Letters To The Editor: Proponent Of Charter Conversions Is Missing The Point
I forced myself to read Mr. Bob Freedman's article (CU Journal, June 12) several times because each time I found another argument that uses bank values as the basis for his opinion rather than the more appropriate credit union values. For example, he makes the point that the 30-plus credit unions that have converted to a bank have grown and prospered and the membership has expanded, and therefore they must be doing something right. Maybe success should be defined by more than simple growth? Credit unions have specific principles to guide their decision-making; member education and training, and concern for community are a couple to consider. Do these 30-plus former credit unions still consider themselves successful in terms of the underlying credit union principles and values?
Last year more than 1,200 new banks were launched. How many of them were funded by investors specifically to help customers improve their financial future and make a positive contribution to the community? My guess is the investors of each bank did not think much about it. The banks were formed to attract a customer base and generate profits and pay dividends to the shareholders who invested in the venture. That is fine with me. Anyone should have the right to invest in whatever one wants and they have the right to expect financial rewards to come from their risk. This is part of the American culture.
My only concern is when a small group of credit union leaders decides they want to invest in a bank and they convert their credit union in order to do so. If they want to invest in a bank, there are several excellent bank stocks to purchase. Of course, they will not have the benefit of warrants or stock options; they will have to purchase the shares on the open market just like everyone else.
The idea Mr. Freedman has that credit unions are converting to a bank charter to correct operational deficiencies and ensure future success is disingenuous at best. The credit unions that have converted to a bank did so in order to grow larger, either by having the ability to expand their business loan portfolio or to generate additional capital for future expansion. I do not recall any compelling arguments about the good things these credit unions-turned-banks plan to do to improve member education or their increased support for the community. I guess everyone just assumes that will happen naturally through the increased lending activity.
The fact is, stock-based organizations have but one operating principle-increasing profitability. That does not mean banks are bad, they are just different from credit unions. That is what Mr. Freedman fails to see.
Kevin Lytle, President
Member Loyalty, LLC
Where To Send Your Letter: Send Letters To The Editor To Lisa Freeman at lfreeman