God bless the Navy Federal Credit Union.
If it wasn’t for the credit union, I couldn’t have bought that used Toyota Corona back in 1971. And if it wasn’t for that Toyota, things might not have turned out so well.
Back then, my new bride needed a car so she could move out of her parents’ house in New Jersey and take a “dream” job as a visiting nurse near Newport, R.I., where my oil tanker was based. We were a year out of college with no savings and a credit sheet full of outstanding student loans.
That didn’t bother the Navy Federal Credit Union. It was used to lending money to freshly-minted ensigns with strange-sounding addresses like: “USS Mississinewa (AO-144), FPO, New York.” And the office workers knew exactly where to find the union’s members. They also knew, what with so many shipmates belonging to the same credit union, from the captain to the cook, that for a junior officer to default on a loan would be, well, not a good career move. More like a keel-hauling offense.
So NFCU okayed that thousand bucks by phone, right there at the car dealership, and my new bride and I drove off to our new careers, wedded bliss, kids, a mortgage and all the rest.
Truth be told, we haven’t borrowed much from our credit union since those early years. Except for our mortgage we’ve been fortunate enough to avoid buying-on-time or paying those unconscionable 18 percent bank credit card rates. Still we’re faithful “members-owners” of the NFCU. I keep more than the minimum balance in our “share savings account” for a couple of reasons. You never know when you’ll need a competitively-priced consumer loan; and besides, I believe in what credit unions stand for.
And what they stand for, to my way of thinking, is that people of modest means have a right to form their own not-for-profit cooperatives rather than do business with for-profit companies owned by distant powers-that-be. That’s also why I choose to insure my house and car through a mutual insurance company and why I got my first mortgage from a savings and loan association. And it’s why I was saddened when my S&L was gobbled up–as so many have been–by a mega-bank that’s listed on the New York Stock Exchange and pays its CEO more than $3.6 million a year in salary and bonuses (not including stock options).
Then again, most people don’t care whether their lender or insurer is mutual, co-op or stock. Likewise, most people probably think Frank Capra’s “It’s a Wonderful Life,” was a movie about Christmas, not the tension between mutuals (George Bailey’s S&L) and for-profits (Mr. Potter’s commercial bank.)
Mr. Potter, you may recall, didn’t have much use for the dirty-fingernail types who financed their cottages through their own S&L. So when the opportunity arose to put the plug on the little people (after Uncle Bailey misplaced a bank payment) the greedy Mr. Potter moved in for the foreclosure kill.
Capra’s populist allegory was heavy-handed, to be sure, the product of Depression era angst over the lot of working people. The movie’s plot seems outdated now that so many of us are middle-class with stock portfolios of our own.
But guess what? The spirit of Mr. Potter is alive and well. It throbs within the silk suits of American Bankers Association, which is on a crusade to stop the growth of my NFCU and the 12,000 other member-owned credit unions in these United States.
Turns out more and more consumers are discovering it pays to save and borrow at their own co-ops rather than at banks that need to churn out profits for stockholders and big salaries for bank officers. Even though they hold 93 percent of all the nation’s savings, bankers say they are “concerned” about the growth of credit union membership.
So the ABA has been suing the federal agency that regulates credit unions, claiming the unions ought to confine their membership to savers with a single “common bond” (like employment in the Navy.) In an era of rapid consolidation among all types of lenders, they especially want to stop larger credit unions from merging with smaller ones whose members don’t have the same bond.
The bankers argue that overly permissive federal rules make it possible for the general public to join credit unions. This is an outrage, they say, because unlike banks, credit unions don’t pay income taxes and therefore have an unfair competitive advantage. (An $800 million “government subsidy,” according to ABA publicity materials.)
What the bankers don’t say is that credit unions disburse virtually all their profits to members in the form of dividends, which are, in turn, taxed as personal income.
Maybe that last point was lost on the federal appellate judges who last July overturned lower-court rulings and sided with the banks. If the Supreme Court concurs, some 10 million credit unionists will see their memberships voided.
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Unless, of course, Congress amends the 1934 Federal Credit Union Act so as to liberalize the definition of “common bond.”
Which is precisely what Congress should do, though I’m not going to hold my breath. Money talks in Washington, and the $5 trillion banking industry talks louder than a credit union sector one-sixteenth that size.
It’s a shame, because I don’t think Mr. Potter would have made that loan on our used Toyota.