"Taxation With Over-Representation!" is what I imagine the big sign-boards will read as protesting credit union execs gather to symbolically dump their association dues invoices into the Potomac later this week.
Not likely, you say, especially if it's cold in D.C. You're thinking if the issue is raised at all it will be during conversations inside the heated, comfy confines of the Walter E. Washington Convention Center or over drinks and hors d'oeuvres at a reception nestled safely inside, eh?
Perhaps you're right, but whether the big question in front of CUNA is referred to as Taxation with Over-Representation, or Red State CUs vs. Blue State CUs, or the 1% vs. the 99%, it couldn't be more appropriate that the largest credit union conference of the year will take place this week in Washington, where they know a little something about a house divided.
Given the debate that has been started by a prominent voice in CUs, the audience at CUNA's GAC should listen politely to every member of Congress — who regardless of political affiliation will, in rare bipartisanship, be professing their never-ending love for financial co-ops (and their PACs) — then remember how those very same congressional reps act when faced with tough questions. Here's the opportunity for CUs to do just the opposite: act like rational grown-ups and remember the core values that got credit unions this far.
Washington is the epicenter of a 238-year-old experiment in government and democracy. Now there's a question of democracy and association structure that's been pushed to the forefront of issues in front of credit unions and there are no easy answers.
No Longer A 'What If?'
The move by the nation's second largest credit union, the $27 billion SECU in North Carolina, to disaffiliate from the Carolinas Credit Union League and CUNA because it wants the option of belonging directly to CUNA without having to join the state association brings to a head an issue that has been around in recent years, but it was often the stuff of roundtables and "what ifs." It's an issue credit unions have had to grow into, a growing pain of a new sort.
Affiliations, disaffiliations and re-affiliations aren't anything new for state CU leagues and there isn't a league CEO in the country who hasn't found him or herself in front of some CU's board making a "come join us" sales pitch. But State Employees' highly public disaffiliation gives the issue some new heft. It isn't just that SECU is so large, it's that it's long been a credit union's credit union, it's a philosophical phundamentalist, if you will, and its CEO, Jim Blaine, is as high profile a leader as there is to be found in the industry.
"The current league/CUNA structure is unsustainable in the future," said Blaine. "This leads to some questions about the future structure of CUNA."
But if the CUNA/league infrastructure is unsustainable, it begs the question: what is the sustainable alternative? CUNA can't provide the kind of local grassroots support that the leagues do, most especially in the respective state capitals, and the leagues can't come close to providing the congressional and federal-level lobbying that CUNA does, to say nothing of the training and education.
About Those Consolidations
Mr. Blaine has indicated unhappiness that the North and South Carolina leagues have merged, saying it makes them less effective. But leagues have consolidated because their dues-paying member CUs have consolidated, and many CUs have consolidated, ironically, in search of the kinds of efficiencies a billion-dollar outfit such as SECU has. Right now the only way many small and mid-size CUs obtain group-buying power is, yep, through those associations.
But hang on a minute, Frank, some of you are thinking as you reach for your keyboards to point out that I've missed an obvious alternative model: NAFCU. Federal CUs have the option of not affiliating with their state's league and instead just belonging to the association of FCUs. Not sure that's the best example. There are NAFCU-only CUs, but they get a bit of a free ride on state issues that might affect them and on which the state league represents CUs, such as some consumer protection proposal. And if CUs opt to have direct membership in CUNA — remember what the "N" stands for — who's representing CUs in Albany and Austin and Sacramento? New associations for state charters only?
Wealth Doesn't Make Rich
Although they won't be identified as such, members of Congress who will grace the stage in the Washington Convention Center this week will hail from what are now known as "red" or "blue" states (leaving many of us in a sad state). Credit unions have their own red/blue divide, and its asset size.
I don't need to detail here how the very largest CUs represent the great bulk of total industry assets. There was a report just a few weeks back that the wealthiest 85 people on earth represent the same wealth as the poorest 3.5 billion people. The CU demographics skew similarly, but just as what makes the human experience richest isn't personal wealth, what makes the credit union model most invaluable isn't asset size.
In a pure products and services sense, credit unions such as State Employees or Navy Federal or Pentagon don't need their state leagues. Or CUNA. Or NAFCU. They have the resources to go it alone. But CUs have never been about products and services, not when banks and other providers offer the very same commodities, and besides, there's a "co" in co-operative for a reason.
Trying To Show 'Value'
In some of the feedback CU Journal received to the SECU disaffiliation story, commenters said SECU's first responsibility is to its own membership. Indeed it is, but the mistake there is not to see how acting for the greater good doesn't also very much benefit SECU's 1.8 million members, too.
Mr. Blaine told the Journal, "It gets to, who, in the real world, is paying for what and what value are the members getting." Telling the "value" story has always been a challenge for natural-person credit unions, and once again it is for CUNA. Who knows? Perhaps it is time for some changes to the now 80-year-old league/CUNA structure. Already CUNA has said it has a "Renewal Review Committee" that will be examining that dual membership requirement.
What I do know is this one is on the CUNA board to take charge. Board representation is divided by asset size — the CU version of federal checks and balances — and small, mid-size and large CUs need a renewed debate on that question of value, keeping in mind it is not now and never has been a hard-and-fast ROI number.
Washington is a fine place for this discussion to begin. Our history is replete with lessons in the power of working out differences and, even today, despite the rhetoric, it is 50 states "United" on core values that is the country's most durable legacy.
The Committee of 535
In cooperation CUs stand, divided they fall. And the prospect of divided credit unions, whether large vs. small, federal vs. state, or direct CUNA member vs. direct league member, must have the banking industry trade groups salivating.
At GAC 2014, members of Congress will once more claim to have all the answers for credit unions. By GAC 2015, it will be time for credit unions to give Congress an answer of their own, demonstrating how working together benefits everyone.
That big Committee of 535 will probably never notice, but the real goal must be that current and future CU members do.
In the meantime, I'll look for everyone down next to the Potomac.
Frank J. Diekmann can be reached at frank.diekmann@sourcemedia.com.
