Too small to fail?

Cudahy tavern owner Dusty Graf was a trendsetter in the 1980s and didn’t even realize it.

Graf said she became frustrated when a commercial bank bought out the local savings and loan where she had her mortgage for many years. Shortly after the corporate bank takeover, Graf said someone made a mistake with her account, and representatives were less than willing to help correct the error.

“Then someone told me about Peoples Credit Union,” Graf said, and she was drawn to it because it was smaller, more personable, and local. She started a Christmas club account at Peoples, and hasn’t looked back since.

“At the big banks, you’re just a number,” said Graf, who has had both her personal and business accounts at Peoples Credit Union, 4801 S. Packard Ave., for over 20 years.

Move Your Money Movement

Fast forward to today, when a grassroots movement has started to encourage people to follow in the footsteps of Graf and others who have moved their money from large banks into smaller, local institutions. Following a credit crisis, recession, and enormous taxpayer bailouts of even more enormous banks, the public mood toward the financial industry has soured.

In late 2009, Arianna Huffington of the Huffington Post and her friends brainstormed a way to channel public outrage into meaningful structural change. They started a website (moveyourmoney.info), made a video featuring fictional community banker George Bailey from It’s a Wonderful Life, and the Move Your Money phenomenon went viral. Their goal was to empower consumers to change the system by pulling money out of America’s six largest banks-JP Morgan/Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs-so as not to support corrupt, economically destabilizing practices at the top of the wealth pyramid and instead support struggling local banks at the economy’s roots. In a New Year’s Resolution proposition at the Huffington Post, Huffington especially criticized those big, bailed-out banks for cutting lending and lobbying against financial reform.

“And as we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don’t we take our money out of these big banks and put [it] into community banks?” Huffington wrote. “And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse-what if we used it to make the system better?”

Fueled by disdain of corporate commercial banks that engage in risky lending, charge astronomical interest rates on credit cards, but still find ways to reward their top executives with outlandish bonuses, thousands of Americans have already “moved their money,” in effect investing it their communities instead of on Wall Street.

Local Credit Unions

“The corruption of big banking is getting worse,” said St. Francis resident Marlon Cherry, “the greed, making all their money off people who cannot afford it, giving out loans to people who cannot afford it.”

In contrast, Cherry said he is pleased with the personalized service he receives at Southshore Credit Union, 4580 S. Nicholson Ave. in Cudahy, where he opened an account about six months ago. “Plus you get a lot of the same advantages at credit unions that you get at the big banks.”

Many credit unions came into being in the first half of the 1900s to provide financial services for trade groups and factory employees of Milwaukee’s then-powerful manufacturing sector. With the decline of industrial and union-based employment in the 1970s and 1980s, many credit unions opened their services to the public to expand their membership bases.

Today, the membership requirement for many Milwaukee-area credit unions is to simply live or work in Milwaukee County. Membership can be obtained at most credit unions by opening a “share” (savings) account with as little as $5 to $25.

With one branch inside Outpost Natural Foods, 2826 S. Kinnickinnic Ave., Brewery Credit Union currently has 7,800 owners/members, said Jim Schrimpf, Brewery’s president. “It shows that the community is coming together,” he said.

Brewery Credit Union is also CDFI (Community Development Financial Institutions) designated, Schrimpf said. CDFI encourages fair access to financial services for people in underserved communities across America. “60 percent of our loans are to people in distressed areas,” Schrimpf said.

Keeping its money where its mouth is, Brewery also helped found Our Milwaukee (ourmilwaukee.net), an alliance of roughly 180 locally-owned businesses that advocate the Buy Local movement, surely something George Bailey could be proud of.

Wisconsin Credit Unions

Credit unions are not-for-profit financial cooperatives, owned by their members.

In contrast, corporate banks have paid boards of directors whose allegiance is to their shareholders.

“Because the members are the owners and they’re the only people who can use the credit union, there’s not the push to make income for off-site shareholders,” said Suzanne Cowan, director of the Office of Credit Unions at the Wisconsin Department of Financial Institutions.

Being community-based instead of profit driven, credit unions can also offer higher rates on deposits, lower interest rates on loans, and more free or low-cost services.

Most credit unions, and all of Wisconsin’s, are federally insured by the National Credit Union Administration (NCUA). For those concerned about not having the more familiar FDIC-insured deposits, “Credit unions’ deposits are insured to the same level that bank deposits are,” Cowan said.

Credit unions have been in Wisconsin since 1923 and all but two are state-chartered. Of the 236 state-chartered credit unions, six have over $1 billion in assets, Cowan said, but many small fry are still in business: the median size of Wisconsin credit unions is $12 million.

While Cowan said it’s too soon to track if the Move Your Money movement has influenced Wisconsin consumers, the popularity of credit unions in the state is on the rise.

The number of credit unions in Wisconsin has been declining from a high around 781 in the 1960s-due in large part to consolidations-but the number of credit union members and their total assets has been increasing. In 2009, there were over 2.1 million credit union members reported in the state. Credit union assets totaled $19.7 billion, up from $18.1 billion in 2008.

That’s small compared to the money currently in banks (M&I Bank alone has $57 billion in assets), but it’s still a chunk of change.

To illustrate the growth in the industry, consider the following data snapshot:

In 1999, 42.4 percent of Wisconsin credit union assets were personal loans and 36.8 percent real estate loans-a total of almost $7 billion across 350 credit unions. Almost a decade later, in 2008, 52.4 percent were real estate loans and 28.7 percent were personal loans-a total of over $14 billion in loans across 250 credit unions.

Especially over the past two years, Cowan has noted an influx of assets into both Wisconsin banks and credit unions. She speculates people are either taking money from the stock market or not putting as much in.

Landscape of Consolidations

Just because you put money in a credit union doesn’t mean it will stay small and local forever, however. In Wisconsin, as across the nation, credit unions are tending to consolidate to offer more services. Cowan cites Landmark Credit Union, which has merged multiple times.

Local banks are also tending toward consolidation.

For example, longtime Bay View area residents still remember St. Francis Bank. While the physical bank remains at 3545 S. Kinnickinnic Ave., its identity and ownership have been absorbed three times in the past decade. First by MidAmerica Bank, then by National City Bank, and now by PNC Bank, headquartered in Pittsburgh, Pa.

While members of small banks that get swallowed by bigger banks are ultimately subject to boards selected by bank shareholders-who may not even be in-state residents-credit union member/owners theoretically retain their voice even when credit unions merge. “They’re still owned by members who have the option of attending the annual meetings,” Cowan said.

With Maritime Savings Bank’s retreat last summer from its Kinnickinnic Avenue roots (the bank started in 1912 as the Kinnickinnic Mutual Loan & Building Association, later became KK Federal, and currently claims over $400 million in assets), Bay View residents have fewer local banking options in their neighborhood.

But not every financial institution that started small has ballooned away or been absorbed. Bay View Federal Savings & Loan, 3974 S. Howell Ave., now lists over $100 million in assets. It started doing business in 1915.

Credit Unions Open to the Public on the South Shore (with 2008 Year-End Reported Assets**)

• A-B Credit Union, 225 W. Greenfield Ave., (414) 645-5160 ($42,634,999)
• American Credit Union, 3280 S. Clement Ave., (414) 747-2226 ($25,510,640)
• Brewery Credit Union*, 2826 S. Kinnickinnic Ave., (414) 755-0048 ($28,401,047)
• First Credit Union, 2121 E. Rawson Ave., Oak Creek, (414) 762-4460 ($10,531,767)
• Guardian Credit Union*, 1025 Milwaukee Ave., South Milwaukee, (800) 556-5154 ($281,978,012)
• Kyle Central Credit Union, 1201 Marquette Ave., South Milwaukee, (414) 764-4830 ($10,208,075)
• Ladish Community Credit Union, 5570 S. Packard Ave., Cudahy, (414) 481-6220 ($12,944,175)
• Peoples Credit Union, 4801 S. Packard Ave., Cudahy, (414) 481-1570 ($12,676,855)
• Prime Financial Credit Union*, 5656 S. Packard Ave., Cudahy, (414) 486-4510 ($190,145,091)
• Southshore Credit Union, 4580 S. Nicholson Ave., Cudahy, (414) 769-2345 ($14,953,384)

*These locations are branches.

**Total assets listed are 2008 year-end assets reported to the Wisconsin Department of Financial Institutions. 2009 year-end data are expected in several weeks.

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