Worker Coop Credit Union Proposal Brent Emerson Mike Leung 2008 Democracy at Work Conference

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

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

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

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

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

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

Existing Financing Sources OrganizationAssets Fraction to Worker Coops InsuredRegion WOF$700k100%NoNational NCDFNCFCU$12M$6M60%0%NoNCUA Upper Midwest CFNECCF$6M$500k15%100%NoNoNortheast LEAF$1M90%NoNortheast NCB$2B ~1% ??? FDICNational 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 situation A worker coop startup requiring over $10M in unsecured capital is currently very difficult A worker coop startup requiring over $10M in unsecured capital is currently very difficult All capital intensive startups are corporations All capital intensive startups are corporations No worker coop entrepreneurs in most sectors due to lack of financing No worker coop entrepreneurs in most sectors due to lack of financing Especially industrial/manufacturing Especially industrial/manufacturing Minimal capacity to create coop jobs Minimal capacity to create coop jobs Coop employment less than 0.01% of workforce Coop employment less than 0.01% of workforce Instead a focus on corporate buyouts and conversions Instead a focus on corporate buyouts and conversions Fundamental pricing issues Fundamental pricing issues

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

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

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

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

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

Option two: Modify Existing Infrastructure? National Cooperative Bank National Cooperative Bank Small shift in lending priority  big financial impact Small shift in lending priority  big financial impact Unlikely to finance entrepreneurial activities Unlikely to finance entrepreneurial activities Little worker coop influence Little worker coop influence Northcountry Cooperative Federal Credit Union Northcountry 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: Worker Cooperative Bank Advantages Advantages Better business lending regulation Better business lending regulation Easy expansion Easy expansion No common bond No common bond Entrepreneurial Financing Entrepreneurial Financing Disadvantages Disadvantages Democratic difficulty Democratic difficulty Long/High startup cost Long/High startup cost ~$2M Precharter ~$20M Postcharter Large equity capital requirements Large equity capital requirements Not currently feasible Not currently feasible

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

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

Discussion More info at More info at workercoopfcu.org