Credit Unions, A Vital American Institution

CREDIT UNIONS, A VITAL AMERICAN INSTITUTION -- (Extensions of Remarks - May 17, 2004)

Mr. SANDERS. Mr. Speaker, I want to talk today about an essential element in our national life, America's credit unions. They are one of the most vital, one of the most democratic, institutions in America, and yet time and again credit unions are overlooked and even ignored by the mainstream media. But I know, as tens of millions across the Nation know, that credit unions are healthy, thriving, and essential to the prosperity of the Nation and the well-being of millions of families.

The principle behind credit unions is simple. A group of people join together to pool some of their resources; in turn, those resources are available as low-cost loans to the members of the group. Without the need to make a profit, without heavy advertising costs, without huge bonus packages to corporate executives, credit unions can provide loans at rates lower than other financial institutions. And they also can provide loans to those who might otherwise be turned away from conventional banking institutions.

Credit unions are cooperatively owned by those who deposit money in them, not by 'investors' who want to make a profit from loaning money. They are democratic, owned and run by their members. And anyone who makes a deposit is a member.

Although the concept of coming together to pool resources dates back to ancient times, the modern credit union movement began in the mid-nineteenth century, when economic depression, massive crop failures, and especially harsh winters created horrendous conditions for rural and working people in Europe. The first credit union dates from 1850 in Germany. Quickly, the idea spread across Europe.

In 1901, in Quebec, the Canadian province neighboring my State of Vermont, the first credit union in North America was established by Alphonse Desjardins in a town called Levis. It was called La Caisse Populaire de Levis, and like its European counterparts it made credit available to all sorts of people who could not get loans from banks: small farmers, working families, and renters who had no collateral.

In 1908, inspired by that model, the first credit union in the United States was founded. Parishioners of St. Mary's
Church in New Hampshire, Vermont's neighbor to the east, formed the first U.S. credit union, with help from Desjardins. (Today, St. Mary's Bank is still a credit union and still vital, with more than $450 million in assets.)

In 1909 Edward Filene, a progressive businessman whose department stores are still prominent in the Northeast-one is located in Burlington, Vermont-helped develop and enact the Massachusetts Credit Union Act. Many states followed Massachusetts in passing similar legislation. By 1930 there were 32 states with credit union laws, and there
were a total of 1,100 credit unions nationwide.

The depression, of course, made credit more important than ever to hard-pressed working people. In 1934, the Congress passed the Federal Credit Union Act. When President Franklin Roosevelt signed the law in 1934, he said its purpose would be "to make more available to people of small means credit for provident purposes through a national system of cooperative credit."

Credit unions grew and flourished. By 1960 more than 6 million people were members at one or more of over 10,000 federal credit unions.

I was proud to be an original sponsor, and to work side-by-side with credit unions and their members during a long and contentious struggle in 1998. We were successful in that fight, and passed the law that preserved the right of consumers to join credit unions. So, credit union membership remained open to many millions of Americans.

Today, I am pleased to report, credit unions are stronger than ever, and serving more people than ever. There are over 12,000 credit unions in existence today. They have $316 billion in assets-and they serve 70 million people in our nation.

The credit union movement's long and great history of making credit available to people of small means has been based on the same central idea from the outset. Credit unions enable everyday people to band together for the common good, allowing them to make basic financial services available through not-for-profit and democratic means.

In our day, unhappily, tragically, the conditions that led to the beginning of the credit union movement in Germany more than a century-and-a-half ago still exist. Families, even with two and three workers in a household, even with people holding multiple jobs, often cannot pay their bills, their health care, their pharmaceutical costs.

Our economy is booming-but only for some. Corporate profits are up, productivity is up and stock prices are relatively high. The wealthiest people in our country have never had it so good. The richest one percent of our population now owns more wealth than the bottom 95 percent, and the typical CEO of a major corporation now earns over 300 times more than the average worker.

But workers across the country are often working longer hours for lower wages than they earned twenty-five years ago. Thirty percent of our workers earn poverty or near-poverty wages. In fact, low-wage American workers are now the lowest paid in the industrialized world. One out of every five children in America now lives in poverty, compared to one out of seven twenty-five years ago. Thirty-four million Americans live in hunger or in families so poor that parents skip meals so their children can eat.

Ordinary Americans are struggling. They need allies like the credit union movement.

Meanwhile, the for-profit financial services industry has left many ordinary Americans behind. Mergers have led to larger institutions serving higher-end customers, the loss of local ownership andcontrol, less competition, higher fees, and the lack of life-line financial services to moderate- and low-income consumers.

There are 20 million American adults who do not have checking or savings accounts. Some have been priced out by high fees. Others simply can't get small loans from banks. When their cars break down, they borrow the money to fix them from wherever they can-like payday loans. Banks often think that the best way for working people to get a loan is to draw heavily on their credit cards-cards that often charge hefty monthly penalty fees on top of close to thirty percent interest rates!

So America's credit unions are just as vital today as they were when Desjardins helped organize that first credit union in New Hampshire.

Yet even though credit unions serve seventy million people-perhaps because they serve seventy million people-they are under attack by the for-profit financial establishment.

Today, huge corporate banks are hard at work lobbying Congress to tax credit unions. Unscrupulously, the banking lobby has even questioned the safety and soundness of credit unions. They hammer away and hammer away at their theme: "It is not fair that credit unions are not taxed. They get a federal subsidy." Yet it is the banks, with their multi-million dollar CEO's, their rising profits, and their rising ATM surcharges, that come before Congress to ask for huge bailouts for bad overseas investments. When the banks say that credit unions should pay a billion a year in taxes, they conveniently forget to mention that privately owned banks have received hundreds of billions in taxpayer support in the last fifteen years, ranging from outright bailouts of failed domestic banks to underwriting of their losses abroad.

Credit unions are tax exempt for good reasons, and not because anyone is doing them a special favor. Credit unions are tax-exempt because they are not-for-profit institutions. And under federal law, and rightly in my view, non-profits are exempt from taxes: churches, hospitals, libraries, universities-and credit unions.

For almost all of the past century, credit unions brought people together, allowed them to share their resources, and served the financial needs of their members in good times and bad.

It is my belief that credit unions and their members have the potential to be an even more important economic, social and political force in our country in the decades ahead. In a nation facing forces that threaten to rip our economic well-being apart-downsizing, outsourcing, shipping jobs abroad-credit unions remind us that we can work together for the common good. They show us, day after day, that it is not necessary to incorporate the profit motive into every aspect of American life. In fact, credit unions show us how, if profits are not involved, people can come together to help themselves, sustain themselves, and create healthy communities.

I never make excuses for the fact that I am a strong supporter of credit unions. I want to see credit unions grow and flourish because I believe credit unions are good for the working people of Vermont and good for America.

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