http://www.time.com/time/business/article/0,8599,1865649,00.html?iid=sphere-inline-sidebar

Way to go, Michael Fryzel and the NCUA. You just communipunched all credit unions in the face. Nice job with that.

As a taxpayer, the idea that we would give any organizations money that don’t truly need it is one I find very unsavory. Never mind the fact that, as a capitalist, I object to the whole concept of government giving businesses money in the first place.

Theoretically, the money given to banks that are struggling should not give them a competitive advantage; it should (again, theoretically) save them from the brink of ruin. At least that’s how the argument goes. Apparently, their balance sheets are so screwed up that they need cash to get their cap ratios back up to where they can legally lend again.

The idea that healthy credit unions deserve money because struggling banks are getting money sounds a lot like an average income earner saying they need a handout because some people get welfare: “It isn’t fair!”

Even if — and that’s a big “if” — the credit union industry needs a bailout, the manner in which the relief has been sought has been mishandled. For starters, is it a bailout, or is it about equitable treatment and fair play?

Instead of begging for a bailout, why didn’t the CU industry try this approach: “All those banks you’ve given billions to aren’t doing what they’re supposed to with the money. They are doing two things. (1) They are sitting on it, and aren’t lending it out. (2) They are using it to buy-up other banks. If you give money to us, the credit unions of America, we guarantee that we’ll lend it out — directly to American consumers on Main Street. That’s what we do. That’s all we do!”

Re: the tarnished reputation… It doesn’t matter how savvy Joe Public is. If the media doesn’t descend on a CU TARP bailout immediately, they will after the ABA gets a hold of them.

And, as history has proven many times, the good intentions of our leaders do not always equate to positive outcomes.

While I agree that CUs should stay away from TARP on the matter of principle, I have to add that it’s not quite as simple as we’d like it to be. For example, what happens if all of the banks around us are infused with cash?

Suddenly, they can offer better rates. They can advertise more. What if this happens at the same time we are experiencing our A member defaulting and our non-interest income plummeting?

Or, what if the bailout comes in the package of a consumer incentive – something crazy like bank customers can get a mortgage push down but credit union members can’t?

As for this harming our reputation, I tend to think that consumers are not quite as savvy on the bailout options as industry folks are.

If this issue were really cut and dried, our smartest minds would not be agonizing over it. I think our CEO’s have the members’ best interest in mind. I really do.

That is what I think.

Great post. I’m so glad this conversation is occurring in a public format. Now if we can just get CUNA and NAFCU to listen.

Therein lies our problem, IMHO. Both have dues paying credit unions hiring them to lobby – and these two trade associations, as far as I can tell, are NOT on the same page about how to help their members. And by members, I mean DUES paying credit unions (read CEOs of large credit unions with jobs at stake).

That’s what is so frustrating about this issue. The majority of credit unions are in great shape and stand to greatly benefit from this crisis by the press pointing out the REAL difference and shouting our praises, but the collective voices of these do not overpower the few voices that are screaming for help right now.

Anyway – here’s how I see it. If the CEO of a big enough credit union, paying big enough dues to CUNA or NAFCU wants some bail-out money we’re all at risk. CUNA does seem to have a good solution (using our NCUSIF to help) but what I’ve been reading lately, NAFCU is still pursuing taxpayer money (I wrote about it here http://denisewymore.wordpress.com/2008/11/13/business-weak-by-businessweek-magazine/)

I agree with y’all. If we take that dirty money, we deserve to be taxed, and I’m outta here.

I still think the decent thing to do (for the credit unions with toxic assets on their books) would be to convert to a mutual savings bank and then get in the welfare line.

But how do we get that message to the trade associations? If we don’t pay them, they won’t listen.

Each morning at the gym I’m approached by a local physician, attorney, real estate broker and a landscaper about what I think will happen in the great bail-out today. I’m also asked what I think the stock market will do and so on…… Of course, if I had the magical answer or could see clearly into the crystal ball I wouldn’t be sitting here blogging.

The message that I give loud and clear to my captive audience (covered in nothing but a towel) is that credit unions are in a very unique position. Thankfully, the Oncologist in the group is a strong member of my credit union. I have repeatedly (while looking over my shoulder) let them know that the banks are the one’s waiting with their hands out for the government payday. I have indicated that credit unions, as a whole, will only be indirectly impacted as a result of the poor decisions of banks. Now, the new question is the auto industry and their plea for help. Again, I have held strong that credit unions are safe, sound and secure in their positions, and will have no need to take money from the American taxpayers.

Personally, I would hate to see the powers-that-be take cover under TARP when I really can’t see the need to do so. I understand there are credit unions in distress and troubled but a quick relief is probably not their answer either. I feel that if we do ask for and accept TARP then we as the credit union industry had better run for cover someplace else.

At a time when public awareness seems to be at it’s peak for credit unions, this is our time to shine like never before. The media has never been eager to embrace credit unions and have always pushed banks to the forefront. Well, banks are no doubt at the forefront today, but in a negative light. Credit Unions are glowing Stars today given our recent press. I have been saying it since I came into the credit union industry (from a bank), “credit unions should do what they do best and stop trying to become a bank.” I feel that my statement couldn’t be more profound given today’s situations. For my credit union, we’ve never wanted to become or be like a bank, and we sure dont’ wish to start with TARP as our conversion platform.

Your cynicism (justified or not) about credit unions’ democratic process doesn’t change the fact that those mechanisms are in place. Members must stay involved, demand a say, and exercise their rights as member owners. Organizationally, you can encourage that…but there’s no way (at least that I’ve seen implemented) of mandating it. Democracies can’t fix apathy, but they can defend themselves against the apathetic.

With a merger, the members have the opportunity to vote for or against the merger. Would the same thing apply to sending money to another credit union, or would the board vote on and budget it with little to no member input?

There is a time and a place for mergers. Like you said, a merger can be used to help out a struggling credit union. However, there is a process to a merger that requires a vote, but would those same requirements be used in a monetary bail out?

I’m playing devils advocate here, but I think there are some legitimate concerns any time a purely monetary bail out is considered, regardless of whether its coming from taxpayers or members.