In 1985 I drove past a scene straight out of the Depression. Hundreds of people were lined up outside a branch of Home State Savings in Cincinnati attempting to withdraw their life's savings. It was a good, old-fashioned run (good if you didn't have money in Home State, old-fashioned if you had learned a lesson about 50 years earlier.)
Smugly, I chuckled at the lines of panic-stricken customers. Fools, I thought as I watched video of more Home State customers on the news lined up at its other branches. A few days later, I was among them, and more than willing to throw an elbow to knock down any elderly woman trying to get in line ahead of me.
In the early 1980s I had deposited what little savings I had at that point in a little local savings and loan called Midwest Savings. I had been attracted by the double-digit passbook rates and hadn't paid much attention to the insurance sticker on the door. I trusted everything was on the up and up, and besides, did I mention the passbook rates? That is until the confidence contagion afflicting Home State Savings started to spread to other institutions where deposits were insured by the Ohio Deposit Insurance Corp. (yes, the aptly acronymed ODIC). Actually, many people were saying a lot stronger things than ODIC-it was more like "Oh,..." as the panic spread and the unthinkable became thinkable.
Three things have recently brought back to me memories of those worried days. The first is the ongoing scandal surrounding Enron and its "What! Me Worry?" management and its "Conflict! What Conflict?" auditor. The second was an interview that appeared in the Jan. 14 issue of The Credit Union Journal with Bert Ely, who rose to fame by accurately predicting the collapse of the savings and loan industry in the mid-1980s (Mr. Ely apparently took a pass on Enron) and who is predicting a similar conflagration for credit unions. And the third is the cover to last week's Time Magazine that posited no one can be trusted anymore, a sad state it summed it up as, "You're On Your Own, Baby."
If you're a credit union executive or volunteer and all of that is enough to take the shine off your bronze bust of Ed Filene, fear not-because there's extraordinarily good news there for you. In the Enron mess, the warning from Darth Ely and Time's every-man-for-himself message are the much sought opportunities every business is chasing and which time (excuse the pun) and time again present themselves to credit unions that often mistakenly believe that's not opportunity knocking but some sort of dire new threat.
Every credit union exec in the country should start knocking out a letter to the editor of Time in response to that angst-ridden sentiment, "You're On Your Own, Baby," that begins, "Baby, No You're Not." Time's thesis is that you used to be able to Trust Your Car to the Man in the Star, but have you seen him lately? The only thing faster than making money in a growing Enron is losing it in a failing Enron. Your "health care" provider has already run the numbers on you and knows at which point it's more profitable for you to die.
Worried Americans don't put their faith in much anymore (I volunteer with the Boy Scouts, which is no longer concerned with helping little old ladies across the street or teaching young men how to build a fire with one match, but instead obsessed with ensuring that at no point are adult leaders left in one-on-one situations with the Scouts), but that doesn't mean they aren't desperately searching for such a trust repository. That's what you are. Lots of credit unions have explored offering trust services, but no credit union can exist if its service isn't wrapped in trust.
That's where Bert Ely raises potentially legitimate points. Ely's contention is that the credit union cooperative ethic is going to go down in flames as FOM overlaps breed competition. "It's kind of an erosion that is developing over time," Ely said. "I think it's going to cause some problems down the road. It makes it harder and harder for credit unions to advertise that they are different or distinct from banks and thrifts."
Ely will have his second great prediction come true if credit unions do put growth and FOM ahead of earning and maintaining trust. And not just with their own members, but with each other. Who did Enron's management put first? It wasn't its own customers, it wasn't its stockholders, it wasn't even the bulk of its employees. It was itself. And if you don't put your members first, ultimately you won't last.
If that sounds simple, it's because it is. Simple is as simple does, whatever that means. But simple works. Just ask all those Home State Savings and Midwest Savings customers who were standing there scared to death in line with me a short 15 years ago. They simply wanted their money back, and they simply haven't forgotten how far a little trust can go.
Frank J. Diekmann is Editor of The Credit Union Journal. He can be reached at P.O. Box 4387, W. Palm Beach, FL 33402 or at diekmann flinet.com.