People Helping People: 75 Years of the Texas Credit Union League

By Edward M. Walters

An in-depth look at the history of the financial institution, from its 1934 establishment to the 2008 US financial crisis.

The first seventy-five years for the Texas Credit Union League have been extraordinary! From its modest inception to its solid stature enjoyed today, the membership’s collective voice has guided us and served as a steadying arm. For three-quarters of a century, we’ve reached out to support one another in our drive toward improving the financial health of credit union members. This book illuminates the individuals who championed the credit union movement in Texas and who worked tirelessly to safeguard our cooperative nature and to enhance our ability to meet member needs.

The League story is one of vision, faith, and the firm belief that each of us is enriched because of the sum of our cooperative experiences. Because we continue to support one another, our association lives its mission of protecting credit unions and promoting their growth, strength, and unity.

• Language: English
• Publisher: Open Road Integrated Media
• Release date: Apr 1, 2009
• ISBN: 9781612541952

Book preview

People Helping People

On Labor Day weekend 2005, Ed Speed, president and CEO of the Texas Dow Employees Federal Credit Union Galveston, received an urgent call from Jeff Hendrickson at the Louisiana Dow Credit Union in Baton Rouge. Thousands of refugees from New Orleans and the Gulf Coast were pouring into Baton Rouge on the heels of the destruction and flooding from Hurricane Katrina. In addition to the hectic conditions of the evacuation, these evacuees were placing great strain on financial services.

Due to the downed and jammed telecommunications lines, the Baton Rouge credit union was operating on a cash basis, and they were running out of cash. They had failed to receive a Federal Reserve shipment of money on September 2, and the credit union needed money to get through its extended hours of service on Labor Day. Without cash, Louisiana Dow would be unable to meet the needs of its members for food, shelter, clothing, and medicine.

Texas Dow Credit Union acted quickly. Within fifteen minutes, they had a full count of their cash on hand from all their branches. In less than twenty-five minutes, Speed called Hendrickson back with a commitment to deliver $600,000 in cash immediately. Within two hours, Speed, who had recently obtained his pilot’s license, loaded his plane for the two-hour flight to Baton Rouge. As Speed would say later, Until the day that I die, I will never forget the words of the Baton Rouge tower controller: ‘November-eight-four-three-five-Foxtrot, you are cleared to land.’ Speed said he touched down about 8:00 p.m., six hours after the initial call. He was greeted by Hendrickson and armed security guards from the local Sheriff’s Department who would escort the cash. The arrival of the cash insured that the Dow Credit Union could meet all its obligations to respond to Katrina victims.

Speed dismissed any notion that he is a hero for his efforts. If there was a hero, he said, it was Jeff Hendrickson. He was determined that his credit union would not, under any circumstances, fail people in need. Hendrickson said, I knew that if I called upon another credit union, if I relied on our movement, someone would come through for us. I just knew it. This is who we are; this is what we do. It had been just another example of the people-helping-people philosophy that has characterized the credit union movement from the beginning of its history in the remote past of rural Germany.

All over Texas, in the wake of Hurricane Katrina, credit unions responded with magnanimous feats. They sent money, they fed and housed those displaced by the Hurricane, and they prayed for the victims. As Hurricane Katrina swept through the Gulf Coast on August 29, 2005, it left a path of destroyed and damaged communities in its wake. Texas credit unions responded in heroic fashion, but credit unions themselves were not exempted from the destruction.

The Louisiana Credit Union League operated remotely while it attempted to assess the damage. In New Orleans, most of the four hundred eighty thousand residents had been evacuated before the storm, but without supplies of potable water, the city had been rendered basically a cesspool. The Louisiana Credit Union League was without phone service, email, or their Web site. The office was located one mile from the Mississippi River and was reported to be five feet underwater. The League was encouraging credit union members to utilize Credit Union Service Centers to access their funds.

The Texas Credit Union League was immediate in its response to the crisis. One of the first actions it took was to set up a Hurricane Katrina Disaster Relief Fund in the Texas Credit Union Foundation. Director Jill Pharr worked with staff of the credit union leagues of Louisiana, Mississippi, and Alabama to obtain damage estimates and establish need. Once the extent of the damage was determined, the Texas Credit Union Foundation would work closely with leagues in the three states and the National Credit Union Foundation to be sure that the funds were distributed accordingly. Within two days, the Hurricane Katrina Disaster Relief Fund already had pledges of $50,000. Many credit unions acted independently. When members of the Port Arthur Teachers Credit Union learned that there were stranded families in a nearby hotel, they took up a collection and purchased food and beverages for these families displaced by the hurricane.

Texas League president Dick Ensweiler issued a Hurricane Update on September 2. He said first that the best qualities of our credit union movement are shining brightly during these dark days in our neighboring states. The generosity of Texas credit unions and their members has been overwhelming in response to the desperate needs of all the families in Louisiana, Mississippi, and Alabama who have lost so much. With many thousands of desperate victims arriving in Texas, all of us are eager to roll up our sleeves and help make our neighbors comfortable during what could be an extended stay in the Lone Star State.

At the Texas Credit Union League, phones and emails had been going nonstop for forty-eight hours. Representatives talked alternately with credit unions about their efforts to help and with leaders in the affected states about their needs. Ensweiler said that the efforts were necessary to ensure that the response was appropriate and effective. As you know, one of the core functions of the League is to provide you with information that you need. It was clear that with all the outpouring of support there was a need for constant information and updates about fund-raising, relief efforts, financial services for the influx of new people into Texas, and regulatory guidance for dealing with the unprecedented situation. The League launched a daily update about the relief efforts to address the many problems. The spirit of people helping people was never more evident than in the League response to Hurricane Katrina.

Today, when we consider the vast enterprises that Texas credit unions have become, it seems almost inconceivable that the Texas Credit Union League could have begun scarcely seventy-five years ago in Fort Worth, from a quickly assembled group of thirty-three credit union representatives, a little more than half of the sixty-three credit unions in the state. Today there are 575 credit unions in Texas that have almost seven million members. They have total assets in excess of $52 billion. They boast $44 billion in savings and $35 billion in loans. Many credit unions in Texas enjoy assets above $1 billion. Texas credit unions continue to grow in membership, assets, savings, and loans each year, and they have a robust belief in people helping people through loans and a great variety of financial services to their members.

The first organizational meeting of the Texas Credit Union League was held at the Texas Hotel in Fort Worth on October 6, 1934. The meeting was presided over by C. T. Bergeron who had been a state representative to the Credit Union National Extension Bureau. Thomas Doig, who represented the newly formed National Credit Union Association, was also present, along with R. F. Siddons, the deputy state banking commissioner. The exact number of delegates is not known, but of the sixty-three credit unions thought to exist in Texas, more than half sent a representative. A total of thirty-three persons signed the original constitution and bylaws that were adopted on that day.

In all the organizational work for the meeting, leaders were mindful of the fact that they were a part of a historic movement and not a for-profit financial enterprise. Doig outlined a brief history of the credit union movement both in continental Europe and the United States. He explained that through the philanthropic works of Edward A. Filene, a wealthy Boston merchant, credit unions had developed in the United States. At the time of the founding of the Texas Credit Union League, three thousand of them were operating in the United States with assets in excess of $75 million and more than five hundred thousand members. Many of these credit unions had been organized only in the last several years, through the Credit Union National Extension Bureau, one of Filene’s philanthropic endeavors.

The cooperative spirit of credit unions hung over the Fort Worth organizational meeting, and there was little debate or apparent dissention among the delegates. The constitution and bylaws were adopted by unanimous vote. The delegates’ primary attention was focused upon how districts were to be drawn for electing the members of the board of directors. The League also voted to affiliate with the Credit Union National Association. Immediately following the organizational meeting of the Texas Credit Union League, the first board of directors elected a slate of officers which included R. H. Pitts as president. The Texas Credit Union League was now an official organization with an approved constitution and bylaws and an official slate of officers and directors. The task before the organization was where to go from there.

After the founding of the Texas Credit Union League, the leaders placed great emphasis on creating new credit unions. In addition to relying on the Credit Union National Association’s field representatives, who were paid to organize credit unions, the League created its own field representatives, who had territories within the Lone Star State. These organizers were an energetic and gifted group, and by 1942, Texas credit unions had grown from sixty-three to 456, with a membership of almost ninety thousand. Texas credit unions were experiencing vigorous growth. But then World War II came, and this growth came to an immediate standstill and began contracting. Texas would lose almost 25 percent of its credit unions.

Even with the general decline of credit unions, both nationally and in Texas, during World War II, they kept the spirit of people helping people alive and well through their collective support of the war effort. National and local leaders stressed to the membership that credit unions could not expect business as usual during the war. With lending brought to a virtual halt due to an assortment of federal regulations designed to curb consumer expansion, these leaders asserted that the major thrust of credit unions was now toward thrift, saving so that purchasing could be continued after the war, when restrictions on lending would be lifted.

The major way the Texas credit unions put the people-helping-people philosophy into practice during the war was through their wholehearted embrace of the defense bond and stamp program. In 1942, credit unions became qualified as agents for the sale of defense bonds, which were soon being sold by the thousands across the state. By January 1942, seventy-five Texas credit unions were acting as agents of the U.S. Treasury Department for the sale of defense bonds and stamps. In only one month during 1941, Humble Employees Federal Credit Union of Houston sold more than $18,000 in stamps and bonds. Other credit unions performed comparably in the defense bond program.

Granville Elder, treasurer of the Houston Postal Credit Union, came up with an elaborate plan for the sale of defense bonds. His plan called for each wage earner to pledge to purchase one twenty-five cent defense stamp each month. Those who did so would be given a red, white, and blue Victory Button. Elder planned for his program to go national, and he predicted he could have ten thousand credit unions participating, representing 3.25 million members. It was truly a plan of people helping people on a grand scale and was typical of how Texans supported the prosecution of the war effort.

After World War II, the Texas Credit Union League embarked on a period of growth that was unprecedented in its history. In 1946, the number of Texas credit unions stood at a low of 331. Under leadership of a new managing director, from the end of 1946 to the end of 1970, approximately eleven hundred new credit unions were created, even after subtracting liquidations. It was a period of outstanding prosperity and growth for Texas credit unions. Equally impressive was the growth in total assets, from $14 million in 1946 to an astonishing $1.1 billion. Membership likewise increased from 82,078 in 1946 to 1,452,416 members in 1970. Savings and loans grew by equally impressive amounts. In some ways, the period was a kind of golden age for credit unions.

The philosophy of people helping people was working wonders in the movement, and it was proving to be a very attractive force for recruiting new members and new credit unions. It also set the stage for demonstrating the power of that philosophy in times of crisis.

At the beginning of this period of exciting growth for the League, an event occurred which would set the standard for how the Texas Credit Union League responds to major disaster. On April 16, 1947, a ship laden with chemicals exploded in the ship channel in Texas City, Texas. In all, 570 persons were killed, and more than four thousand were injured. The damage and loss of life were so great that four credit unions in the area were threatened.

Never before had the Texas Credit Union League faced so great a disaster, and it was challenged to respond. With matters still in a state of total chaos, managing director James Barry went immediately to the scene. CUNA Mutual authorized Barry to expedite claims service. He made a lot of settlements right on the spot, and the credit unions came through with flying colors. It was another great example of people helping people. The Texas Credit Union League’s response would become the normal process for dealing with man-made and natural disasters. The reputation of Texas credit unions going above and beyond the call of duty was born.

Following the period of astounding growth and development from 1946 to 1970, Texas credit unions entered a new era. Marketplace conditions began to change, and some long-held tenets had to be reexamined. As political authorities began to deregulate the financial marketplace, credit unions found themselves facing a new set of problems. Mergers and acquisitions of companies occurred with increasing frequency, and credit unions began to feel pressure as sponsoring companies phased out their branch plants, went out of business, or relocated. Many credit unions had to struggle to maintain their sense of a common bond among members. The result forced many credit unions to merge with others in an effort to survive plant closings, mergers, and companies going out of business.

Credit unions responded with energy and imagination to these market conditions, and they began to expand their fields of membership to remain viable and continue to grow. Expansion brought them into conflict with banks with renewed intensity, and a number of political skirmishes with bankers’ associations ensued. Credit unions showed great unity of the movement in these battles and emerged victorious by displaying grassroots political influence at the right times.

Texas credit unions and, to some extent, all credit unions today find themselves in a period of consolidation after a heyday of growth. Beginning in the late 1970s in Texas, the total number of credit unions began to decline as individuals merged on a regular basis. In some cases, these mergers were the only means for a credit union to survive. In other cases, they merged in order to thrive and grow larger. From 1978 to 2007, the number of Texas credit unions decreased from 1,417 to 595, for a loss of 802. At the same time, total membership grew by 4,117,982 to a high of 6,993,043 and total assets grew by $48.2 billion to $52,740,894,608. Savings and loans grew by the same percentages. Clearly, the merger activity was generally very healthy for most Texas credit unions, and more and more Texans were finding it easy to join one if they desired.

With statistics putting out a mixed signal for credit unions, some leaders wondered out loud if credit unions were not at a crossroads. They pointed out that a large percentage of assets were being held in a relatively small number of credit unions. By the year 2013, they estimated roughly 7 percent of all credit unions would hold 68 percent of the industry’s total assets and 60 percent of the members. In other words, credit unions with assets of $500 million or more would hold the majority of the assets and the majority of the members. CUNA Mutual staff saw some significant trends shaping credit unions: The rapid decline in the number of credit unions, consolidation of assets, members concentrated in fewer credit unions, and growing global competition are the key trends that are significantly shaping our marketplace.

In Texas, these trends were clearly at work, especially in the decline in the total number of credit unions and consolidation of assets into larger credit unions. The question was, Where will these trends lead? No one really knew, nor knows today, but one thing is completely clear. The spirit of people helping people is still very much alive and well in Texas credit unions. Whatever problems they face, this spirit will exert a tremendous impact on the solution to the problems. It’s the Texas way; it’s the credit union way.

Credit Unions Come to Texas

Five Highlights of the Early Era of Credit Unions

Credit unions created in Germany in the 1840s

Credit unions migrate to North America in 1900

Massachusetts Credit Union Enabling Act in 1909

Texas Credit Union Act in 1913

First successful credit unions in Texas in 1929

Successful credit unions in Texas grew out of the harshest economic times the country had ever known. The drastic collapse of the stock market, the failure of the nation’s banks, the greatest unemployment the country had ever seen, dust bowl drought, and depleted farm land were the conditions out of which the first successful Texas credit unions were born. They were created out of hard times for a people who would not give up. That spirit has characterized credit unions and their members ever since.

The story of how credit unions came to Texas does not follow a clear linear progression. It is interwoven with the story of the credit union movement itself and of those early visionaries who had great faith in the idea of cooperative credit societies or people’s banks. It had some false starts in its early stages.

In its fully mature form, a credit union is a voluntary, cooperative organization, with members drawn from defined fields of membership. It is a democratic organization owned and controlled by its members, who contribute to and democratically control its capital. It maintains autonomy and independence as a self-help organization, but cooperates with other cooperatives in structured ways. While focusing on member needs, credit unions work for sustainable development of communities, including those with people of modest means.

In the early days, credit unions consisted simply of people who pooled their capital with other people who shared a common bond and loaned it to each other in times of need. The character of the borrower was paramount in lending transactions—a basic and simple form of self-help.

Germany: The Birthplace of Credit Unions

Most historians credit Germany as being the true birthplace of the credit union movement as we know it today. In the 1840s, German economic reformers began to publicize some of the experiments taking place in England and France dealing with economic self-help for struggling workers and small proprietors. Franz Hermann Schulze-Delitzsch, a young lawyer, spent a career organizing 183 people’s banks with eighteen thousand members. He concentrated his efforts among artisans and proprietors in cities where traditions of guilds were strong, an urban model that would later be found effective in Texas.

Friedrich Wilhelm Raiffeisen, who had been alarmed by the poverty that he saw in various Rhine villages where he had lived, concentrated his efforts at organizing cooperative banks in rural areas. By the time of his death in 1888, Raiffeisen had begun 423 such banks. They tended to look like more modern credit unions, organized around the principles of each member having one vote, only members being allowed to deposit and borrow, and character being the most important security for loans. In 1866, he published The Credit Union, which some regard as the bible of the international credit union movement. He is credited with infusing a spirit of brotherly love into the movement, an idea that reverberates in credit unions to this day.

Credit unions might have been introduced to Texas with the massive infusion of German immigrants in the latter half of the nineteenth century. But they did not arrive that way. Instead, a long, complicated path from the Northeast and a number of failed attempts led credit unions to Texas.

Credit Unions Migrate to North America

The German idea of cooperative banks first took root in North America in Quebec, where the French-speaking Canadians were less well off than their English-speaking counterparts. Frequently, they faced conditions where their financial institutions did not meet their needs, and they were limited in their efforts to enter into commerce.

The plight of the less fortunate of Quebec was taken up as a major cause by Alphonse Desjardins, a resident of Levis near Quebec City. Throughout his life, Desjardins combined a sympathetic concern for the poor with a strong commitment to Catholic social activism. Through his search for ways to alleviate poverty, he was led to the idea of people’s banks.

On December 6, 1900, Desjardins formed the Levis caisse populaire, the first real credit union in North America. At the first meeting in his home, he raised $26.40 from his wife and neighbors. One of the primary goals of this credit union was encouragement of thrift among its members. The Levis caisse grew steadily and in seven years accumulated $80,000 in assets. It made twenty-nine hundred loans for $350,000 without incurring a single loss.

Before his death in 1920, Desjardins had organized 175 caisses in Quebec. More importantly, his influence extended beyond the borders of Quebec. He played an important role in the beginnings of the cooperative banking movement in the United States. His ideas and work began to be spread from Quebec immigrants seeking work in New England factories and from writings in the French newspapers. The credit union idea was still far away from Texas, but it was getting closer. First, it had to cross the Canadian border into the United States.

The first credit union established in the United States was created in November 1908 in St. Mary’s parish church of Manchester, New Hampshire. Monsignor Hevey had invited Desjardins to come to the parish to explain his banking system to the members. As a result of his visit, the parish organized a cooperative credit society along the lines of those functioning in Canada. In 1909, the New Hampshire Legislature passed special enabling legislation to provide statutory authority for what they had done. Credit unions had taken root in the United States, and the idea would not die.

Edward Filene: the Father of American Credit Unions

Credit unions had gotten a start in the northeastern United States, but they needed a proponent to spread the new idea to a waiting public. They found one in Edward A. Filene, a wealthy Boston merchant who had begun to focus much of his energy on the causes of poverty, disease, and social distress. As the owner