Credit unions - Business in United States of America
Credit unions: Government Deregulation
Definition: Cooperative financial establishments under the control of their membership
Significance: Initially designed to provide credit to needy households, credit unions gradually became more like banks, representing a viable alternative to banks for consumers seeking a community-based financial establishment.
Credit unions were created as a means of dealing with the credit problems of low-income families, particularly industrial workers. Each institution formed around a cohesive social group, such as employees of the same businesses, members of churches, members of trade unions, or members of fraternal organizations. The cooperative principle emphasized that members were committing their savings to create a pool of loan funds for people whom they already knew. The implicit social pressure made borrowers more likely to repay. Putting money into the credit union involved acquiring shares, although they very much resembled deposits. For many years their chief business was extending personal loans to members. Group cohesiveness helped keep down credit risks and transactions costs. Credit unions were and remain not-for-profit organizations.
- Fountain, Wendell V. The Credit Union World: Theory, Process, Practice—Cases and Applications. Bloomington, Ind.: Author House, 2007. Examines all aspects of credit unions, from history to their future, covering topics such as governance and marketing.
- Mishkin, Fredric S., and Stanley G. Eakins. Financial Markets and Institutions. 6th ed. Boston: Pearson Prentice Hall, 2009. Basic work on the financial world and its institutions, contains a chapter on savings and loan associations and credit unions.
- Moody, J. Carroll, and Gilbert Fite. The Credit Union Movement: Origins and Development, 1850-1970. Lincoln: University of Nebraska Press, 1971. This scholarly study emphasizes the idealistic motivation of many credit union developers.
- Pugh, Olin S., and F. Jerry Ingram. Credit Unions: A Movement Becomes an Industry. Reston, Va.: Reston, 1984. Rich in detail on the transition from philanthropy to business.
- Wilcox, James. “Credit Union Conversions: Ripe for Abuse . . . and Reforms,” Credit Union Times, July, 2006. This newsletter provides a good view of current credit union conditions. The article documents criticisms of conversions to banks.
See also: Farm Credit Administration.