Wednesday, April 6, 2016

Are credit unions evil banks, or virtuous anti-banks?

As I was walking through a parking lot near a credit union office, I spotted a Bernie Sanders for President bumper sticker.

And it got me thinking.

As many of you know, the Bernie Sanders campaign can almost be characterized as a single issue campaign - namely, to ensure that land acquisition for the National Park Service is fully funded.

Whoops - I seem to have scrambled my notes. Actually, the Sanders issue that is getting a lot of attention can be summarized in four words: "Wall Street is evil."

From the Sanders website:

Wall Street cannot continue to be an island unto itself, gambling trillions in risky financial decisions while expecting the public to bail it out....

The six largest financial institutions in this country today hold assets equal to about 60% of the nation’s gross domestic product. These six banks issue more than two-thirds of all credit cards and over 35% of all mortgages. They control 95% of all derivatives and hold more than 40% of all bank deposits in the United States.

We must break up too-big-to-fail financial institutions. Those institutions received a $700 billion bailout from the US taxpayer, and more than $16 trillion in virtually zero interest loans from the Federal Reserve. Despite that, financial institutions made over $152 billion in profit in 2014 – the most profitable year on record, and three of the four largest financial institutions are 80% bigger today than they were before we bailed them out.

So why would a credit union employee support a guy like Sanders?

One possible reason might be the conclusion that when Sanders rails against financial institutions, he's not railing against credit unions. After all, credit unions are different - the government said so:

Credit unions are not-for-profit organizations that exist to serve their members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services. But as member-owned and cooperative institutions, credit unions provide a safe place to save and borrow at reasonable rates.

So perhaps the bumper sticker owner believes that the problems on Wall Street are solely caused by for-profit (rather than not-for-profit) firms that are controlled by oligarchs (rather than individual credit union members just like you and me).

Or perhaps the bumper sticker owner realizes that money is money, but supports Sanders anyway. If so, he or she is not alone:

Meredith Burak is a third-generation Wall Street executive. At 32, she has worked in global wealth management for Bank of America and Merrill Lynch....

"Wall Street has been very good to my family," she said. "It has enabled myself and my cousins and people around me to go to college."

But at the same time, Burak said, Wall Street needs tougher regulation and rules. "People on Wall Street want the game to be fair," she said. "It is when people cheat that things get messed up for everyone. And to the extent that we can have rules and more enforcement to get people like [Ponzi schemer] Bernie Madoff out of the financial system, the better it is for the economy."

Burak said she left Merrill Lynch earlier this month and is traveling in Israel this week, focusing on charitable work on behalf of a cancer foundation in honor of her mother.

And after all, as an anonymous Sanders supporter points out:

"You've got Warren Buffett — one of the wealthiest people in the country — and he's out there supporting raising taxes and the things that Bernie talks about."
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