Worker Coop Credit UnionWorker Coop Credit UnionProposalProposal

Brent EmersonBrent Emerson

Mike LeungMike Leung

2008 Democracy at Work 2008 Democracy at Work ConferenceConference

IntroductionsIntroductions Brent EmersonBrent Emerson

Worker-owner at Electric Embers CooperativeWorker-owner at Electric Embers Cooperative

Worker Ownership Fund advisory boardWorker Ownership Fund advisory board

Former NoBAWC board memberFormer NoBAWC board member

Tech Underground founderTech Underground founder

Mike LeungMike Leung

Worker Coop Credit Union organizerWorker Coop Credit Union organizer

Physics, human rights, poverty and developmentPhysics, human rights, poverty and development

More info at workercoopfcu.orgMore info at workercoopfcu.org

OutlineOutline

1) Current Financial Infrastructure1) Current Financial Infrastructure

Startup financing lackingStartup financing lacking

2) Credit Union Benefits2) Credit Union Benefits

Pooling worker coop resources Pooling worker coop resources democraticallydemocratically

Accessing outside resources Accessing outside resources

3) Next steps3) Next steps

Discussion and analysisDiscussion and analysis

Setting up a steering committee Setting up a steering committee

Why Worker Coops?Why Worker Coops? Inherently protects workers rightsInherently protects workers rights

Worker ownershipWorker ownership

Democratic managementDemocratic management

Over 15M unemployed or underemployedOver 15M unemployed or underemployed

Large demand for jobs, supply lackingLarge demand for jobs, supply lacking

Protect existing jobs Protect existing jobs

Reduce wealth/power concentrationReduce wealth/power concentration

Redirect profits for workersRedirect profits for workers

Supports human rights and social justiceSupports human rights and social justice

Current NeedsCurrent Needs

A way for average people to support A way for average people to support worker coop developmentworker coop development

Consumer financial services Consumer financial services

Startup and expansion financing for Startup and expansion financing for worker cooperativesworker cooperatives

Financing for entrepreneurial activitiesFinancing for entrepreneurial activities

Shared development expenseShared development expense

Grassroots Support for Worker Cooperatives

Entrepreneurial Activities

Startup/Expand Worker Coops

Established Worker Cooperatives

Deposits Deposits

Loans

Worker Cooperative Employment

CreditUnion

Grassroots Support for Worker Cooperatives

Entrepreneurial Activities

Startup/Expand Worker Coops

Established Worker Cooperatives

Deposits Deposits

Loans

Existing Financing SourcesExisting Financing SourcesOrganizatiOrganizationon

AssetsAssets Fraction to Fraction to Worker Worker CoopsCoops

InsuredInsured RegionRegion

WOFWOF $700k$700k 100%100% NoNo NationalNational

NCDFNCDF

NCFCUNCFCU$12M$12M

$6M$6M60% 60%

0%0%NoNo

NCUANCUAUpper Upper MidwestMidwest

CFNECFNE

CCFCCF$6M$6M

$500k$500k15%15%

100%100%NoNo

NoNoNortheastNortheast

LEAFLEAF $1M$1M 90%90% NoNo NortheastNortheast

NCBNCB $2B$2B ~1% ???~1% ??? FDICFDIC NationalNational

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

Present situationPresent situation A worker coop startup requiring over $10M in A worker coop startup requiring over $10M in

unsecured capital is currently very difficultunsecured capital is currently very difficult

All capital intensive startups are corporationsAll capital intensive startups are corporations

No worker coop entrepreneurs in most sectors due No worker coop entrepreneurs in most sectors due to lack of financingto lack of financing

Especially industrial/manufacturingEspecially industrial/manufacturing

Minimal capacity to create coop jobsMinimal capacity to create coop jobs

Coop employment less than 0.01% of workforceCoop employment less than 0.01% of workforce

Instead a focus on corporate buyouts and Instead a focus on corporate buyouts and conversionsconversions

Fundamental pricing issuesFundamental pricing issues

A Participatory Financial A Participatory Financial Institution?Institution?

Business lending exclusively to worker Business lending exclusively to worker coopscoops

Enhanced ability to attract resourcesEnhanced ability to attract resources

Socially responsible investors, labor movementSocially responsible investors, labor movement

Retirement fundsRetirement funds

Better way to fund entrepreneurial activitiesBetter way to fund entrepreneurial activities

Mondragon type developmentMondragon type development

Credit UnionsCredit Unions

Financial consumer cooperativesFinancial consumer cooperatives Depositors and borrowers are Depositors and borrowers are

membersmembers Member owned and controlled, one Member owned and controlled, one

member one votemember one vote Pooling financial resources for lendingPooling financial resources for lending In U.S. there are In U.S. there are 8400 credit unions

90 Million members with $780B assets90 Million members with $780B assets $650B savings and $540B loans $650B savings and $540B loans

outstandingoutstanding

Credit Union AdvantagesCredit Union Advantages Relatively easy to startRelatively easy to start

$50-500k depending on services$50-500k depending on services

Comparatively fast startup timeComparatively fast startup time

Insured depositsInsured deposits

Average person can participateAverage person can participate

Potentially large pool of resourcesPotentially large pool of resources

Efficiently utilize existing coop resources Efficiently utilize existing coop resources

Fractional reserve bankingFractional reserve banking

Democratic worker coop sector autonomy Democratic worker coop sector autonomy

Financial self sufficiency with control of creditFinancial self sufficiency with control of credit

Credit Union DescriptionCredit Union Description Full service credit unionFull service credit union

Consumer financial servicesConsumer financial services Savings, checking, CDs, loans, initial capital contributionsSavings, checking, CDs, loans, initial capital contributions

Business lending exclusively for worker coopsBusiness lending exclusively for worker coops Business checking, savings, loans, lines of creditBusiness checking, savings, loans, lines of credit

Community Development Financial InstitutionCommunity Development Financial Institution Low income designated credit union?Low income designated credit union?

Common bond of worker coops Common bond of worker coops Plus support and development associationsPlus support and development associations

Financing for entrepreneurial activitiesFinancing for entrepreneurial activities Similar to Arizmendi AssociationSimilar to Arizmendi Association

Credit Union DisadvantagesCredit Union Disadvantages Common bond requirementCommon bond requirement

Limits growth from external sourcesLimits growth from external sources

Limited business lending ~ 12.25% of Limited business lending ~ 12.25% of assetsassets

Wrong entity for startup financingWrong entity for startup financing

Should be FDIC, not NCUA regulatedShould be FDIC, not NCUA regulated

Likely to have limited services initiallyLikely to have limited services initially

2 year probationary period on business lending, 2 year probationary period on business lending, checking accountschecking accounts

Option two:Option two:Modify Existing Infrastructure?Modify Existing Infrastructure?

National Cooperative BankNational Cooperative Bank

Small shift in lending priority Small shift in lending priority big financial impact big financial impact

Unlikely to finance entrepreneurial activitiesUnlikely to finance entrepreneurial activities

Little worker coop influenceLittle worker coop influence

Northcountry Cooperative Federal Credit UnionNorthcountry Cooperative Federal Credit Union

But full service and national?But full service and national?

And focused on worker coops?And focused on worker coops?

Option three:Option three:Worker Cooperative BankWorker Cooperative Bank

AdvantagesAdvantages

Better business Better business lending regulationlending regulation

Easy expansionEasy expansion

No common bondNo common bond

Entrepreneurial Entrepreneurial FinancingFinancing

DisadvantagesDisadvantages

Democratic difficultyDemocratic difficulty

Long/High startup Long/High startup costcost

~$2M Precharter~$2M Precharter

~$20M Postcharter~$20M Postcharter

Large equity capital Large equity capital requirementsrequirements

Not currently feasibleNot currently feasible

Survey ResultsSurvey Results

Worker CooperativesWorker Cooperatives

US Federation and NoBAWC surveyedUS Federation and NoBAWC surveyed

Neutral to positive responseNeutral to positive response

Some business accountsSome business accounts

IndividualsIndividuals

About 50 member pledgesAbout 50 member pledges

Interest in low income servicesInterest in low income services

Next StepsNext Steps

Steering Committee of interested coopsSteering Committee of interested coops

Discuss financial needsDiscuss financial needs

Evaluate appropriateness of credit unionEvaluate appropriateness of credit union

Define Mission: Maximize Worker Coop Employment?Define Mission: Maximize Worker Coop Employment?

Form Advisory TeamForm Advisory Team

Evaluate market, complete feasibility study, write Evaluate market, complete feasibility study, write business plan, etc.business plan, etc.

DiscussionDiscussion

More info at More info at

workercoopfcu.org