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The soap opera-like drama surrounding credit unions converting to mutual savings banks has been a major story in the trade press in recent months. Many long-time credit union advocates are understandably distraught about these conversions, and overwhelmingly cite board and management greed and self-interest as the driving forces behind these actions. There is a problem with this oversimplified analysis. In America making money is revered as long as it is not illegal. Although some converting- credit union officials can be accused of poor judgment and flawed implementation, none have yet been jailed for criminality. No matter how one looks at it, this credit union-to-bank conversion trend is not a pretty picture if it represents the future for the credit union charter. But where there is a bright light to be found is in the credit union community recognizing and understanding the underlying significance of dramatic developments like these conversions, as well as their ramifications, rather than ignoring them.
The fact of the matter is that existing laws and regulations support these conversions. The ability to convert charters from one type of institution to another is entrenched in U.S. financial institution public policy implemented during the 1980s and 1990s as a significant part of the solution to the savings and loan association debacle. These days a savings and loan association...