding warrants on the person or if the person has a record that might warrant a search of his or her person.

Fortunately, between my white male privilege force-field and the fact that I've maintained a clean criminal record, word came over the radio that I was not the droid they were looking for, and the cop sent me on my way. The fun of my ramble thoroughly deflated by the Manchester PD's fishing expedition, I returned to my hotel and got a bit of shut-eye in preparation for my first day at the museum.

THURSDAY

That night the weather, as predicted, turned into quite the nasty ice-storm. I thus awoke to an email from the museum director noting that, as she lived high on a hill, she was going to be a bit late getting in, so I took the extra time to avail myself of the Econolodge's meager continental breakfast. The hotel itself was in one of the old mill buildings, and so I had some fun in the breakfast-room examining an enormous wrought-iron furnace door that was about nine feet off the floor and about nine feet in diameter. Also during breakfast, I got a little better idea as to why my stop-and-frisk happened where it did. While eating my English muffin, the man sitting at the next table with his wife and small child leaned over and said "I love this hotel. You can find anything here if you go looking for it." He gave me a meaningful glance and then, just to make sure I hadn't been overwhelmed by the subtlety of his approach, continued, "Ya know, like hookers." After thanking the man for his kindly offer, I made a bee-line for the door and began gingerly navigating the icy roads to the museum.

I arrived a touch after 10am, and, while making travel miserable, the snow and ice had left the museum looking absolutely gorgeous. Originally the home and office of the professional-class Franco-American Boivin family that had been at the center of America's first credit union, the building has been lovingly restored to its full early twentieth century glory both outside and in. In fact, according to museum director Peggy Powell, during the renovation of the section of the first floor that had housed the original credit union office, they actually visited a Quebec nursing home to interview the daughter of the founder, who had been five years old when the credit union was founded. Thanks to her recollections, the style of the furniture, the color of the wallpaper, etc., all accurately recreate the space where Franco-American mill workers would come to make deposits and take out loans in 1908.

The entry hall.

America's very first credit union office!

The little man goes to war.

After inspecting the front rooms, Ms. Powell took me on a whirl-wind orientation to the rest of the museum. The remainder of the first floor has a number of displays that form a general time-line of the credit union movement's history, while the second floor contains diverse themed displays, including a feature on famed credit union cartoonist Joe Stern (the creator of the "little man under the umbrella") and an in-depth display (including a short film) that tells the story of African Americans in the credit union movement. Finally, the third floor consists of a capacious meeting/conference space, which the museum primarily uses to host financial education programs for middle-school students enrolled in a program called "CU 4 Reality."

Following this tour, I headed to the second floor reading room to tackle the first thing on my agenda: reading Roy Bergengren's book Cumet. Occasionally mentioned in a somewhat self-deprecating way in his subsequent writings, I'd interpreted his description of the work as a "fantasy" in the modern sense of the word: a speculative fiction novel. Instead, what I discovered was that Cumet is a thirty-four page pamphlet advocating a specific program for credit unions, rather than an narrative epic consisting of brave knights overthrowing usurious orcs by means of cooperative credit. Despite my mild disappointment, it was nonetheless an interesting read (and an important historical document), and, after taking a break to tour the exhibits and have lunch at an awesome Mexican place with Julia Riber-Pitt (you can read her reflections on the museum here), I spent the remainder of the afternoon writing up a review.

FRIDAY

Day 2 Base Camp - The Reading Room

I returned to the museum Friday morning refreshed and excited for my second day of research, and immediately plopped myself down in the reading room. On Thursday, I'd had a set goal to read and review Cumet. My task on Friday, however, was more loosey-goosey: I wanted to explore the museum's collection and see what sorts of interesting sources I could find.

The first thing I looked through were the books, and I was pleased with what I found. While lacking a few of the Roy Bergengren books that I've been searching for in vain for the last year (such as Soul), the Museum's collection of both state and individual institutional histories is quite impressive. While a few state leagues have published official histories that can be found on book websites such as Amazon, it turns out that many more have created informally published works that are likely only to be found in their respective leagues' offices and the America's Credit Union Museum's reading room, making the museum a truly essential resource for anyone interested in comparative state histories.

Another fascinating source to be found in the reading room is a bound set of the Massachusetts Credit Union League's newsletter from 1924 to the early 1970s. I spent an hour leafing through some of the volumes, and stumbled upon some very interesting information which will be featured in an upcoming Credit Union History post. I'll not say more so as to keep you, dear reader, in suspense, but suffice it to say that those newsletters are a rare and rich source of information for anyone interested in character of the early credit union movement at the local, rather than national, level (although there are some interesting bits that highlight how the national movement was seen by rank-and-file credit unionists).

I was starting to get a bit cross-eyed from all the old documents by 1pm, so I took a quick lunch break and, upon my return, sat down with museum director Peggy Powell to conduct an interview. I'll hopefully put up a full transcript of the interview soon, but, in a nutshell, we ranged widely over the museum's origins (it was inspired by the Maison Alphonse-Desjardins in Quebec), the ways in which credit union history is remembered and portrayed, the role she sees the museum playing (both as educating the public and helping to refresh the memories of those in the movement about why we do what we do), and her hopes for the museum's future as a possible center of scholarship and archival repository of old credit union documents.

After finishing our conversation, I hurried to my car and hit the road a bit early in an attempt to avoid the next wave of terrible New England weather, but no such luck was to be had. As my Subaru churned north at about forty miles per hour through a blinding snow-storm, I had plenty of time to reflect on my trip. In spite of the overbearing police and the sketchy hotel, my overall experience of Manchester was a positive one - I can honestly say that I like the city.

And, of course, the Museum is AWESOME. The fact that it's in the beautiful original building that housed the country's first credit union gives it a powerful sense of place and context that would have been utterly lacking had they simply built a new museum in a major metro area, and the exhibits were interesting and well put together. Those factors, combined with the small but growing collection of important documents, make America's Credit Union Museum an essential pilgrimage site for anyone interested in credit union history. I, for one, am already plotting my return!

Credit Union Songs from the Founding of CUNA

2012-01-14T00:57:00.000-05:00

After braving the icy roads back to Burlington, VT from my trip to America's Credit Union Museum in Manchester, NH, I have so many things to write about! A full recap of the trip will be forthcoming [*Update: Read it here*], but, in the meantime, I figured I'd treat Credit Union History readers to a fun find: a collection of credit union songs found in Edward Filene's diary from the Credit Union National Association's 1934 founding convention in Estes Park, CO! Included are such toe-tapping numbers as:

"The Old Loan Shark" (to the tune of "The Old Gray Mare")
"Credit Union Fellowship Song" ("Sidewalks of New York")
"Edward A. Filene" ("Yankee Doodle")
"Credit Union, Parley-Voo" ("Hinkey-Dinkey, Parley-Voo")
"Theme Song for Estes Park Credit Union Conference" ("The Man on the Flying Trapeze")
"Song of the Credit Union Widow to her Husband" ("Till We Meet Again")
"Song of the Credit Union Spinsters" ("Silver Threads Among the Gold")

I have to say, I'm looking forward to The Disclosures putting out a grind-core cover of one of these classics. Until that happens, though, I'll leave you with a recent video from those modern toubadours that continues the proud tradition of credit union people writing goofy songs about our movement...

Book Review - Cumet by Roy Bergengren

2012-01-12T19:32:00.000-05:00

Written on the ship purser's portable type-writer while returning home from his own European tour in 1933, Cumet: A Fantasy Having to do With Credit Union Mass European Tours (CUMET being an acronym for Credit Union Mass European Tours) is a thirty-four page pamphlet very much inspired by Roy Bergengren's anxieties over the potential for renewed world war. Written in a light, conversational style and hitting on many of the themes treated in greater depth in his 1932 book We the People, Cumet is, in essence, a proposed strategy by which the credit union movement might contribute to heading off such a conflict.

At the core of his proposal is the idea that "all the peoples of the earth would, if they could, live at peace. I believe that they need only to know each other--for they have common hopes and joys and sorrows and a common urge to find happiness." (34) In a world that is rich in relationships that cross international boundaries, Bergengren argues that war would difficult to justify, since people would viscerally understand it as an attack upon people they care about rather than faceless foreigners.

With this idea of "peace through tourism" firmly in mind, he proposes that credit unions are the ideal vehicles for undertaking such a program for a number of reasons. First, the movement's diverse international pedigree (having been started by Germans inspired by the British cooperatives, further developed in Italy, introduced to North America by French-Canadian Catholics, and championed by an American Jew) offers a ready-made network for connecting to a wide variety of people. Though of different nationalities, Bergengren seems to imply that the identity of "credit union member" would be a common denominator that might serve as the foundation for relationship building between disparate peoples.

The biggest road-block to the development of such perspective-broadening international travel, however, was the price-tag; such trips were simply beyond the reach of people of modest means. To overcome this obstacle, Bergengren asserts that credit unions are excellently situated to increase access to such experiences (and thereby bolster the level of international good-will) in two key ways. First, by chartering transportation and reserving accommodations in bulk, the cost per person of such trips would be dramatically reduced. Second, to help people pay for their trips, Bergengren proposes the establishment of specially-designated travel savings accounts by which members might slowly and methodically accumulate the necessary funds. This is exactly how his travel companion, Tom Doig, paid for his trip: he "started two and a half years ago saving semi-monthly in the Industrial Credit Union of Boston $8.33. With the proceeds he has paid all his expenses on a trip which has involved travel in five countries." (25)

Written in the depths of the Great Depression when Bergengren was fresh from his first-hand experience of recently empowered fascism (one of the many European spectacles garnering mention is marching "Hitler boys"), he describes the purpose of the text as "a humble effort to visualize for [credit union members] a pilgrimage of peace in which they may participate." (8) Indeed, this idea of international engagement as an important goal for the credit union movement has persisted through the decades since Bergengren pounded out Cumet on a borrowed type-writer. For example, the New England Credit Union School was partially supported by the money raised from organizing a trip to Bermuda in the 1960s, and many Leagues and individual credit unions have developed "sister" relationships with institutions across the globe. Though the mass credit union travel system proposed by Cumet failed to materialize and dispel the gathering storm-clouds of the Second World War as Bergengren hoped, the book's core idea of cultivating a broad, international perspective has profoundly informed the values and priorities of the contemporary credit union movement. As such, Cumet is definitely worth a gander from anyone interested in Roy Bergengren, the early credit union movement, and/or the development of its international perspective and programs (such as the World Council of Credit Unions).

"Ownership Salience" in Credit Unions (and Cooperatives)

2012-01-07T16:46:00.000-05:00

An extremely interesting and unique characteristic of credit unions (and cooperatives generally) is the nature of their relationships with their member-owners. While often understood simply in terms of members' contractual and legal rights, the movement's history clearly suggests that the ways in which members conceptualize their relationship to their credit unions can vary extremely widely between institutions with identical governance structures. Such differences, in turn, can often exert profound influence on the developmental paths of different credit unions, and thus must be understood as driven by subjective, rather than structural, factors. One such dynamic that that I've found particularly useful and compelling when considering credit union development is something I've come to refer to as "ownership salience."

By this I mean, simply, the intensity with which a credit union member psychologically and behaviorally internalizes the fact that he or she owns their credit union. When ownership salience is entirely lacking, members simply treats their relationship with their credit union relationship as identical in kind to the customer relationship with a bank or other non-member owned business. This sort of person is a credit union member simply because it is the most attractive option on the market, and, when thinking about their institution, he or she uses the pronouns "they" and/or "it" (as in, "They made a donation to the food shelf"). If such a person has a negative experience, their natural response is no different than it would be at a bank: take their business elsewhere.

On the other extreme lies the completely ownership-salient member. To this kind of person, the credit union is fundamentally and viscerally theirs; they go to the annual meeting, read the annual report, and might even run for the board of directors. In contrast to the non-salient member, when the credit union does something, it is understood that "we" (not "they) are doing it. As a result, when encountering a frustrating experience, the salient member reacts by accessing their credit union's governance structures to resolve the issue, rather than leaving the credit union for a competitor. At its core, high ownership salience means that, on a psychological level, the member perceives his or her personal interests and those of the credit union to be in alignment. What's good for the credit union is good for the member, and vice-versa.

For credit unions with highly ownership-salient members, such logic can be a profound source of strength. Indeed, when looking at the process by which many credit unions were established, the level of salience among the early members was often quite staggering. For example, Yvonne Gratton, who was the first treasurer of the Chittenden County College Employees Credit Union in the late 1960s, felt such a powerful sense of ownership that every time her board of directors tried to pay her, she donated the money back to the credit union. Over the last few decades, however, the movement professionalized, institutions grew in size, and intensive member participation ceased to be essential to institutional survival, all of which seems to have combined to drive a general decline in the level of ownership salience.

The existence of this trend, however, does not mean that the credit union movement is inevitably trending towards a state of zero ownership-salience among its members. Instead, once sufficiently recognized, the level of member consciousness can (and should) be treated as a variable that can be modified by institutional policies and initiatives.

A great example of this in action can be seen in the case of my food co-op, [City Market]. It was founded in the 1970s as a small buying club in which all the members contributed volunteer labor, but, over the past several decades, its success has turned it into the largest down-town grocery store in Burlington, Vermont. That growth, however, was accompanied by a reduction in the sense of control and ownership experienced by many members (for instance, see these comments). In response, the co-op has actively attempted to mitigate such growing alienation in a number of ways, including running a well-used member-worker program, hosting fully catered semi-annual meetings, allowing members to vote on-line, and sponsoring tours of local farms, free classes, and service projects that allows members to build their common identity as members of their co-op.

While such strategies are not cheap, the resultant member buy-in can pay off in ways that are not easily quantifiable. One concrete example of this can be seen in an experience I had at a bagel shop a few months ago. While standing in line, I overheard the group of young women who were making sandwiches discussing the relative merits of local natural-food stores. When one of the women mentioned that City Market was a co-op, but she wasn't exactly sure what that meant, I chimed in and gave a super-brief overview. To my surprise, it turned out that the woman behind me in line was also a member, and backed up my brief spiel with her own comment in support of the co-op. In two minutes, the women went from holding mixed views about the different options to all understanding, and having favorable opinions of, City Market.

As a customer of a for-profit store, I would not have felt the need to intervene in the conversation. However, because we identified our personal interests and those of City Market as complementary, both my fellow member and I felt it to be appropriate in that moment to make the case for the co-op. In a world in which people are becoming rapidly desensitized to traditional marketing techniques, having members act as ambassadors for their cooperatives in the web of trusting relationships that comprise their everyday lives is an enormously valuable thing, and the next time the banks try to politically attack the movement, it will be ownership-salient members whose participation will be essential its successful defense.

However, such benefits can only be realized when members have fully incorporated the role of "member-owner" into their identities. As such, working out effective strategies that serve to cultivate ownership-salience is one of the most important challenges facing the credit union movement today (for example, one strategy that I have proposed concerning participatory community giving). This task will require an enormous amount of creativity, experimentation, and hard work, but, if successful, it will result in a vibrant, participatory, and strong credit union movement that will be poised to substantially build on the successes that previous generations of credit union people have left us as their hard-won legacy.

Book Review - People Helping People: A History of the Maine Credit Union Movement

2012-01-01T17:23:00.000-05:00

"People Helping People," is a well-used credit union slogan, and also, it turns out, a common title for books about state movements. Edward M. Walters used the phrase for his 2009 history of credit unionism in Texas, but it's first appearance seems to be on John W. Zerillo and Ted Desveaux's 2004 book People Helping People: A History of the Maine Credit Union Movement.

Though commissioned and published by the Maine Credit Union League, Zerillo and Desveaux's work is especially interesting because, unlike many other trade-association supported histories (including the aforementioned work by Walters and Moody and Fite's CUNA-sponsored national history), it doesn't treat the development of its sponsoring organization as a proxy for the history of the movement as a whole. While the Maine Credit Union League is the focus of one quite readable and interesting chapter, the most fascinating parts of the book come when the authors tell stories of early credit unionism that highlight the culture of the early credit union movement.

To accomplish this, Zerillo and Desveaux supplement their archival research with extensive oral history interviews. In fact, one chapter, entitled "Maine Credit Union Pioneers and Volunteers," is entirely devoted to profiling key figures, many of them quite elderly but still living at the time of writing. Whether recounting the often strange logistics of running a credit union out of one's home (such as being woken up at 4:00 AM on Christmas morning to make a loan to a member who needed to visit a sick relative in Canada) or recalling the purpose of the very first loan made by Ste. Famille FCU (to buy a milk cow, of which the book contains a photo), such personal accounts powerfully convey the sense of purpose felt by early credit union volunteers. While modern credit unions still use the term "movement" (with some temporary lapses of "industry" from time to time), People Helping People's oral history component helps communicate what that term meant to previous generations of credit unionists.

Another interesting aspect of the book is the amount of space the authors devote to the histories of individual institutions. Since the Maine Legislature was very late in passing a state-wide credit union law, only three credit unions were founded (thanks to special acts of the Legislature) prior to the passage of the Federal Credit Union Act in 1934. As a result of their unorthodox way in which they were established, these credit unions had a variety of idiosyncrasies, such as a huge, twenty-four person board of directors and extra-restrictive membership requirements, that set them apart from the rest of the movement for decades.

In addition to their extensive discussion of the pioneering organizations, Zerillo and Desveaux also devote an entire chapter to a compilation of brief historical sketches of all of the state's credit unions. While some of the pieces were written by the book's authors and others were submitted by the credit unions themselves, reading them all back-to-back is a fascinating way to take in both the similarities and the diversities of the movement's constituent parts, whether one considers the ways in which they were established, how they developed, and their strategies for navigating a variety of challenges.

A final valuable element of People Helping People is the long memory it provides of banker attacks on the credit union movement. In many credit union histories, bank opposition to credit unions is brushed off with a vague mention of the issue of credit union taxation. By contrast, Zerillo and Desveaux come back to the topic repeatedly in a way that underscores the variety of tactics that bankers have used over the years in their campaigns to suppress competition from the cooperative model. Whether in the form of opposition to credit union enabling legislation in the 1920s and 1930s, attempts to put banks branches in factories with credit unions in the 1960s, or regulatory wrangling in the 1990s, the book's authors don't shy away from discussions of the movement's often tense relationship with the banks.

Overall, People Helping People is a quick, accessible read that delivers a solid overview of both the institutional and social history of the credit union movement in Maine. While the authors do neglect a few potentially interesting topics (such as the unique character of the French Canadian credit unions that Mark Richard touches on in Loyal But French), their book is nonetheless a vitally important contribution to the credit union history literature. Indeed, it's the best executed example of the "state movement history" genre I've encountered thus-far, and I heartily recommend that anyone considering undertaking such a project in their own state first read People Helping People for inspiration in regards to both method and structure.

My Coming Trip to the Credit Union Museum: Call for Suggestions

2011-12-29T12:46:00.000-05:00

Ever since I first discovered the existence of America's Credit Union Museum in Manchester, New Hampshire, I've been dying to check it out. Unfortunately, life kept getting in the way of my dreams of archival adventuring, but I've decided to put my foot down and make January the month I finally get to take in the American credit union movement's premiere historical institution for two glorious days. My hope is that this trip will provide inspiration for a number of Credit Union History posts, including (but, thanks to the inspirational magic of primary sources, not limited to):

A video interview with museum director Peggy Powell.
A review of the museum's exhibits (hopefully with photos!).
A brief guide to the resources available in the museum's reading room.
A book review of Roy Bergengren's single known work of fiction, Cumet: A Fantasy Having to do With Credit Union Mass European Tours (as it turns out, Paul Thompson's The Credit Union Lady is not the only credit-union themed novel ever written). Self-deprecatingly mentioned in several of his subsequent non-fiction books, Bergengren's novel supposedly proposes the idea of credit unions organizing trips to other parts of the world in order to help create international understanding. I've been fruitlessly searching out a copy of Cumet for a while, but it has been impossible to find; however, it turns out that the Museum has one, and Ms. Powell has graciously offered to open the glass case and allow me to read it!

Additionally, I'd happily welcome any suggestions from readers of Credit Union History as to other thing to look for and/or what you'd like me to write about. Leave your suggestions in the comment section, on the Facebook page, or drop me an email.

***UPDATE***

I finally got the Credit Union History "Tip Jar" working. If you'd like to help fill my gas tank for this trip, click on the "Google Checkout" button on the right hand of the screen...

Book Review - Cooperation Works! by Nadeau and Thompson

2011-12-28T14:52:00.000-05:00

Cooperation Works! How People Are Using Cooperative Action to Rebuild Communities and Revitalize the Economy, by E.J. Nadeau and David J. Thompson, is an accessible and wide-ranging overview of the cooperative movement in the United States as things stood at the time of the book's publication in 1996. Including both a general discussion and a number of specific anecdotes, each chapter is devoted to a specific form of cooperation, including such topics as senior housing co-ops, community-owned sports teams, and employee owned enterprises.

In addition to the value of the overall comparative perspective promoted by the diverse subject matter of Cooperation Works!, the book's chapter on community development credit unions (CDCUs) is particularly valuable to those interested in credit union history. Though the historiography of American credit unions in general is pretty sparse, extra little has been written about the CDCU model. This neglect can likely be attributed to the fact that, with their relatively recent origins and a tiny fraction of the asset-size of traditional credit unions, CDCUs are relatively easy to relegate to a footnote or an aside. When discussed at all, they are mentioned in passing as a project that emerged out of the "War on Poverty" era before the narrative returns to the main credit union story.

Such neglect is unfortunate, especially since the CDCU model has followed a trajectory of historical development that meaningfully differs from that of the main-line credit union movement. While traditional credit unions were busy growing through mergers and consolidation in the 1980s, a wave of new CDCUs were founded and established innovative roles for themselves in their communities and local economies. With their own trade association, culture, and approach to doing business, it is important to understand the history of CDCUs on their own terms.

Happily, the CDCU chapter in Cooperation Works fills in some of the gaps by relating tales of the establishment, struggles, and successes of CDCUs in Santa Cruz, Brooklyn, and North Carolina. While brief, the anecdotes touch on numerous issues that are profoundly important to credit union people today, including struggles with regulators over business lending, balancing social and economic missions, and reaching under-served communities. By focusing on the level of the individual institution, the reader finishes the chapter with a good sense of the development of the CDCU model up to the mid-nineties.

In sum, while the book's advancing age is apparent in some places (such as breathless talk of the potential of something called "the Internet"), it is nonetheless a valuable resource for credit union people. Not only does it offer a clear window into an oft-neglected aspect of credit union history, but the examples it draws from across the breadth of the cooperative movement often contain fascinating observations and ideas. Certain dynamics are inherent to the cooperative model, whether the co-op is in the business of processing grain in South Dakota or providing financial services in North Carolina. As such, it is vital to understand how different cooperatives have dealt with their issues, and CooperationWorks! is a great resource for cultivating such potentially useful knowledge and a strongly recommended addition to one's cooperative studies shelf.

Common Bonds and Conflicting Identities: The Establishment and Development of the Vermont State Employees Credit Union

2011-12-21T09:53:00.000-05:00

Given that I busted my butt writing this document for the better part of a year in order to finish my masters degree, I might as well make it available for public consumption. Read the whole thing here (pdf); the Abstract follows the break:
Though there is a moderately extensive literature on the developmental paths of credit unions, little has been written on the entrepreneurial process through which these institutions come into existence. The wider co-operative studies literature suggests that "supportive external stakeholders" play an important role in the process of co-operative entrepreneurship, but the motivations of those agents is often unclear, as are the changes and continuities in the nature of the relationship between the two entities over time.

    To shed light on these issues, this thesis investigates the relationship between the Vermont State Employees Credit Union (VSECU) and the Vermont State Employees Association (VSEA), which was the "supportive external stakeholder" that helped to establish the credit union. Beginning with the founding of the credit union in 1946, this study demonstrates a variety of ways in which the VSEA supported and subsidized the growth of the credit union, and postulates that it was, in part, motivated to make these investments by the fact that, since only VSEA members were allowed to use the VSECU, the credit union served as an incentive to labor union membership.

    However, as a legally independent entity, the institutional interests of the credit union gradually diverged from those of the VSEA, which manifested in the form of struggles over the boundaries of the common bond. Additionally, this study postulates that this divergence was reflected by the emergence of a new identity among both the credit union's leadership and its rank-and-file. Whereas the earlier members viewed the interests of the credit union as subordinate to those of the VSEA, a growing number began to identify more with the VSECU than they did with the union.

    The strength of this "credit unionist" identity grew over the course of the 1960s, and culminated in a campaign at the end of that decade to open credit union membership to all state employees, regardless of union membership. After a near-miss, this was achieved in an overwhelming vote at the organization's annual meeting in 1970. The break with the "parent" organization was further confirmed two years later, when the membership overwhelmingly rejected a proposal to permit VSEA employees to join the credit union.

    This narrative suggests that, when attempting to understand co-operative entrepreneurship and development, it is extremely important to take the ideas and identities of co-operative members into account. Although leaders certainly exert influence in co-operatives, the organizations' unique democratic corporate structure based on the principle of "one member, one vote" means that the subjective interests of their members are more easily translated into policy changes than would be the case in more hierarchical organizations. As such, the importance of a "bottom up" approach to the study of credit unions and other co-operatives is emphasized.

Book Review - Speaking of Change by Edward Filene

2011-12-19T12:16:00.000-05:00

Edward Filene

When considering the development of the early credit union movement, it is impossible to ignore the key role played by reform-minded business man Edward Filene (of Filene's Basement). After encountering cooperative banking on a trip to India, he arranged for the Canadien credit union pioneer Alphonse Desjardins to speak to a group of community leaders in Boston about cooperative banking. Thereafter, Filene led the charge in obtaining the first credit union law in Massachusetts in 1909, and he spent over a million dollars of his own money over the subsequent three decades on credit union organizing and advocacy.

Described by one historian as "an American Owenite" (in reference to the early 19th century British utopian industrialist and cooperative pioneer Robert Owen), Filene was a man of action who devoted his later life to patronizing and supporting a wide variety of causes in addition to the credit union movement. In doing so, he constantly traveled and spoke before diverse audiences. After his death in 1937, a group of his associates decided to memorialize him by collecting what they felt to be the best of these speeches and publishing them in a book entitled Speaking of Change.

The original edition (a new one was published by the Filene Research Institute in 2008) is a handsome leather-bound and gold-embossed volume, and the copy I bought actually contained the note that accompanied the book which states that "former associates of the late Edward A. Filene of Boston take pleasure in sending you this book, which has just been published as a memorial to Mr. Filene." Containing thirty-two speeches spread over 322 pages, the book begins with a brief introduction to his life written by an unnamed associate. At first, I suspected the mysterious author might have been fellow CUNA founder Roy Bergengren, but the essay refers to Bergengren in the third person, so the identity of the piece's writer remains an enigma.

As for the speeches, they target a diversity of audiences (the audience of each talk is footnoted) and topics, but they all share a consistent theme that obviously weighed heavily in Filene's thinking during this period (all but one of the speeches was made during the Great Depression). By his reckoning, the logic of the "machine age" in which American society found itself was fundamentally different than what came before, and to embrace the social and economic logic of a previous era to solve contemporary problems would be not only ineffectual, but actively dangerous. Whether addressing the Chamber of Commerce or high-school students, Filene argues that the problems of the machine age are not the result of scarcity, but of abundance, and that the vital question facing society at that moment was how to ensure that the masses had sufficient buying power to consume the product of ever-increasingly productive industry.

The answers Filene advocates in his speeches are diverse: Roosevelt's New Deal, mandating high wages, consumer cooperatives, and credit unions. The latter topic comes to the fore in only one of the speeches in the collection, which is an address to the 1936 annual meeting of the California Credit Union League. In it, he states that,

In the very nature of modern machinery, we have become universally interdependent, and in the very nature of this new society, the masses must have adequate buying power--that is, such money power as will enable them to buy enough to keep themselves employed ... It is necessary from every legitimate element of the population; and our problems, therefore, have all ceased to be problems of conflicting interests and have become problems of how to achieve co-operation. The credit union movement is pioneering in the solution of those problems.¹

In addition to other expressions of Filene's take on the social and economic challenges facing the United States in the speeches throughout the book, the above quote is vitally important to understanding his enthusiastic and long-standing patronage of the credit union movement. By providing credit to the unbanked, credit unions were increasing the short-term buying power of people of modest means. By doing so cooperatively in a way that evenly spread the profits of the concern among their patrons, they were helping to mitigate the concentration of wealth that Filene held to be largely responsible for the industrial malaise of the Depression.

Overall, Speaking of Change is well written and thought-provoking. The fact that the "chapters" are speeches means that the book is readable in short, easily digested chunks, and that the language is engaging rather than technical. On the downside, at times it can get repetitive, as Filene introduces his "machine age" framework to the audience at the beginning of almost every speech, but there's enough variety of content to make up for the occasional dull page.

A more serious critique concerns the time period covered by the essays. For someone interested in the Great Depression, Speaking of Change is an essential read; however, for those of us studying credit union history, Filene's perspective from the 1920s is conspicuously absent. Though the above-quoted address and the deeper understanding of Filene's thought gleaned from a wide reading of his speeches are quite useful, the minimal treatment that credit unions receive compared to Roosevelt and the New Deal is unfortunate. As such, though Speaking of Change is a vital text that should be in the library of anyone interested in early credit union history, it alone is not sufficient to gain a complete understanding of Filene's involvement with the movement. According the Bergengren's writings, Filene addressed many gatherings of credit union people, and a separate collection of those speeches would make a wonderful supplement to this book.

1 Filene, 160.

Occupy and Credit Unions: Next Steps

2011-12-03T15:51:00.001-05:00

As readers of this blog are well aware, I've been actively advocating a synergistic relationship between the Occupy and credit union movements ever since since the former kicked off in Zuccotti Park on September 17th, and the developments since that date have been truly exciting. Beginning in early October, "Bank Transfer Day" spread widely through the Occupy movement's networks, which not only resulted in hundreds of thousands of people moving their money from commercial banks to credit unions, but was also critical in making activists aware of the basic differences between banks and credit unions. This awareness has fed activism that continued long after November 5th, with Occupiers across the country supporting the credit union model with teach-ins, pro-credit union pickets of banks branches, and using credit unions almost exclusively as the institution where movement funds are kept.

Given all of this, a recent development in San Francisco has been framed by many as the logical next step: members of the Occupy movement there have decided to establish their own credit union. Called the Peoples Reserve Credit Union, the founders stated that the "goal of this project is to encourage San Francisco residents, businesses, as well as nonprofit and city agencies to keep their money out of the big banks and to redistribute that money locally. Initial services will include micro-loans for the working poor and homeless, and subsidized student loans at low interest rates." After starting with 500 members, the founders aspire to have over 2,000 within a year.

While it is incredibly exhilarating to see an Occupy group embrace the credit union model to this extent, I believe that their plan has two fundamental, interrelated flaws. First, it reflects a lack of understanding of one of the most powerful trends in the credit union movement in the last 40+ years: consolidation. While membership rolls and assets have both grown robustly, the number of credit unions in the United States has declined every year since 1969. This has been the case for a number of reasons that are beyond the scope of this essay, but, at its core, the trend towards fewer and larger institutions has been driven by economies of scale. In order to best deliver the services that members require (debit cards, on-line banking, etc.) while also providing more affordable rates than for-profit banks, studies have shown that credit unions optimally need a minimum of a few hundred million dollars in assets. Even in its founders' sanguine scenario, the Peoples Reserve CU would only reach a fraction of that size, and would thus face the slew of issues that small credit unions are struggling with across America.

Second, the Peoples Reserve plan appears to be based upon the faulty premise that the best way for the Occupy movement to have a credit union reflect its values is to found one. This is the logic of the for-profit economy; if you don't like a business, you start a competitor. However, credit unions are not for-profit businesses, but rather democratic co-operatives in which each member has one vote. As such, instead of trying to reinvent the wheel by founding a new credit union, I believe that the Occupy movement in both San Francisco and across the country should instead use the democratic process to reshape existing credit unions in ways that align with the movement's values.

Doing so would be a relatively simple process. First, the movement would need to draw up a list of changes that it would like to see in credit union policies and practices. This could include (but is in no way limited to) such things as increasing opportunities for democratic decision-making by the membership as a whole (for instance, see the proposal at the end of this essay), promoting member participation at annual meetings by making them social events with free food and entertainment, instituting p2p lending, and creating lending programs that actively support the development of co-operative businesses.

Once such a "platform" is drawn up, the next step is to find people in the Occupy movement who are willing to run for the board of directors of a local credit union. As a result of the aforementioned trend of consolidation, the sense of community that used to characterize credit unions has profoundly degraded, which means that, at many credit unions, only a handful of people show up to the annual meetings. This means that, by simply organizing a few dozen Occupiers (who are members of the credit union and thus entitled to a vote) to attend the annual meeting, the Occupy candidates could easily unseat the incumbents. If successful, this strategy would mean that, in a relatively short amount of time, Occupy-sympathetic people could be at the helm of institutions with hundreds of millions of dollars in assets and well-trained staffs, rather than struggling to get a tiny institution off the ground.¹

The people who founded the credit union movement in the early twentieth century were very explicit about what they were creating: democratic financial institutions. Indeed, Roy Bergengren, who established upwards of 3,000 credit unions as well as the Credit Union National Association over the course of his life, entitled his memoirs Crusade: The Fight for Economic Democracy. The democratic structures by which credit unions are governed are a hard-won inheritance that previous generations of credit union activists have passed down to us. We should honor their efforts by using these precious tools to help ensure that credit unions continue to stand as tall as they possibly can as an inspiring and socially just alternative to the corruption and greed of the Wall Street model.

-----

1One thing to keep in mind, however, is that credit union bylaws often prohibit nominations from the floor, so, if you want to run for the board, you have to collect a petition with a certain number of signatures by a certain date. Check your credit union's by-laws for exact details on this matter.

Banks vs. Credit Unions in the Financial Crisis - with Graphs

2011-11-23T21:44:00.001-05:00

In recent discussions of the relative merits of using banks or credit unions, one argument in favor of the latter asserts that they generally fared better than banks in the financial crisis. The reason for this, the argument goes, is that for-profit bank shareholders are only liable for losses up to the value of their investment, while they stand to profit from the returns on both their own investment as well as the depositors' funds. Thus, since it's rational to take greater risks when gambling with other peoples' money than with your own, for-profit banks tended to take on risky investments during the real estate bubble.

By contrast, since they are owned by their members, the conflict of interest between shareholders' desire for greater returns and depositors' desire for increased stability simply doesn't exist in credit unions. They thus tended to take fewer risks during the boom, and, as a result, didn't take as grave of a hit as commercial banks when the economy went bust.

In order to see if this thesis reflected the actual experience of the financial crisis, I crunched some numbers from the NCUA and FDIC. The results, which were published yesterday by the Motley Fool, seem to confirm credit unions' relatively superior performance in the bust. Read the full article, complete with pretty graphs, here.

Bank Transfer Day: A Model Victory for the Occupy Movement

2011-11-14T16:27:00.001-05:00

Frustrated by a number of negative experiences involving her bank, LA gallery owner Kristen Christian decided to draw the line on October 4th, 2011, when she created a Facebook event entitled "Bank Transfer Day." Calling for people to move their money from banks to credit unions on November 5th, the action quickly went viral. By the intended date, more than 70,000 people had indicated their intent to participate on the Facebook event page, and the Credit Union National Association estimated that more than 650,000 new accounts were opened in the month before November 5th (more than had been set up in the entirety of 2010), and a further 40,000 people joined on the day itself.

When trying to explain this phenomenon, the dominant narrative coming out of both the credit union movement and the mainstream media as a whole is that Bank Transfer Day was primarily a reaction to the decision by large banks (most visibly Bank of America) to institute debit card fees. This ham-handed and poorly-executed policy change, the story goes, struck a nerve and instigated normally passive banking consumers to take Christian's call to heart by revolting en masse and moving their money to credit unions.

While true as far as it goes, this narrative discounts an incredibly vital element of the Bank Transfer Day phenomenon: the Occupy movement. Indeed, when Christian first created the event, the announcement was laden with Occupy-esque language talking about the "99%," its image was a modified Guy Fawkes mask, and the location was listed as "Occupy Wall Street." Though she later tried to distance the event from the Occupy movement and reframe it in the terms described above by moderating the language and removing the location, it had already been picked up on by Occupiers across the United States. They began eagerly promoting it within their rapidly expanding networks both on-line (through Facebook, websites, and forums) and in person (through teach-ins and informational pickets of Too Big to Fail banks), and the day itself was marked by the Occupy movement with pro-credit union rallies and mass account openings.

Interestingly, the involvement of the Occupy movement in Bank Transfer Day seems to have not simply increased the number of people moving their money, but it also influenced the profile of new members. Prior to the action, some in the credit union movement had raised the concern that the bank fees had been instituted with the intention of driving off unprofitable customers. As such, they worried that the accounts gained through Bank Transfer Day would actually end up being a financial drag on, rather than a gain for, many credit unions.

Had people been drawn to the action simply by fees, this would have likely been the case, and the impact on commercial banks would have been minimal (or even positive). However, by politicizing one's choice of financial institution, the Occupy movement added a new wrinkle to the event. Instead of being simply a reaction to the immediate affront of new fees, moving one's money to credit unions was framed by Occupy as an effective tactic for protesting a wide range of issues, such as the bailouts, Wall Street's inordinate influence on the political system, etc. Many of the people drawn in by this narrative were not the unprofitable customers who were the intended targets of the $5 fee, but well-off, politically-aware people whose departure dealt a meaningful blow to the bottom-line of their erstwhile banks. Therefore, the Occupy movement's involvement in Bank Transfer Day was not just supplemental in nature; it was the movement, rather than bank fees, that was primarily responsible for making the action a success.

As such, the example of the concrete and meaningful victory that the Occupy movement won with Bank Transfer Day both provides an answer to the movement's critics who claim that it is directionless, as well as a template for future successful actions. What BTD really demonstrates is that the real strength of the Occupy movement stems from its ability to rapidly disseminate new and innovative ideas through its networks. Instead of relying upon a centrally developed and administered platform for direction, all of the participants are equally empowered to propose actions or strategies. Most of those ideas only gain limited traction, but when something is proposed that makes sense to a critical mass of people, it spreads like wildfire through the whole movement (Kevin Carson insightfully dissects the phenomenon in a fascinating way in this recent article).

Bank Transfer Day was one of the first of these ideas which, originated by someone with a bit of outrage and a Facebook account (but no previous experience with credit unions), caught on and meaningfully shifted the balance of power within the financial system in the direction of democracy and accountability. As long as the millions of activists in Occupy movements around the globe continue the work that was started on September 17th, the emergence of innovative and effective actions will proceed apace. It is impossible to predict what form such developments will take; the only thing that's certain is that change is coming...

Dropping a Little Credit Union History at the Occupy Burlington "Bank Transfer Day" Teach-In

2011-11-07T19:00:00.000-05:00

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

2011-11-03T01:05:00.000-04:00

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.

On the other hand, some credit union people have expressed skepticism and even concern about the event's potential impact. The Financial Brand blog recently published a post entitled "Four Reasons Why 'Bank Transfer Day' is Silly," which essentially takes the nascent movement to task for not having been developed by a marketing professional. While a useful publicity stunt, the writer concludes that "[i]f something like Bank Transfer Day were to ever really take off in the credit union industry, it would need the support of trade associations like CUNA. But alas, the credit union lobby group has its hands tied; they can’t be associated with anything that could be interpreted as trying to spark a run on banks — that would be bad political juju." Furthermore, a number of figures have argued in the pages of Credit Union Times that the big banks have been using their fees to drive away their least profitable customers, so the influx of new members might even turn out to be a net negative for the movement's bottom line.

Though these conflicting views have emerged through discussion of the issue of the day, the flow of credit union history suggests that the debate is not rooted in the particulars of "Bank Transfer Day." Instead, it should be seen as the latest manifestation of the tension between professionalism and populism that has been present in the credit union movement since its very earliest days.

Up until the 1940s, the credit union movement can be understood as having a strongly populist character. The new institutions were not simply viewed as a way to get a bit better off financially, but were tied into the larger goals of fighting usurious loan-sharking in poor communities and contributing to a cooperatively based economy that was referred to by credit union pioneer and CUNA co-founder Roy Bergengren as "economic democracy." During this period, the movement's newsletter covered such topics as cooperative stores, and its growth was driven by volunteer organizers and "field men," whose exhausting schedules and extremely meager compensation was off-set by the moral fervor they had for the cause. This spirit was captured by the term the Bergengren used to describe his vocation; it was not a job - it was a "crusade."

As the movement grew and institutionalized, however, a second perspective became increasingly prevalent: that of professionalism. While not opposed to the moral mission of the credit union movement, the priority for "professionalists" tended to be the movement's "nuts and bolts." For such people, success was to be primarily measured through statistics of membership and asset growth, rather than through the far more subjective judgment of the movement's effectiveness at achieving its populist goals of reducing poverty and promoting economic democracy.

The growing influence of this latter perspective in the early 1940s culminated in Roy Bergengren's forced retirement (after a contentious struggle) from the leadership of the Credit Union National Association in 1945. Strong populist feelings persisted for several more decades in the movement's lower echelons, but the trend was, for a number of reasons, inexorably towards greater professionalization. The watershed decade seems to have been the 1970s. Before then, most credit union leadership and staff came from within the movement, for whom credit union work was often a second job or career. By the 1980s, however, experience in financial services was quickly becoming a primary metric for judging potential hires, and the movement became increasingly run by people for whom credit unions were a career choice, not a crusade.

Many in the retiring old guard bemoaned this transformation as a threat to the soul of credit unionism, and it was the source of some controversy in the late 1970s and early 1980s. However, consistent growth of the movement under the professionalist program and the retirement of the last of the credit unionists who had cut their teeth in the Bergengren era meant such criticisms quieted down by the early 1990s.

The dominant narrative as to the reason for this transformation put forward by the leading scholars of credit unionism is a developmental one. Whether looking at the work of Ferguson and McKillop or Ian MacPherson, the basic idea is that populism is a characteristic of an immature credit union movement. As it grows, consolidates, and forms institutions such as trade associations, the movement requires an increasingly skilled work-force, and the populist energy that drove its initial burst of growth is replaced by increasing rationalization and professionalization.

While such models provide a fairly accurate sense of the way in which credit union movements developed in the 20th century, the "Bank Transfer Day" phenomenon adds a new wrinkle to the otherwise neat tale. Within those models, since populism is a characteristic of an early stage movement, a resurgence of populism might be viewed as a regressive phenomenon. Indeed, such a viewpoint is implicit in the Financial Brand piece's assertion that any truly successful pro-credit union action necessarily requires the backing of the professionals who staff the movement institutions.

However, there is another way of understanding what's going on. Instead of viewing a populist orientation as simply an ahistorical precondition for the initiation of a credit union movement, it might instead be understood as a reflection of the economic conditions of the moment. In times of relative economic stability, the urgency of the movement's larger socio-economic mission fades into the back-ground, and credit unions compete in the marketplace on essentially the same terms as banks (with a slightly abnormal ownership structure).

An economic crisis, however, changes the game. Historically, crises have always been times great growth for the cooperative movement, whether one looks at the economic dislocations of the late 1840s, the Populist surge of the 1890s, or the Great Depression of the 1930s. In such times, the dual economic and social character of cooperatives provides them with a decisive advantage over for-profit firms. While such for-profit banks can only hope to stay afloat by using the same tactics they use when business is good (marketing, price competition, etc.), credit unions can offer their members not only competitive services, but also the opportunity to participate in building a better world. As such, the underlying philosophical mission of the credit union movement should not be written off as an anachronism of a bygone era, but might instead be seen as an essential component of the movement's character that waits in the wings during times of prosperity, but moves to center stage whenever a crisis hits.

Strategically, this idea has several interesting implications. First, in order to maximize the over-all long-term growth and success of the movement, it means that credit unions should be consciously prepared to behave in fundamentally different ways depending on the economic situation. In good times, when the whole economic "pie" is growing, most people (due to feeling secure) are not interested in devoting much energy to building a better world. As such, the movement should approach promotion in the way it has over the last few decades; through professional marketing that appeals to the self-interest of consumers in a way that is no different than any other bank. By doing so, we can gradually increase the size of our "slice" of "pie," but we cannot expect to significantly shift the distribution of power and market-share in the financial services sector. Instead, flush economic conditions should be seen as the time for credit unions to grow and gather strength.

The time to deploy that strength most effectively is in periods of economic crisis. When unemployment is high and faith in the status quo low, issues that are of little interest to people in flush times, such as the structure of financial service providers, suddenly becomes the urgent center of attention. In such an environment, instead of competing on the same terms as banks, credit unions can gain decisive advantage by riding the waves of populist anger, linking up with other social movements, and advocating for the credit union idea as a key component to the crisis' just resolution.

Doing so, however, requires that credit unions be able to recognize when to hold back and when to attack, and adjust their tactics and staffing accordingly. In good times, when they are engaged in normal competition with banks, a professional marketing staff is essential. However, in order to take full advantages of the opportunities presented by an economic crisis, the focus should shift from marketing to organizing. Bank Transfer Day has demonstrated that an amateur activist with nothing but a Facebook account can create more buzz, awareness, and defections than a multi-million dollar traditional advertising campaign by plugging the credit union idea into a vibrant social movement. By deploying organizers in times of crisis to strengthen and deepen the relationships between such movements and credit unions, the potential exists to spark the mass shift of whole communities out of banks. Extensive marketing in good times often accomplishes little more than keeping credit unions on par with their competitors; organizing during crises, on the other hand, provides the movement with the once-in-a-generation opportunity to fundamentally re-shape the economic landscape.

When considering the overall "grand strategy" of the credit union movement, it is vitally important to remember the ultimate purpose: building economic democracy. The movement will not have actualized its full potential until every person has access to financial services through a member-owned cooperative bank, and credit unionists have been striving tirelessly towards that goal since Alphonse Desjardins founded the first North American caisse populaire in 1900. Given the dynamics identified in this essay, the process by which the cause will be advanced seems to have two phases: holding the line in good economic times, and going on populist offensives in bad. With the Occupy Wall Street movement nearing the two month mark, the European Union in crisis, and consumer confidence hanging near record lows, we are clearly in a moment of great opportunity; it would be a shame to let it go to waste!

Credit Unions and the Wall Street Occupation

2011-09-20T16:28:00.000-04:00

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.

By contrast, credit unions are cooperatively owned by their customers (or “members,” in credit union parlance), so the conflict between the desires of depositors and shareholders doesn't exist. As such, the institutions' policies conformed to the more conservative risk preferences of their depositor-owners, and they thus weathered the financial storm better than their for-profit competitors (for more information on the specifics of this, see this document).

If one accepts this logic, it adds another layer of injustice to the already much-maligned bailout of the banking industry. Despite the cries from the banking lobby and their cronies that the sky would fall had the “too big to fail” banks been permitted to go under, it is clear that the cooperative credit union sector of the financial system was still in relatively good health. As such, rather than causing economic anarchy, the fall of the likes of Bank of America and Citigroup might have created a void which credit unions, as superior institutions that had better stewarded their members' money, could have quickly filled. Though membership growth rates demonstrate that many people have discovered the superiority of credit unions over banks in the years since the financial crisis, they pale in comparison to the potential that the credit union movement had in that moment to become America's dominant financial institution.

Ultimately, the possibility for a wholesale transition to a cooperative, people-powered financial sector was neutralized; not by market competition, but by the political influence of Wall Street. Faced with the stark and terrifying consequences of their reckless behavior, arms were twisted and Congress, after a breathless week, wrote a blank check to save the industry of their biggest donors. That bailout was a powerful injustice: not only was it an affront to the American taxpayer, but it was a slap in the face to credit union people everywhere. At the moment when long years of quiet growth and sound management were on the verge of paying off, the Federal government lent historically unprecedented resources and backing to the very organizations whose malfeasance drove the economy off a cliff.

As such, I have decided to make my way down to New York City today to stand with the folks undertaking the occupation of Wall Street as a proud and affronted credit unionist. The financial crisis of 2008 should have been the moment when the selfless work of Alphonse Desjardins, Ed Filene, Roy Bergengren, and countless other unsung credit union heroes reached its full fruition with the establishment of a financial system that is truly “for all the people.” Instead, it served as one more example of the stranglehold that corporate banking has on the American political system. As such, I encourage credit union people in the New York area to come down and join me in helping to spread the credit union message of hope among those challenging the political clout of the big banks (I'll be the one with the sign that says “Credit Union Power”). Let's make some credit union history!

P.S. If you can't make it in person, but would like to lend your support, visit Feed The Protest.

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

2011-09-13T15:14:00.000-04:00

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.

The first part of the book is primarily concerned with butchering some of the economics profession's sacred cows. After pointing out that most Econ 1 students are currently taught that money evolved out of barter relationships, Graeber shows that this perspective has been rooted in thought experiments since the time of Adam Smith. However, when the actual historical and anthropological record is consulted, it is glaringly obvious that it actually happened the other way around: credit relationships came first and were later supplemented and sometimes replaced by coinage only as a result of the utility that the State derived from the markets thus created (i.e., they were convenient ways to provision troops, bureaucrats, etc.).

From this starting point, Graeber takes the reader on a whirlwind tour through a variety of topics which, on the surface, seem to have little to do with debt proper, such as slavery, honor, and the main moral principles which he argues underpin all economic relations in various combinations: communism (in a micro-social rather than political sense), exchange, and hierarchy. Masterfully synthesizing these disparate ideas, Graeber advances a very interesting argument about the origins of our contemporary conceptions of debt.

Initially, he notes, most human societies recognize that their constituent individuals cannot be truly bought or sold, and, as such, things such as dowries and bride wealth were paid in a special kind of currency (which he refers to as "social currency") which was generally not negotiable for commodities such as food, simple crafts, etc. Instead, such social currency had the function of rearranging the social relationships of people in the community, but, no matter the form of that rearrangement, each party had responsibilities towards the other.

This begins to shift in societies with the introduction of chattel slavery. In a traditional hierarchical society, even being at the bottom of the totem pole still meant that you existed in a web of mutual obligations with others in the community. However, an individual who has been entirely torn from their social context and purchased by an individual in a community in which they have no connections is an entirely different story. That slave can be treated in almost any manner without social repercussions, and can thus be used (and thought of) in an entirely instrumental way. This, according to Graeber, leads to a whole cascade of consequences that fundamentally changes the way people view the world in general: if humans are negotiable and alienable, so is everything else. The brutal effects of this transformation are illustrated with vivid historical examples from societies as disparate as West Africa and Thailand, and provides the foundation for a fascinating perspective that sees the social, religious, philosophical, and economic characteristics of a variety of historical periods as being heavily influenced by each era's conceptions about the nature of money and debt.

While the intricacies of Graeber's world-historical argument are fascinating and add enormous value to the book, its most interesting element, from a credit unionist perspective, is his discussion of the fundamental nature of debt. As he makes very clear, debt is such an essential element of our culture that we rarely stop to really consider its particulars. As such, he sets out to do just that, stating that, at its core, "Debt is a very specific thing ... It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are currently not in a state of equality--but for whom there is some way to set matters straight." (120)

A debt between two individuals thus creates a temporary hierarchical relationship between them, and in societies in which the alienation of relationships pioneered by slavery has been internalized, such debts can then be transfered to, or even originated by, a creditor with no interest at all in the wellbeing of the debtor as long as the debt continues to be serviced. As a result, debts in such societies can make the status of debtor virtually a form of slavery as they are pushed to do things that would have been unthinkable had the need to pay off their debts not been hanging over their heads.

A fascinating example of debt-obligations leading to incredible brutality can be historically located in the example of the conquest of Mexico. The leader of the small Spanish expeditionary force, Cortes, was deeply in debt, and saw the expedition as his chance to finally extricate himself from that situation. The incredible brutality of that campaign and of the genocidal working conditions later implemented by his lieutenants in the mines they administered has been traditionally been chalked up to the barbaric greed of thuggish conquistadors. However, Graeber argues that, as debtors, those men actually did not feel that they had much choice in the matter of how they behaved. In order to fend off their creditors, they had to extract as much wealth as quickly as they could in order to avoid being shipped off to Spain in chains, and their creditors, being distant and disconnected, cared little about what they were doing as long as the interest payments kept rolling in.

In light of this understanding of debt, the credit union project takes on new meaning. In contrast to the alienated quasi-slavery that resulted from being deeply indebted to a usurious loan shark, the credit union offered a different way of being. Instead of debt creating an hierarchical power relationship between the debtor and the lender, receiving a loan from an institution in which the debtor had an ownership stake allowed, in many cases, for being in debt to not have the effect of breaking the debtor's equal standing with the other members of his or her community. In addition, the "esprit de corps" that Roy Bergengren saw as a characteristic of many small credit unions functioned to limit the disconnect between the debt and the personal situation of the debtor. Old minutes of credit committee meetings are replete with instances of a loan being adjusted, or even written off, due to circumstances of legitimate hardship. As such, an appreciation of Graeber's perspective on the intersection of debt and power serves to provide a deeper understanding of the nature of the liberation that credit unions offered many people of modest means in the 20th century. The credit union was not simply a way to get better returns on one's savings or cheaper credit; it also offered a way for people who had been deeply socially degraded by debt to recover their dignity.

Though not specifically about credit unions, Graeber's work is nonetheless an incredibly valuable resource for both those interested in credit union history and those who work in the movement's contemporary institutions. He covers a truly enormous amount of ground, from anthropology to economics to philosophy to religion, and upon completing the book, one's understanding of debt, money, and history will be profoundly enriched. Do yourself a favor and get your hands on Debt: The First 5,000 Years!

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

2011-09-06T07:00:00.000-04:00

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.

With the credit union's pedegree firmly established, Bergengren locates examples of the urban (Shulze-Delitzsch) and rural (Raiffesen) models of credit union development in Massachusetts and North Carolina, respectively. Devoting a chapter to the experience of each state, he both notes the issues that the different types of credit unions solved for their potential members and gives numerous specific examples from actual credit union practice. In the urban industrial environment, he argues, credit unions help put loan sharks who prey on financially naive workers out of business as well as encouraging thrift through accepting and putting to work the small savings of those with modest means. In the country, not only did credit unions allow for farmers to get cheap credit, but he notes that many of the organizations also became de facto purchasing co-operatives, obtaining bulk items such as fertilizer for up to 30% less than the members would have paid retail. Though still quite recent, Bergengren argues that such examples demonstrate the enormous potential benefits of continued credit union development in a wide variety of environments.

In addition to being a powerful example of early American credit union movement propaganda, Cooperative Banking also offers an interesting window into the nature of the relationship between banks and credit unions in the movement's early years. By the time of Bergengren's death in the 1950s, the for-profit banking industry was beginning to view credit unions as potential competitors. However, Cooperative Banking shows that, in the 1920s, many bankers viewed credit unions in a positive light since they usually deposited their surplus funds in banks and served as a stepping stone by which people of modest means might raise themselves economically to the point where they would utilize bank services. Bergengren repeats at several points in the book that credit unions were a supplement to the banking system, and the the credit union law in the state of Georgia was actually passed with the support of that state's banking lobby.

Another historically valuable element of Cooperative Banking can be found in the book's final chapter, entitled "The Credit Union--Democracy and Other Things." In it, Bergengren lays out his perspective on the larger problems then facing America, such as labor unrest and economic depression. Interestingly, he understands those issues as ultimately deriving from the ascendancy of fractious partisanship over the unified patriotism that the country had gotten a taste of during the First World War. The solution that he argues for is very reflective of the era's progressive values; namely, that the "best and brightest" of the various elements of society should come together and, putting the interests of the whole society above partisan concerns, dispassionately and rationally help assemble a social order that justly balances the interests of all. This position is especially fascinating since, later in his career, he became much more skeptical of the use of state power for promoting even a positive agenda (for instance, he successfully opposed Federal subsidies to the credit union movement in the New Deal, believing that such support would destroy the credit union movement's independence). As such, the chapter suggests that, in light of his other work, Bergengren's intellectual starting point was fairly conventional early 20th century progressivism, and that the origins and nature of his deviations from that ideology over the course of his later career might be a fascinating subject for further research.

In sum, Cooperative Banking: A Credit Union Book is a lucid and well written view into the realities of the credit union movement, combining statistical data, anecdotes, and a sweeping historical perspective. Written at the beginning of his decades-long self-described "crusade" for economic democracy, the book is a vital read for anyone who wishes to better understand either Roy Bergengren's career as the leading voice of American credit unionism or the early credit union movement in America.

Social History and Credit Unions

2011-08-30T17:29:00.000-04:00

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.

By the middle of the twentieth century, however, this view was challenged by the emerging field of social history. Though its practitioners have trod enormously varied paths since the birth of the discipline, the core agenda of social history was powerfully summarized by E.P. Thompson in the introduction to his seminal 1961 book, The Making of the English Working Class. "I am seeking," he declared, "to rescue the poor stockinger the Luddite cropper, the 'obsolete' handloom weaver, the 'utopian' artisan, and even the delude follower of Joanna Southcott from the enormous condescension of posterity ... they lived through these times of acute social disturbance, and we did not. Their aspirations were valid in terms of their own experience; and, if they were casualties of history, they remain, condemned in their own lives, as casualties."

This declaration of the importance understanding the historical realities of everyday people had a powerful effect on the discipline of history, and countless projects have been undertaken since Thompson's writing that have shed enormous light on previously darkened historical corners. However, with this new focus came new challenges for historians. One of the benefits of studying "great men" is that they tended to leave voluminous paper trails in the form of journals, writings, correspondence, etc. By contrast, written accounts and records of the lives of women in colonial America, slaves on 19th century cotton plantations, or semi-literate immigrant factory workers in 1920s New York are few and far between. To fill the gaps, social historians have turned to a wide variety of alternative sources of information, from judicial records to material culture to folk-lore.

However, one exceedingly rich vein of information that has been hardly tapped by social historians of the early to mid-20th century is the credit union. Early credit unions were usually formed by tight-knight communities, and many groups of interest to social historians, such as urban immigrants and African-American farmers in the rural South, founded many such institutions from the 1910s to the 1960s. Staffed by volunteers and relying upon the social knowledge of their democratically elected credit committees to determine whether or not to make loans, the minutes of early credit unions offer a fascinating view into the lives of many communities that have otherwise left behind few records. By looking at what members needed loans for, what kinds of requests were approved or denied, what sorts of people assumed leadership roles, the topics of debate at annual meetings, etc., investigating credit union archives can contribute new perspectives on a community's history.

A recent example of the effective historical use of credit union records can be found in Mark Richard's excellent book Loyal But French: The Negotiation of Identity by French-Canadian Descendants in the United States. An investigation of the changing identities of successive generations of Franco-American in the mill town of Lewiston, Maine, the book uses credit union records as evidence of the decline of the importance of spoken French to community life in the 1970s. Recounting debates at annual meetings over the language, Richard shows how the institutions slowly succumbed to the Franco-American community's new reality over the course of the decade, first allowing for some committee reports to be published in English before converting entirely over to the language by 1980.

The use that Richard got out of credit union records in his book is one of truly countless ways in which credit union records could be used to enrich scholarship on 20th century American social history. Such records exist half-forgotten in the back rooms of credit unions all across America, just waiting to be unearthed and put to good use by scholars and graduate students seeking new ways of understanding the past.

The Unique Importance of Co-op Histories

2011-08-17T13:38:00.000-04:00

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.