Published on June 26, 2018
Written by The Servion Group
June 26 is a celebratory day for credit unions as it plays a significant part in the history of the CU movement.
Though the first credit union was formed by Alphonse Desjardins in New Hampshire in 1909, it wasn’t until this day in 1934 that President Roosevelt signed the Federal Credit Union Act, enabling all 50 states to authorize federally chartered credit unions.
As a credit union service organization, the anniversary of this historic law offers a moment to reflect on where our nation was at this point in history and acknowledge the steps that got us here:
Credit Union National Extension Bureau (CUNEB) The CUNEB was founded in 1921 to promote the establishment of credit unions and to move closer to establishing credit union laws at the federal level in all states. It also served a large part in the rapid growth of credit unions in the United States.
The Great Depression During this time, our country was suffering devastating setback from the worst economic downturn in history. Over the years following the stock market crash of 1929, consumer spending and investment dropped drastically. By 1933, the effects had left some 15 million Americans without a job. On top of that, nearly half the country’s banks had failed.
President Roosevelt signs FCU Act To help make credit available to more Americans, FDR and his administration looked toward the idea of cooperative financial institutions. In June 1934, President Roosevelt signed the Federal Credit Union Act, enabling federally chartered credit unions in all states. That August, Claude R. Orchard assumed federal credit union leadership and held supervision responsibility until 1953, when J. Dean Gannon was named director of the Bureau of Federal Credit Unions.
By 1960, credit union membership amounted to more than 6 million individuals belonging to more than 10,000 federal credit unions.
NCUA and NCUSIF formed On March 10, 1970, the National Credit Union Administration was formed to supervise federal credit unions. The National Credit Union Share Insurance Fund was also formed to protect credit union deposits. From then until 1979, assets in credit unions tripled. In 1977, new laws allowed credit unions to begin offering services including mortgage lending and share certificates.
Federal credit unions grew immensely during the 1970s. The number of credit union members more than doubled since 1969, and credit union assets tripled to more than $65 billion.
Recapitalization of NCUSIF Credit unions experienced vast changes during the 1980s due to deregulation, increased flexibility in merger and field of membership criteria, and expanded member services. On top of that, high interest rates and unemployment also brought supervisory changes and insurance losses. With the NCUSIF experiencing financial stress, the CU community relied on Congress to approve a recapitalization plan. In 1985, federally insured credit unions recapitalized the NCUSIF to be a “federal fund backed by the full faith and credit of the U.S. Government” by depositing 1 percent of their shares.
Recession U.S. credit unions continued to expand throughout the 1990s and beginning of the 21st century, until 2008, when the nation faced the most severe economic downturn since the Great Depression. The NCUA took action to safeguard the U.S. credit union system, but five of the largest corporate credit unions in the United States were unable to recover.
Stabilization Fund The NCUA worked with Congress and the U.S. Treasury Department to establish the Temporary Corporate Credit Union Stabilization Fund to protect the NCUSIF and the stability of U.S. credit unions. Over time, insured credit unions will pay back the costs of the Stabilization Fund.
“Red Flag” System To protect credit unions from failure, NCUA implemented a “red flag” early warning system to detect problems before they reach the point of destruction. NCUA adopted a 12-month examination cycle for federally insured credit unions, and by 2009, more than 96 percent of credit unions were considered “well capitalized.”
Today, credit unions continue to overcome economic challenges and serve more Americans than ever before.
Servion takes pride in our ability to serve so many great credit unions and community banks around the country. June 26 is an important date in history to us, especially, because without the creation of credit unions, our company wouldn’t exist, either.
Thank you to all the institutions that work with us, and thank you for meeting the financial needs of your communities.