US Catholic Faith in Real Life

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Make a deposit of faith when finding a home for your money

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Cashing a CheckMoving your money out of a big bank and into a credit union is creative, Catholic, and prudent.

By Rose Marie Berger, Sojourners associate editor and author of Who Killed Donte Manning? (Apprentice House)

[Sounding Boards are one person's take on a many-sided subject and do not necessarily reflect the opinions of U.S. Catholic, its editors, or the Claretians.]

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I remember when I got my first savings account pass book. I was about 8 years old. My Dad took me to the local branch of Wells Fargo Bank in Sacramento and the bank manager explained how a savings account worked—and I had my first hint of the high math of “compound interest.” She gave me my little blue passbook with embossed gold lettering and showed me where to sign my name.

Most of my deposits were money accumulated from birthday gifts, allowances, and chores. I felt proud to save this money. I was excited to put it in the Lenten milk-carton collections for children in Africa or for the homeless; happy to make my addition to the collection basket at Mass. My money was helping people—my family, my church, and people who needed help.

When I moved to Washington, D.C. in 1986, I opened an account at a D.C.-based bank with a branch a few blocks from where I lived. But, over the course of 20 years, that bank was bought by Bank of America. I switched to another regional bank, but it was bought by Wachovia. A few years ago, Wachovia was bought out by Wells Fargo. But it wasn’t the same Wells Fargo I had grown up with.

Until the 1980s, U.S. banks served three basic functions: security for money, to facilitate payment for goods or services (checks, credit cards, wire transfers), and extend credit. By law they were limited to operating within their state of incorporation and barred from investment banking and speculative trading. Policies kept banks responsible to local communities and businesses, which created a generative circle of strengthening local economies. It was a stable system. Between 1940 and 1980, there were fewer than 260 bank failures, compared to more than 2,800 in the years since.

The Reagan-era rush to deregulate successfully chipped away at the policies that made this system work. The coup d’état came in 1999 when Congress overturned the Glass-Steagall Act. For the first time since the Great Depression, commercial banking and speculative investment banking could take place under the same roof. Big banks could create the conditions for an international financial crisis with no regulator big enough to stop them. Within 10 years we were back into a Great Recession, local economies were failing, and we were sliding downward.

In 2009, Wells Fargo merged with Wachovia to create a “superbank” with $1.4 trillion in assets and 48 million customers. Along with Bank of America, JPMorgan Chase, Ally Financial, and Citigroup, Wells Fargo stole the homes and life savings of hundreds of thousands of Americans through forging documents. It’s also been found guilty of charging a higher interest to African-American and Hispanic home buyers and lying to customers to secure subprime loan agreements.

Additionally, Wells Fargo is the second largest investor in the GEO Group, one of the top three owners of private prisons in America. This year Wells Fargo plans expansion into 20 countries in Europe and Asia. In my estimation, it’s one of the financial institutions whose cancerous greed drove America’s economy off a cliff, while providing its CEOs with a platinum parachute for safe escape.

As a Catholic and as an American, I was not happy with Wells Fargo. Finally, last year, I again moved my money, this time to Lafayette Federal Credit Union.

I love Lafayette. It’s local. It’s half a block from work. Charlotte, the branch manager, knows my name. Sometimes, they even have a candy dish with peppermints. It’s a financial institution where I actually prefer to go inside and talk to the teller, rather than simply use the ATM. I enjoy talking to the neighbors and catching up on local news. And it pays better.

Believe me, the move wasn’t easy. In the age of “e-money”—direct deposit, bill pay, online banking, ATMs, etc.—it is difficult to untangle the many wires that run through one person’s bank account. There were multiple waiting periods and possible fines, but when finally the deed was done I was much happier.

I had an “exit interview” with the Wells Fargo bank manager. I wasn’t forced to sit down and talk with him, but I took advantage of the invitation. I listed all the reasons I thought big banks were acting as an unregulated scourge across the American economy and that Wells Fargo had just been convicted of practicing its own form of “red lining.” I told him that credit unions were on the upswing and were hiring—maybe he could get a job with one of them! He made a few notes and politely—and swiftly—ushered me out of his office.

One of the first questions to ask when assessing one’s own financial social responsibility is: How quickly does my dollar leave my neighborhood? Or as one community organizer put it: How many of your neighbors’ hands does your money pass through before it leaves your immediate community? Generally speaking, the bigger the financial corporation, the quicker your dollar exits.

Credit unions, as we know them today, originated in Europe in the 1800s as financial self-help cooperatives among small business owners and farmers in particular locales, geared toward providing for and protecting their economic sovereignty. Many of them were started by Catholics and were based on principles of Catholic Social Teaching. For example, both St. Anthony Claret (1807-1870)--founder of the Claretians, who publish this magazine--and Franciszek Stefczyk (1861–1924) worked in rural areas to establish credit unions among poor farmers. Both wanted famers to own their farms and market their own crops, and they understood that one’s financial health was intimately connected with one’s family and local community. Stefczyk’s community organizations were intended to be “schools of character” for enhancing human dignity and stabilizing local communities.

As immigrant Catholics brought credit unions to America, they became organized around seven principles that reflect Catholic teaching: 1) voluntary membership, 2) democratic governance, 3) member control of capital, 4) autonomy and independence, 5) education of members and public in cooperative principles, 6) cooperation between cooperatives, and 7) concern for the local community. Most credit unions today are still built around these principles.

“If love is wise,” wrote Pope Benedict in his 2009 encyclical Charity in Truth, “it can find ways of working in accordance with provident and just expediency, as is illustrated in a significant way by much of the experience of credit unions.”

The bottom line for a good credit union is that it exists to help people, not make a profit. For example, I became a member of my new credit union when I bought a $50 share. When members make deposits into various accounts, funds are pooled together. Then the funds are lent to other members at reasonable, lower interest rates. 

As a not-for-profit institution, credit unions do not have stock holders whose votes are weighted by the amount of stock they own. Credit unions are democratic, one member-one vote institutions.

My credit union hosts a financial literacy center, is a member of the Credit Union National Association, and generates tens of thousands of dollars for the Capital Area Food Bank. According to the Credit Union National Association rate index, credit unions on average pay higher interest than banks on personal savings and checking accounts and charge lower interest on credit cards and loans.

In Charity in Truth, Pope Benedict reminds us that “grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.” In other words, when governments don’t properly regulate markets, then those same governments can’t ensure that their citizens are adequately provided for.

Are all credit unions created equal? Of course not.

Some credit unions have minimized their investment in local communities. Some may not invest according to an aggressive social screen. Some have taken on more corporate customers or increased real estate lending portfolios, both of which expose them to broader market risks. Additionally, small banks and credit unions provide only basic financial services and don’t have high-end bells and whistles. And they often aren’t as convenient  when it comes to online banking or ATMs (though this is changing rapidly).

One advantage of big banks is, well, they’re big—as in geographically spread out. If you move often, then it might be difficult to maintain relationships with a local bank. And if you regularly transfer money to accounts outside of your bank—and especially outside the U.S.—you’ll find big banks can accommodate this more smoothly.

If you consider moving your money from a big bank to a local bank, credit union, or other community development financial institution (CDFI), here are some questions to ask: Where do you invest customers’ funds? Did you take bailout money? Do you sell your loans or hold them? What social screens do you have on your loans? How do you use your profit? What are your requirements for membership? Do you participate in “credit pools” or “shared banking” and with whom? Depending on the answers, you can decide whether the financial institution reflects the values you want to promote.

My next financial step is to establish long-term savings in CDFIs, which specifically target underserved populations and allow me to direct my “interest” toward particular needs such as inner-city education, low-income housing, environmental protection, and micro-loans for women.

The U.S. Catholic population is currently about 77.7 million, just under 1 in 4 Americans. If every Catholic family moved its money from a big bank to a credit union—as an act of Catholic public witness—we could both stabilize our economy and evangelize for our church. There may even be a Catholic credit union near you.

I no longer have a savings passbook and my tithing isn’t though a Lenten milk carton, but my money is once again helping people. And that’s what money should be about—building strong relationships in the service and love of God. What’s your money doing?

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