The downtown branch of the TVA Employees Credit Union hardly seems like the staging ground for an insurrection. It's a spacious, quiet place in a building just down Wall Avenue from the concrete TVA towers. There's a Christmas window display for Mission of Hope full of teddy bears and Barbie dolls, and inside you can find cheerful tellers and a complimentary carafe of coffee on a table near the door.
But in recent months, placid financial facilities like this one have become rallying points for hundreds of thousands of people disaffected with American banking and corporate profiteering in general. Credit unions—nonprofit, member-owned cooperatives that specialize in small-scale checking, savings, and lending—have been touted as a populist alternative to the Bank of Americas and Citicorps of the world.
Last month, a Los Angeles art-gallery owner started a Facebook frenzy with a campaign called Bank Transfer Day, encouraging people to close their accounts at commercial banks on Nov. 5 and move the money into local credit unions. The Credit Union National Association, a trade group representing about 90 percent of the country's credit unions, estimates that 40,000 people did just that. That capped a swell that started at the end of September, when many banks (including Regions and SunTrust, in Knoxville) announced new monthly fees of $4 or $5 for debit-card users.
The banks were reacting to limits on their charges to retailers included in financial reforms passed by Congress, but outraged customers—who have seen a steady increase in financial fees of various kinds—responded by taking their business elsewhere. CUNA says more than 650,000 people nationwide opened credit union accounts in the following weeks, more new members than credit unions saw in all of 2010. Even though the biggest banks quickly dropped their new fees, the damage was done, and credit unions had enjoyed an unusual burst of publicity.
Some of that momentum carried over locally. Glenn Siler, CEO of the Knoxville-based TVA Employees union, says there was a moderate bump in new memberships over the last few months. Originally open, as its name suggests, only to local TVA workers, the institution has had a community charter for about the last 10 years. That means membership is available to anyone who lives, works, attends school, or worships in eight local counties: Blount, Jefferson, Loudon, Sevier, Hamblen, Knox, Roane and Sullivan. To join, you just have to deposit $5 in an account.
"A lot of people don't know that they're eligible," Siler says. Still, even without the recent attention, he says membership has been growing steadily. It currently sits at about 125,000 customers (or owners, more accurately—that initial deposit makes you a shareholder in the credit union).
The same trends hold true across the state, says Tom Gaines, CEO of the Tennessee Credit Union League. The group represents 160 credit unions. "There's been a continuing net inflow of membership," Gaines says. Collectively, the League's institutions have about 1.5 million members.
Credit unions have interesting roots in 19th century Europe, where they arose as cooperative financial pools for tradespeople and rural communities that didn't have access to other kinds of capital. They offered a form of what modern economists call microfinance, small loans at reasonable rates to people left out of the traditional banking system. The first American credit unions weren't formed until early last century, with the idea spreading south from Quebec into New England. In this country, they became most widespread as employee associations, within large factories or unions. (Gaines says as a rule of thumb, you need about 3,000 people to get a credit union charter.) Many Knoxville-area credit unions still take that form, like one for county employees and another for teachers.
But regulations eventually permitted credit unions with sufficient funds to open their doors to the public, through community charters. Besides the TVA Employees, those include the ORNL Federal Credit Union, which serves 16 counties, and the Y-12 Federal Credit Union, which serves eight.
Gaines seems a little uncomfortable with some of the rhetoric around the Bank Transfer Day movement. He says he sees credit unions and banks as complementary parts of the financial system, not adversaries. But he acknowledges that many of the trends in lending and creative investing that ripped apart Wall Street in the last decade mostly bypassed credit unions, because of their nature. "Most of our credit unions did not initiate or have significant investments in the infamous mortgage-backed [securities]," he says. "With credit unions, you have a much higher percentage of mom-and-pop savings accounts."
Occupy Wall Street sentiments aside, that no-nonsense appeal to financial basics seems well tailored to the current economic mood. What credit unions offer is the kind of community-based service that used to be associated with the word "banking," before people learned how to say things like "credit default swaps" and "sub-prime derivatives."
And without the demand for profits that forced banks into trying to pass on those debit-card fees in the first place, Siler says credit unions are able to offer rates comparable to those of much larger institutions, especially right now. "We're very competitive," he says. "We've got some of the lowest car-loan rates that I've ever seen, and I've been here a long time."