Worker Coop Credit Union Proposal

1. Worker Coop Credit UnionProposal Brent Emerson Mike Leung 2008 Democracy at Work Conference

2. Introductions • Brent Emerson • Worker-owner at Electric Embers Cooperative • Worker Ownership Fund advisory board • Former NoBAWC board member • Tech Underground founder • Mike Leung • Worker Coop Credit Union organizer • Physics, human rights, poverty and development • More info at workercoopfcu.org

3. Outline 1) Current Financial Infrastructure • Startup financing lacking 2) Credit Union Benefits • Pooling worker coop resources democratically • Accessing outside resources 3) Next steps • Discussion and analysis • Setting up a steering committee

4. Why Worker Coops? • Inherently protects workers rights • Worker ownership • Democratic management • Over 15M unemployed or underemployed • Large demand for jobs, supply lacking • Protect existing jobs • Reduce wealth/power concentration • Redirect profits for workers • Supports human rights and social justice

5. Current Needs • A way for average people to support worker coop development • Consumer financial services • Startup and expansion financing for worker cooperatives • Financing for entrepreneurial activities • Shared development expense

6. Entrepreneurial Activities Startup/Expand Worker Coops Loans Deposits Deposits Grassroots Support for Worker Cooperatives Established Worker Cooperatives

7. Worker Cooperative Employment Entrepreneurial Activities Startup/Expand Worker Coops Loans Credit Union Deposits Deposits Grassroots Support for Worker Cooperatives Established Worker Cooperatives

8. Existing Financing Sources Worker Ownership Fund, Northcountry Cooperative Development Fund, Northcountry Federal Credit Union, Cooperative Fund of New England, Cooperative Capital Fund, Local Enterprise Assistance Fund, National Cooperative Bank

9. Present situation • A worker coop startup requiring over $10M in unsecured capital is currently very difficult • All capital intensive startups are corporations • No worker coop entrepreneurs in most sectors due to lack of financing • Especially industrial/manufacturing • Minimal capacity to create coop jobs • Coop employment less than 0.01% of workforce • Instead a focus on corporate buyouts and conversions • Fundamental pricing issues

10. A Participatory Financial Institution? • Business lending exclusively to worker coops • Enhanced ability to attract resources • Socially responsible investors, labor movement • Retirement funds • Better way to fund entrepreneurial activities • Mondragon type development

11. Credit Unions • Financial consumer cooperatives • Depositors and borrowers are members • Member owned and controlled, one member one vote • Pooling financial resources for lending • In U.S. there are 8400 credit unions • 90 Million members with $780B assets • $650B savings and $540B loans outstanding

12. Credit Union Advantages • Relatively easy to start • $50-500k depending on services • Comparatively fast startup time • Insured deposits • Average person can participate • Potentially large pool of resources • Efficiently utilize existing coop resources • Fractional reserve banking • Democratic worker coop sector autonomy • Financial self sufficiency with control of credit

13. Credit Union Description • Full service credit union • Consumer financial services • Savings, checking, CDs, loans, initial capital contributions • Business lending exclusively for worker coops • Business checking, savings, loans, lines of credit • Community Development Financial Institution • Low income designated credit union? • Common bond of worker coops • Plus support and development associations • Financing for entrepreneurial activities • Similar to Arizmendi Association

14. Credit Union Disadvantages • Common bond requirement • Limits growth from external sources • Limited business lending ~ 12.25% of assets • Wrong entity for startup financing • Should be FDIC, not NCUA regulated • Likely to have limited services initially • 2 year probationary period on business lending, checking accounts

15. Option two:Modify Existing Infrastructure? • National Cooperative Bank • Small shift in lending priority  big financial impact • Unlikely to finance entrepreneurial activities • Little worker coop influence • Northcountry Cooperative Federal Credit Union • But full service and national? • And focused on worker coops?

16. Option three:Worker Cooperative Bank Disadvantages • Democratic difficulty • Long/High startup cost ~$2M Precharter ~$20M Postcharter • Large equity capital requirements • Not currently feasible Advantages • Better business lending regulation • Easy expansion • No common bond • Entrepreneurial Financing

17. Survey Results • Worker Cooperatives • US Federation and NoBAWC surveyed • Neutral to positive response • Some business accounts • Individuals • About 50 member pledges • Interest in low income services

18. Next Steps • Steering Committee of interested coops • Discuss financial needs • Evaluate appropriateness of credit union • Define Mission: Maximize Worker Coop Employment? • Form Advisory Team • Evaluate market, complete feasibility study, write business plan, etc.

19. Discussion More info at workercoopfcu.org