Credit unions and the common bond

  • Credit Unions are cooperative financial institutions specializing in the basic financial needs of certain groups of consumers. A distinguishing feature of credit unions is the legal requirement that members share a common bond. This organizing principle recently became the focus of national attention as the Supreme Court and the U.S. Congress took opposite sides in a controversy regarding the number of common bonds that could co-exist within the membership of a single credit union. Despite its importance, little research has been done into how common bonds affect how credit unions actually operate. We frame the issues with a simple theoretical model of credit-union formation and consolidation. To provide intuition into the flexibility of multiple-group credit unions in serving members, we simulate the model and present some comparative-static results. We then apply a semi-parametric empirical model to a large dataset drawn from federally chartered occupational credit unions in 1996 to investigate the effects of common bonds. Our results suggest that credit unions with multiple common bonds have higher participation rates than credit unions that are otherwise similar but whose membership shares a single common bond.

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Author:William R. Emmons, Frank A. Schmid
Parent Title (German):Institut für Kapitalmarktforschung (Frankfurt am Main): CFS working paper series ; No. 1999,01
Series (Serial Number):CFS working paper series (1999, 01)
Publisher:Inst. für Kapitalmarktforschung
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:1999
Year of first Publication:1999
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/05/24
Tag:Credit union; common bond; participation rate; semi-parametric estimation
GND Keyword:USA; Kreditgenossenschaft; Kreditgenossenschaftlicher Verbund; Raiffeisenbank; Volksbank; Mitgliedschaft; Abwanderung-Widerspruch-Theorie; Schätzung
Page Number:66
Last Page:64
Revised edition in: Federal Reserve Bank of St. Louis Review, Vol. 81 (5), (1999), 41-64.
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht