Half a loaf may be better than no loaf at all.
Controversy-wracked Lafayette Federal Credit Union, a $330 million institution with eligible member-groups in the Baltimore area, will not help a faction opposed to the nonprofit?s proposed conversion to a thrift present the dissenting side to its 16,000 members.
“Basically because [members] would be unhappy if I allowed just anyone to start contacting them with information that they thought was necessary for them to have,” Lafayette FCU President Michael Hearne said of the group?s direct mail request. Ironically, such practices could become prospectively mandatory if a proposed disclosure rule before the credit union regulator passes in November.
But Hearne will let the dissidents ? who, in a probing, recent letter to the board, questioned the member-mindedness of the demutualization of a 70-year-old institution ? inspect meeting minutes and conversion papers and pose in-person questions to him and board Chairman Arnold Rosenthal.
They will not, however, be provided written responses to their skeptical letter, Hearne said.
“There is no instance of a conversion where the benefits to the members have increased,” said conversion opponent Tom Carter, an USAID grant coordinator for overseas cooperatives. “No conversions, as studies have shown, have resulted in benefits for members. There are benefits to the CEO, the staff and boards, however.”
Referring to this possibility of Lafayette?s further conversion to stock ownership, Hearne stated, however, that all officers have foresworn stock option incentives, opting for access to offerings only on an equal basis with all account-holders.
The controversial conversion move, initiated in June, would make Lafayette the fourth-largest credit union of 29 to convert to a mutual bank since 1998 ? a cumulative asset transfer from the 8,600-institution, $660 billion-asset credit union system of more than $6 billion.
The matter has implications beyond claims that such conversion proposals are preferentially disclosed and result in insiders profiting at the expense of ordinary members. Credit union-to-bank conversions are one theater in the war between credit union and banking associations, which object to credit unions getting a tax exemption.
