Free our Credit Unions...

Alan Feuer tells us of The Bank Of Cattaraugus, a bank near Buffalo in the town of Cattaraugus.  Its a small bank, real small, in fact its pretty damn wee.  Its got around $12 million in assets (less than Jamie Dimon, CEO of Chase, had his compensation increase by this year), of which around $5.5 million consists of state and municipal deposits.
   The bank is run by one family - The Cullens - for the last 130 years, and by all accounts they are not the Potters of  Bedford Falls, having run the bank for the good of the community in all these years.  They truly do seem to have a sense of noblesse oblige - running a very lean operation, and barely paying themselves anything ($300K/year in total compensation across the eleven employees and directors.  Peanuts really).  Mind you, they do have effective monopoly status in the town and vicinity, but again they seem to never have abused this position.

   Do I have a problem with this?  Absolutely.  To misquote Terry Pratchett, Its all well to have a Good and Wise King, but you better hope that his children are Good and Wise too, because someday they will take over.  And what about his Wazir?  And the henchmen?  Do you trust them too?

   You get the point.  In the end, the people of the Cattaraugus have no control over their own fate - they are dependent on the benevolence of the Cullens, and even though the Cullens are Good and Wise today, what happens tomorrow?  And what if they sell?
(On a side note, this is why, given a choice between Big Government and Big Corporations, I always side with Big Government, since in the end I do have some say with the Government.  Of course, I'd rather have neither, but thats not how I framed the point :-)  )

I'll let Felix Salmon complete the story

The answer is simple: credit unions. While the Bank of Cattaraugus is a prime example of a small community bank which really is doing God’s work (on a total asset base rather lower than Lloyd Blankfein’s annual salary), everything it does could also be done by a credit union, without the associated risks of the owners selling out at some point. 

Everything, that is, except one important thing: banks are allowed to accept state and municipal deposits, while credit unions are not. If the Bank of Cattaraugus became a credit union tomorrow, it would have to return $5.42 million in deposits, and it would become insolvent overnight. So while I don’t for a minute begrudge the bank those deposits, I do wonder why credit unions don’t have the opportunity to do the same kind of thing with them. The world would be a better place if they could

Amen.  Lets bring some sanity into our banking regulations...