Nader: How Credit Unions Survived the Crash

Ralph Nader, arguably America’s most visible consumer advocate of the last few decades, wrote a great piece on CounterPunch recently detailing why credit unions seems to be faring much better than the corporate, commercial banks during this economic recession.

The opening passage is pretty insightful and summarizes the situation:

“While the reckless giant banks are shattering like an over-heated glacier day by day, the nation’s credit unions are a relative island of calm largely apart from the vortex of casino capitalism.

Eighty five million Americans belong to credit unions which are not-for-profit cooperatives owned by their members who are depositors and borrowers. Your neighborhood or workplace credit union did not invest in these notorious speculative derivatives nor did they offer people “teaser rates” to sign on for a home mortgage they could not afford.

Ninety one percent of the 8,000 credit unions are reporting greater overall growth in mortgage lending than any other kinds of consumer loans they are extending. They are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per account, such as the FDIC does for depositors in commercial banks.

They are well-capitalized because of regulation and because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values and the value of the bosses’ stock options as do the commercial banks.

Credit Unions have no shareholders nor stock nor stock options; they are responsible to their owner-members who are their customers.”

This is really interesting information that, if spread, could push more folks to park their money in a local credit union or community bank given the bleak economic forecast. The results speak for themselves: in the absence of strong government regulation (clearly our situation), the large, corporate banking institutions have clearly showed how irresponsible they are with the people’s money. Becoming a member of your local credit union seems to be a much safer solution for the people. On top of that, it’s the easiest way to localize your finances, in terms of making sure that your money is not only working for you, but strengthening the well-being of your local community.

That being said, I honestly have to follow my own advice and open up a checking/savings account with my local credit union (I’m currently still banking with a large corporate bank). The information in Nader’s article is all the more reason to do so.