By Ray Birch
MADISON, Wis.—Do credit unions have the “excess capital” right now to make emergency loans to members as one group is demanding?
We Own It believes they do. The organization has sent a letter to more than 1,000 credit unions to tap their capital during the coronavirus pandemic to help members in need, while also launching a petition drive at one CU that calls for an anti-eviction program to be created.
Jake Schlachter, executive director of We Own It, hopes the letters will not only provide dollars to members seeking to remain in their homes, but also spark conversation among credit union leaders across the movement regarding the giveback concept.
As CUToday.info reported, We Own It, a nonprofit organization that says it was founded in part to bring member-owners back into their democratically owned cooperatives, has sent the letters to credit unions asking that excess capital be used to make emergency loans to help keep people at risk of foreclosure or eviction as the pandemic brings ongoing job losses and forbearances end.
In addition, the organization said one of its organizers has launched a petition drive calling on Richmond, Va.-based Virginia CU to start an emergency anti-eviction lending program.
The letter was sent to 1,430 CEOs of credit unions with more than $100 million in assets that have, according to the letter, “excess reserves of member-owned capital on their books.”
‘Strive for 5%’
In the letter Schlachter specifically asks the credit unions to "strive for 5%" of capital to be made part of an emergency lending program.
“This is really about starting relationships—not just with We Own It and credit unions, but with credit unions and other credit unions. All of them pulling together to devise solutions that could be put to use across the movement,” Schlachter said. “And when credit unions start these emergency loan programs, I hope it’s really not because we sent them a letter, but because they got a letter or an email from another CEO saying we're doing this and we're calling upon others to join us. And maybe it’s because local members are saying they have the moral authority to demand change in their co-op, and they ask for this use of the capital. Success or failure of this effort will come down to whether local people step up and start saying to their credit union, ‘This is what we want’.”
Schlachter is concerned if nothing is done to assist members the country faces an eviction “nightmare.”
“There's no social safety net,” he said. “The Asp
Jake Schlachter
en Institute estimates 30 to 40 million Americans are at risk of being evicted if things keep going the way they’re headed. All of us wanted to see the eviction moratorium that expired in July extended…People are not going to be able to stay in their homes, so now this falls to credit unions—we have to help each other because no one else is going to do it. This is so much in line with the credit union mission.”
Some CUs Respond
Schlachter told CUToday.info We Own It has received a small number of responses back from credit unions.
“They are trickling in,” said Schlachter. “Some have said we have intrigued them and they want to know more. Some say they are reviewing our letter and will get back to us, while another challenged our concept saying there is not an eviction crisis in the U.S. Most are saying they will get back to us.”
Schlachter said if credit unions follow his organization’s request nearly $10 billion in emergency loans would be available. We Own It said its analysis of 5,200 credit unions shows a combined $185 billion in retained earnings, or capital. Of that, $56 billion is in “excess” of what is required by regulations, according to Schlachter.
“This is capital owned democratically by 120 million Americans that they need now to keep themselves and their neighbors in their homes during an unprecedented eviction crisis in the midst of the COVID pandemic,” Schlachter said.
The organization has published a spreadsheet at https://i.weown.it/cu_info with detailed information on “each credit union’s financial outlook and capacity to make emergency loans.”
Petition Drive Launched
Meanwhile, Schlachter said Daniel Mintz, a Virginia-based organizer affiliated with We Own It, has begun a petition drive calling on Virginia Credit Union to start an emergency anti-eviction lending program. A copy of the letter sent to Chris Shockley, CEO of Virginia Credit Union, is available here.
Schlachter pointed out Richmond has the second highest rate of evictions in the country.
“Virginia Credit Union is one of the larger credit unions ($4.3 billion) in the country,” said Schlachter. “I think and have a pretty substantial amount of reserves that are in excess of what they require statutorily required to hold.”
Virginia CU has 10.69% net worth.
Asked by CUToday.info if the credit union has any plans to put in place the emergency loan program requested by the petition drive, Virginia CU’s Glenn Birch, director of public relations, said in an emailed response, “We did receive the request, and after review we are declining to participate. As always, we continue to work directly with our member borrowers who are having financial challenges.”
When asked whether he believes credit unions can afford to reduce their capital, which has decline by approximately one percentage point overall since the beginning of the pandemic, at a time when there is so much economic uncertainty and many are already waiving fees and offering forbearances, Schlachter said he believes those that have the capital cushion can participate.
Flawed Thinking
When asked if such emergency loans that would lead to a decline in the CU’s capital is actually asking one group of members—those in sound financial shape—to support another group of members who are less fortunate, Schlachter said that thinking is flawed.
“I would say a credit union has been formed by a process of people coming together in solidarity to form a common bond—to lend and extend credit to each other, especially in difficult circumstances,” he said. “Maybe people who think this is one group of members underwriting another group of members should dust off the founding charters of their credit unions and get back in touch with the cooperative principles. Credit unions were founded on the concept of mutual self-help.”