A federal Frankenstein

With its “federal credit union” initiative, Canada’s Department of Finance is writing itself into a horror story.

Originating from British Columbia, Coast Capital Savings as a federal credit union will be a Frankenstein monster. Starting almost two decades ago, Coast Capital Savings was stitched together from various predecessor credit unions. Now, the mad doctors are trying to move the still-warm corpse of a democracy from its provincial village into a federal laboratory, and trying to animate it with incantations from the federal Bank Act. It will be a soulless wretch. Whereas the life-spirit of a traditional provincial credit union comes from the community it grew out of, a federal credit union makes claim to all communities and therefore to no community. It is little more than the product of mad ambition. Stories of lore suggest that this experiment is unlikely to end well.

In my letter to the Department of Finance responding to their public consultation, I continue…

In your Second Consultation Paper, you reveal that “stakeholders” are already trying to suppress member involvement in federal credit unions (page 27). The bigger problem is that nobody has ever articulated a coherent model of how federal credit unions would be of social value. I’ve heard only the superficial idea that more competition is better for consumers. “One member, one vote”—the defining quality of credit unions—has been preserved in federal credit unions, but for what purpose? We are asked to believe that member-ownership inherently leads to a more beneficent institution, but experience demonstrates that member-owners have no power and that directors and management orchestrate elections and other votes to their own benefit. Having member-owners dispersed across the country is a further diffusion of influence.

I have attached the letters I wrote to the Office of the Superintendent of Financial Institutions, arguing against the continuance of Coast Capital Savings as a federal credit union. They document a sham democracy where free expression is squelched and conflicts of interest go undisclosed. Not only do the Board and management of the credit union have no quarterly accountability to any shareholders, they have also freed themselves of accountability to member-owners.

I’m not going to provide you with specific legislative or policy recommendations; rather, let me provide you with historical facts and allow you to draw your own lessons.

I suggest reading the attached letters at night when you’re home alone, if you like a good fright.

 

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