Martin Mayer, a Brookings Institute scholar and author of 32 books, including 1975's "The Bankers" and 1990's "The Greatest Ever Bank Robbery," about the savings and loan crisis, is a renowned observer and student of numerous business disciplines, including law, journalism and finance.
Not surprisingly, his remarks before state regulators and state-chartered credit unions here for NASCUS' annual meeting included some striking observations, perhaps most noticeable because he didn't play to the audience.
For instance, he noted that "discussion of the bankruptcy (reform) law intrigued me. I was a little surprised to see how closely this organization agreed with the idea that all bankrupts are deadbeats. My son is a bankruptcy lawyer, and he has told me the law is absolutely full of landmines that are going to go off. Like most laws this is the product of lobbyists. This thing has a lot of things wrong with it, and you're going to be living with them. When you do go through them let's try to maintain some level of compassion."
As he began to move into his remarks, Mayer also admitted, "I've only briefly thought about credit unions. Credit unions don't claim any noticeable share of mind because they don't claim any noticeable share of the money."
Mayer nevertheless made it clear he understood the basis for and history of credit unions.
"Credit unions play by different rules and they should," he said. "My father was a labor lawyer, and I was brought up with a sense of what the word 'movement' means. Alphonse Dejardins and Edward Filene got this business started to help the underserved."
Three decades ago when Mayer published his acclaimed "The Bankers" he suggested one place where credit unions could play a role was in auto lending. That market has changed. Today, he sees a role for credit unions in overdraft protections and payroll lending.
"Obviously, that sort of activity gets you into some high-risk areas, and the fees and the rates charged have to be commensurate with the risk taken, but they don't have to be where they are now," said Mayer, whose book, "The Lawyers," for many years held the record as most frequently stolen from New York's Mid-Manhattan library. "Where credit unions can make an enormous contribution, and it's enormous, is in financial services to the poor. The people who are really getting ripped off are the Hispanic workers and those who are one step ahead of the sheriff on the payday loans. The banks have little interest in serving low-income members of the community. This is not necessarily to make a lot of money. This is a mission growth, not necessarily a profit growth."
Mayer acknowledged there are challenges in finding ways to effectively reach out to Mexican and Honduran workers who hold jobs legally and are paid by check. But the challenges are worthy of the credit union mission, he said.
"We are talking about possible total savings for poor people that in many cases would be 10% of their earnings," Mayer observed. "It is unbelievable to middle-class Americans how expensive it is for poor people to conduct routine financial transactions."
Mayer said he sees no reason credit unions can't offer lower-priced credit cards to low-income workers, for instance.
While Mayer likely wasn't aware how timely his remarks were, he also offered some observations on charter conversions to mutual savings bank.
"We have had interesting experiences in New York State with the conversion of mutual savings banks to stock institutions to the enormous benefit of directors and officers," he said. "It seems to me the excess liquidity of a credit union does not belong to the directors and officers. When you look at the deals involving credit unions that are being sold off, really one should look at who is getting the benefits and whether the members are getting an honest deal. It seems to me to be fairly straightforward. Certainly much of the goodwill of the institution should go to benefit the depositors and the borrowers and not the directors and officers. But most of all it should not be forgotten about. I do hope some movement of some size will emerge to make sure that we don't add this invitation to greed to all the others that are out there."
