Editor’s Note: This is the second in a three-part series. Part one can be found here.

By Edward Speed

The passage of HR 1151 was meant to secure the future of credit unions, but it unleashed a slow-moving disaster. What should have been a reaffirmation of the movement’s cooperative ideals instead accelerated an internal war—one that pitted small credit unions against large ones, mission-driven leaders against empire builders lusting after obscene levels of executive compensation, and genuine member-focused service against the insatiable drive for growth.

The movement’s great existential fight against the banks had been won—but like so many revolutions, victory bred complacency. The credit union movement, now flush with confidence and political clout, turned inward on itself.

An Industry at War with Itself

When I entered the credit union world in 1985 the battle lines were clear. Banks were the enemy—profit-obsessed institutions indifferent to the struggles of working Americans. Credit unions, in contrast, were the financial alternative: people-driven, community-rooted, and fiercely protective of their mission.   The word “bank” was like Voldemort – a word that could not be spoken aloud.  Vendors who also worked with banks were rejected, lest they pollute us.

But within the movement, another battle raged—a battle for control, for influence, for more and more executive compensation and, above all, for power.

The Betrayal of the Small Credit Union

For decades, small credit unions were the lifeblood of the movement. They represented local communities, church groups, factories, and municipal workers who pooled resources for the common good. But after HR 1151, the momentum shifted. Large, expansion-minded credit unions, emboldened by their newfound ability to chase growth, saw smaller institutions as trophies to be consumed rather than peers to be supported.

At conventions and league meetings I saw small credit unions openly voice – actually shout – their anger. They saw what was happening: their larger counterparts were abandoning the cooperative spirit in favor of aggressive consolidation. The old principle of “people helping people” was now secondary to balance sheet growth.

The trade associations—CUNA (now America’s Credit Unions) and NAFCU—had no incentive to intervene. After all, their revenue streams came from the biggest players. They paid lip service to “preserving small credit unions,” but behind the scenes, the movement’s power brokers saw them as inefficient relics.

This wasn’t just competition. It was a hostile takeover of the movement itself.

The Rise of the Trade Association Cartel

With the external threat of bank opposition diminished, trade associations faced a crisis of their own: how do you keep the money rolling in when there’s no longer a battle to fight?    The last thing that the credit union and bank trades wanted was for Congress to decide the fight over taxes.   Once decided, everyone with special interests would lose.    Congress wouldn’t get lobby dollars.   Trade associations would lose the issue that keeps on giving.

It is only a matter of time before Congress realizes that Project Zip Code is just a harmless nerf gun and that credit unions members are not going to storm their offices again – much less care.  You cannot destroy the sense of common bond and then expect to weaponize it.

The answer was simple: manufacture new enemies.

CUNA and other trade groups quickly pivoted, looking for the next existential threat that would keep their members engaged—and their lobbying dollars flowing. Their goal was no longer to protect credit unions as member-owned financial institutions but to protect their own status, power, and salaries.

The Manufactured Crisis of Bankruptcy Reform

The most glaring example of this fear-mongering strategy was the push for bankruptcy reform in the early 2000s.

CUNA, state leagues, and other trade groups declared war on credit union members themselves. They painted a false picture of widespread abuse—depicting some of their own members as scheming freeloaders who maxed out credit cards and walked away without consequence.

The numbers never justified this hysteria.

Less than 2% of my credit union’s total assets were in credit cards, and less than 1% of those balances were delinquent.   Yet some of our board demanded our members support “bankruptcy reform.”

The national delinquency rate for credit unions was similarly low—well under 2%.

My credit union had one bankruptcy the prior year—out of 250,000 members.

The real bankruptcy crisis wasn’t caused by irresponsible spending—it was driven by medical debt, job loss, divorce, and economic downturns. The single mother using a credit card to buy groceries. The retiree drowning in medical bills. These were the members credit unions were built to protect.

But protection was no longer the priority. Trade association growth was.

Jim Blaine Called It—And Was Ignored and Vilified

Jim Blaine, then-CEO of the second largest credit union in the nation, saw through the deception. He publicly called out the bankruptcy reform push as a manufactured crisis designed to serve the political ambitions of trade groups and large credit unions, not the needs of members.

In November 2002, Jim wrote in Credit Union Times that the bankruptcy fight was a distraction—one that would hurt credit union members far more than it would help their institutions.

He was right. But the movement didn’t listen.  In fact, Jim was attacked for his stance.  

Instead, credit unions aligned themselves with big banks, pushing policies that made it harder for struggling families to recover. The bankruptcy bill they supported led to lifelong financial hardship for thousands of members—many of whom had been lifelong, loyal credit union supporters.

This was a watershed moment. Credit unions moved from their original sin to moral corruption. They were no longer standing apart from banks, they were joining their ranks.

CUNA and the NCUA,  the Credit Union Oligarchy, and the Road to Irrelevance

As credit unions grew, so did the influence of the trade association cartel.

America’s Credit Unions (formerly CUNA and NAFCU) and the state leagues now operated less like member advocates and more like political machines, obsessed with funding their own existence rather than fighting for members.

They claim to represent the movement, but really represent their biggest dues-payers.

They push regulatory battles that benefit a handful of billion-dollar institutions while ignoring the struggles of small credit unions and everyday members.

For me, a shining counter to this was Dick Ensweiler,  who, for example, pushed back when I asked if the Texas League would support a change in the law to allow my CU to take public deposits. I reminded Dick that we paid six-figure dues.  Dick told me flat out “No!”  – that it would distract from advocacy for smaller credit unions.  Dick’s courage is needed today.

Since 1985, more than 20,000 credit unions have disappeared.

And here’s the dirty secret: NCUA and the trade associations aren’t trying to stop it. The NCUA gets its revenue from total assets, not the number of credit unions.  They know that a “movement” with massive credit unions paying high fees is far easier to control than 5,000 smaller, independent cooperatives.

This isn’t a credit union movement anymore. It’s an oligarchy, with the trades and NCUA in cahoots.

What Happens Next? The Final Transformation

This war for control didn’t end with bankruptcy reform. It was just the beginning.

Trade groups and large credit unions soon found a new method to accelerate their dominance—to complete the transformation of credit unions into banks.

That weapon?

The destruction of the common bond.

Coming Next: The Destruction of the Common Bond

Edward Speed is the retired CEO of a multi-billion-dollar credit union, who holds a Masters Degree in Theology.   These days he spends his time serving food, washing dishes and sweeping floors at a Catholic Work House helping homeless senior citizens.