FEDERAL WAY, Wash. and BEAVERTON, Ore. (3/13/12)--Nov. 5--Bank Transfer Day (BTD)--was not the first mass movement away from banks and into cooperative financial institutions, says the Northwest Credit Union Association (NWCUA).
Instead, 2011 marked the "third significant membership milestone in the 100-year history of American credit unions," according to a special edition of NWCUA's Anthem newsletter (March 12), which puts BTD and the resulting membership gains for credit unions into perspective. It also provides information and statistics about national and statewide (Washington and Oregon) membership growth.
Consumers' movement from banks to credit unions "happened several times in America during the 20th Century under circumstances similar to those that occurred during 2011's fourth quarter," said one of the Anthem's articles, "Bank Transfer Day in Context, What Caused the Movement, and What Comes Next?" written by David Bennett, director of publications at NWCUA.
"However, at two specific points in time--in 1934 and again in the mid-Seventies--there was a confluence of events very similar to those that led to last fall's Bank Transfer Season," the article said.
"While credit unions themselves didn't exist before the first state credit union act became law in Massachusetts on April 15, 1909, the conditions that spawned them did," said NWCUA.
The article noted that "the 1909 Massachusetts Credit Union Act was passed on the heels of a systemic banking failure and crisis in 1907-08, when the labor and women's movements were converging and progress was being made to advance their causes. Personal lending was scarce but desperately needed, and most of the nation's citizens lived in rural communities where access to credit was almost nonexistent. Parallel to the interest in credit unions was an interest in maintaining a stable economy. So, with the first state credit union act also came the implementation of the first major bank reform in the U.S."
The first credit union membership spike occurred between 1934 and 1939 during the height of the Great Depression and after the passage of the Federal Credit Union Act, said the article. Credit unions experienced a heyday, while many banks closed their doors, "leaving communities without banking facilities and creating some general hostility toward and fears of banking institutions."
The World War years were lean for credit unions, but in the 1950s, credit unions would turn into a revolution running concurrently with a new economic and post-war industrial revolution. By the end of 1963, credit unions had increased membership by more than 168%--to 14.5 million from three million.
Between 1969 and 1975, the U.S. entered two recessions. "Politically, what happened in the early 1970s is nearly identical to what we are seeing today," said NWCUA. The recession then coincided with a government's attempts at fiscal tightening to close the Vietnam War budget deficit, coupled with the oil and gas crisis. The poor economic situation led to a recession in 1973. Credit unions were maturing but their environment was affected by aggressive banks and revolving retail credit added to the rising tension. The economy began its full switch to a credit-based economy as the rise of ATMs meant more convenience to bank customers, the article said.
"It was do-or-die time for credit unions, so they did," said the report. The result was sweeping changes to the Federal Credit Union Act to allow credit unions to become full-service financial institutions and to institute the corporate credit union system to provide liquidity. The regulations increased and a period of consolidation began, followed by improvements to state credit union acts. Charters advanced and some regions were positive climates for credit unions.
The next test, however, would be Sept. 11, 2001, when terrorists prompted a downward economic spiral and an increase in non-domestic government spending. While the U.S. was "distracted," economic indicators began showing signs of a slowdown. Unregulated investment products, fueled by greed, created a bubble that led to an economic crash and recession, which led to consumers' discontent, the article said.
"What credit unions provided to consumers in 2011 was the opportunity to act in their own combined personal best interests. Credit unions became a positive outlet for the public's bank-directed anger. Credit unions gave the opportunity to punish an industry in the court of public opinion when the justice system couldn't--or wouldn't--punish it in a court of law," said Bennett in the article.
"Credit unions have reached a tipping point again as all the social, political and economic signs are flashing. History is calling on credit unions again to be pillars during this time of need, to serve American consumers on a day-to-day basis in the present, but also to focus on the future of the movement and all that it can be as opposed to just the well-being of individual institutions."
The article also looks to the future and provides a graphic that illustrates 111 years of the U.S. credit union movement from 1900 to 2011. It includes a timeline of social movements, economic indicators and credit union milestones. Use the links to access both the article and the graphic.