The United States was built on cooperation. Our early settlers came here seeking freedom of religion, self-government, and financial freedom. To realize those lofty promises, they had to work together. So, they built each other’s houses, they shared crops, and they organized governments to bind them together. These communities grew because their residents helped each other. People helping people. When we declared independence from England, our colonies became sovereign states and, under the Articles of Confederation (the first attempt at forming a national government) each state explicitly retained its “sovereignty, freedom and independence.” Later, at the Constitutional Convention (our second attempt) the states chose to cede specific powers to the new Union—including the power to coin money—while keeping the remaining powers. That’s the American blueprint: pool collective strength and keep local control. Credit unions run on that same operating system. Built on the fundamental American principle of cooperation, credit unions create economic engines that benefit their members and communities alike. Individual members pool their money to meet the collective financial needs of the membership. Any surplus flows back to members in better rates, lower fees, and even dividends. There are no outside investors to take profits away from the members. Governance is entrusted to the members themselves, the people who actually use the institution, to ensure that the engine keeps working for the benefit of the membership. America’s first credit union, for example, formed in Manchester, New Hampshire in 1909 to help Franco-American mill workers gain access to fair banking services. By reinvesting the pooled savings as loans to other members, the credit union kept its capital circulating within its community, which stimulated Manchester’s economy by helping even more members purchase homes and start businesses. Here’s the distinction that matters: - Inside shareholders (members): when you bank with a credit union, you own it. Surplus goes back to you and your neighbors as better rates, lower fees, and community investment.
- Outside shareholders (investors): at stock banks, customers supply the raw material (deposits and fees), but they don’t get a piece of the profits. That money goes to the outside investor.
As national banking took shape, in 1863 Comptroller Hugh McCulloch warned lenders to honor their business and their borrowers: make only well-secured loans; avoid speculation; distribute risk rather than concentrate it; judge character and integrity; keep capital real; and live within means. Those principles may have built trust then—but now they’re ominously prescient. When a bank is organized to serve outside shareholders, it chases yield, scale, and profit; credit unions, by design, adhere more closely to McCulloch’s vision, whose famous line still hits hard even today: “‘Splendid financiering’ is not legitimate banking, and ‘splendid financiers’ in banking are generally either humbugs or rascals.” What’s past is prologue. Fast-forward to 2019 when the Business Roundtable announced a Statement on the Purpose of a Corporation pledging that the member corporations would move beyond shareholder primacy to benefit all stakeholders. Who is the Roundtable? It is a CEO-only association of America’s largest companies that advocates for policy to protect their companies—not their stakeholders. After more than five years, even the sympathetic reviewers find the pledge to be more promise than pivot: governance and incentives at most firms still benefit the outside investors first. Look at what a company does and not what it says. Credit unions don’t have to pretend: our owners are the stakeholders. If you believe America works best when we pool collective strength and retain local control, then you believe in credit unions too. Tell anyone who is buying a first home, starting a business, or opening their first account.
As Always,
Bruce
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