DULUTH, Ga. -
"The sale of Nationwide CU to Nationwide bank sent a signal that this-the sale of a credit union-is legally possible," said Mike Mercer, CEO of Georgia CU Affiliates. "What has always been unsettling about conversions [of credit unions to bank charters] is that the members aren't getting anything for giving up their economic interest in the credit union. The Nationwide situation demonstrates that this is worth something, and a significant something at that. The next step would be for a private equity firm to make an unsolicited offer to credit union members and make that offer something less than what they could resell it for later."
The problem, Mercer offered, is that there is no clear understanding or precedent of what is a "fair price" to pay for a credit union. "This is all new territory. Buying a credit union is something that is going to evolve through trial and error. I don't look forward to it, but it would be naïve to think this issue is just going to go away."
And if it's not going away, some suggest, it could be doing serious harm to the movement.
"We've seen the mergers, the conversions to banks and the Nationwide CU sale, and now this," said Jim Blaine, CEO of State Employees CU, Raleigh, N.C. "Wings wants Continental and is offering $200 per member for it. Essentially, they want to take part of Continental's capital and give it back to its own members and do it by going around its board of directors and management."
To those who don't believe this is a problem, Blaine suggests they look at how other cooperative movements have faltered. "That's precisely how the Building Societies in England, which were co-ops, were taken over by the banks," he said. "My question is: who will be looking out for the members' interests? Who will defend the member? It won't be the (trade groups), they're ducking. It'll be interesting to see what NCUA does, if anything. This could get ugly; it could be costly if there are lawsuits and become a real black eye for the credit union movement."
"Everyone who addresses this issue has mixed feelings," Mercer commented. "On the one hand, members should be able to do what they want with their credit union, on the other hand, credit union board have a fiduciary duty to the members. There are serious questions about whether boards are exercising that fiduciary care."
