How Did Madison Become the Center of the Credit Union World?

How Did Madison Become the Center of the Credit Union World?

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If you’ve ever explored Madison, you may have noticed that there are a few different credit unions around the city. These establishments are no stranger to Madison or Wisconsin. In fact, after the inception of credit unions in Europe in the 1800s, Madison became a center point for United States credit unions in the 1930s.

A 1934 meeting in Estes Park, Colorado among a consortium of young credit union members soon led to the creation and establishment of the Credit Union National Association in Madison.

But why choose Madison as the headquarters for one of the country’s major trade associations for both state and federally-chartered credit unions? According to CUNA Mutual spokesperson Phil Tschudy, location was a key factor.

With air travel not as prevalent as it is today, many people in the 1930s relied on trains to travel about the U.S. With the first North American credit union established in Canada, as well as the Midwest’s central location, Madison seemed a fit location for the establishment of a centrally-located cooperative, according to Tschudy.

“They wanted something centrally located, so that was probably the primary reason why Madison was in the running,” he said.

According to Tschudy, credit unions were established to help individuals with a common bond. This meant someone could belong to one of these member-owned financial cooperatives if they shared a place of employment or were affiliated with an organization connected to a credit union.

This emphasis on grassroots consumer values rather than big businesses or other larger institutions — which tended to get involved with banks — led the group to want to be near a large city, but not in one. Madison provided this opportunity, Tschudy said.

“They also wanted to be near a large university,” he said. “With the University of Wisconsin being here in Madison, that was a plus. It was a source of potentially future employees and also for research support and that kind of thing.”

Edward A. Filene (left) and Roy F. Bergengren. Filene contributed significant financial resources to help establish CUNA in 1934, and then CUNA Mutual in 1935. At that time, CUNA and CUNA Mutual were one organization. Filene passed away in 1937 and Bergengren, who was CUNA’s first Managing Director, passed away in 1955. Photo courtesy CUNA.

In addition to location and demographics, the Madison community’s receptivity to cooperatives was another motivating factor in Madison’s establishment as a credit union mecca. This was largely due to the state’s laws and influence.

The establishment of CUNA in Wisconsin coincided with President Roosevelt’s New Deal effort in response to the Great Depression. Tschudy said Wisconsin had a “strong reputation” as a champion of the New Deal and noted Wisconsin was the first state to pass unemployment compensation laws.

CUNA’s first headquarters in Madison at 142 E. Gilman Street. It was called “Raiffeisen House,” named after Friedrich Wilhelm Raiffeisen, who was credited with starting a lending society in Germany circa 1850. It later morphed into the credit union movement. Photo courtesy CUNA.

Moreover, the Wisconsin Legislature’s unemployment compensation law was passed three years before the U.S. Social Security Act, which UW-Madison professors had a hand in creating. According to a university timeline, economics professor Edwin Witte headed the commission to draft the Social Security legislation.

But personal ties may have played an even more significant role in the establishment of credit unions in the Madison area. According to a document detailing the founding of the UW Credit Union, which was established in 1931, then UW-Madison President Glenn Frank maintained a “continuing friendship” with Edward Filene, who is considered the father of the U.S. credit union movement. Prompted by an interest in investigating affordable consumer credit, Frank “telephoned Filene in March 1931, to request informative materials about credit unions to be sent ‘at once,’” the document says.

With information from Filene about the “credit union situation in [the] Wisconsin Legislature,” as well as the interest of notable economics professors, seven members of the UW-Madison community soon gathered to form the university-based credit union we know today as the UW Credit Union.

CUNA’s second headquarters at 1342 E. Washington Ave. This is the same building that housed Fyfe’s Corner Bistro and the Washington Host restaurants in years past. Photo courtesy CUNA.

Since then, credit unions haven’t stopped growing.

Paul Kundert, the president and CEO of UW Credit Union, said that while UW Credit Union has an “87-year track record of growth,” much of this growth came in the wake of the Great Recession of 2008. According to Kundert, people looking for new, more affordable financial institutions began to turn to credit unions.

“A lot of households were hit hard by the recession, and I think people practically needed more affordable options, needed [to] pay more attention to their household finances,” he said. “Credit unions, who had done a good job of meeting needs, saw an influx of a lot of people.”

In fact, more than 50,000 people have moved their checking accounts to UW Credit Union in the last five years, according to Kundert. He added that in 2010, while other financial institutions were raising fees to try to maintain the bottom-line profits, UWCU cut its fees and used the financial resources it had on hand to provide relief to people who were struggling to make ends meet during the recession.

UWCU currently serves over 245,000 members, and the credit union sees an increase of about 12,000 checking-account members each year, said Kundert, who attributes the credit union’s growth to its mission-based focus to give value and benefits back to its members.

This expansion comes as no surprise to Tschudy.

While CUNA has been around for over 80 years, Tschudy said the number of credit union members is still growing. There are more than 100 million credit union members across the Midwest, he said, and this could largely be attributed to accessibility to these organizations, as well the ever-expanding services they offer.

Tschudy said credit unions offer services beyond simple savings and loans, which were the “bread and butter” of early credit unions.

“They offer credit cards, debit cards, first mortgages, home equity lines of credit, financial services investments, insurance — really full-service type institutions,” he said.

For Kundert, the full-service mentality of credit unions, as well as the “cooperative phenomenon” in which more services and resources generated by the organization lead to more value going back to its members, will continue to benefit credit unions.

“We refer to the credit union phenomenon as the credit union movement. We really do believe it has the attributes of a movement of people, of something growing, of something idea-based,” Kundert said. “We see a bright future.”

Credit Union Center on Mineral Point Road, where CUNA, CUNA Mutual and the World Council of Credit Unions are now headquartered. Photo courtesy CUNA.

Written by Lawrence Andrea

Lawrence Andrea

Lawrence Andrea is a journalism student at UW Madison and former campus news editor at the Daily Cardinal.

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