Thursday, December 17, 2015

Credit and the Public Good, Part 1

(An earlier version of this was published in City Pulse, a local alternative weekly serving Michigan's Capitol region.)

I suspect that few folks reading this don’t have an account at a bank or credit union. I belong to two credit unions. Credit unions differ from traditional private banks in that they are member owned. This makes it all the more interesting that when I wrote the credit unions I am a member of to ask how we pay our employees, I received no initial response. I asked for three simple figures:
       • What is the minimum beginning wage for a full-time employee?
       • What is the median salary of all employees (the amount that 50 percent of employees make more or     less than)?
       • What is the wage ratio from the bottom to the top?

I looked at their websites before I sent this request, but there is almost no information about how either credit union compensates it employees. I thought OK, I can see where they may not want to share with the larger public, but I was taken back that they wouldn’t share this information with its members/owners.

Now the genesis for this query comes from the physical expansion of both credit unions, which are both statewide entities. Members seem to have no say in the decision-making that goes into this, even though we are member owners? There is little if any transparency in the decision process. The boards has no minutes shared or posted of their deliberations. And in only one case is there even any slim excuse for a financial statement that might allow a member to judge if the expenditures for expansion are warranted.

In the midst of this query into local banking, I tripped upon a new web site . This site allows you to type in your city and see a rating of local financial institutions and how they rank. They use seven criteria pulled from publicly available data: 
1) Small Business Lending, 
2) HQ Location, 
3) Bank Branch Concentration,
4) Ownership Type,
 5) Bank Size,
 6) Small Farm and Agricultural Lending, and
 7) Speculative Trading. 

They then aggregate scores and rank banks/credit unions according to their impact on the locale. The scoring system is spelled out, so one can decide if the scoring reflects one’s own values.

Lansing has a number of institutions that score STRONG, the highest rating. Neither of my credit unions made that category, each coming is as MODERATE. This was somewhat surprising because credit unions and mutual savings banks get an extra point over shareholder-owned banks. Of course, as I mentioned, one can take issue with the criteria selected in this rating system. But the more important issue for this credit union member is, does the place where I bank align with my values. It wasn’t that long ago when we were looking to refinance our home after interest rates fell that we went shopping for a new mortgage. Universally the loan officers we approached and asked how their funds were invested were surprised that we would ask such a question. I mean, after all, isn’t this activity only about money and the best deal for me? Why should we be concerned about whether the bank invests most of its money out of state as long as my interest rate stays low?

Three of the rating criteria used by Bank Local are around what they do with the money we lend them — do they lend to small business; do they lend to small farms; and do they engage in speculative trading. The website allows you to see how each bank/credit union scores in each criteria. It’s not the most complete transparency that I would like when choosing a financial institution to do business with, but it’s certainly adds some perspective to consider. I still want to know how they share the wealth within the business, thus my three-part question. I’m ready to move my accounts to a financial institution willing to tell me what my money is doing for others. Is there any bank or credit union in this community that is willing to do so? I decided to try one of the STRONG rated credit unions in the area, asking my three questions, indicating that I was shopping for a new home to house my finances. I was promptly and politely informed by the VP of human resources for that credit union, that while they were very proud of their treatment of employees they would not disclose this information to me.

Thinking that this might be a reasonable response to a non-member, I replied asking if I would be able to get this information if I became a member. I’m still waiting for responses. My search for a credit union to bank with continues. You can follow my learning journey here.