| Title: | DCU |
| Notice: | 1996 BoD Election results in 1004 |
| Moderator: | CPEEDY::BRADLEY |
| Created: | Sat Feb 07 1987 |
| Last Modified: | Fri Jun 06 1997 |
| Last Successful Update: | Fri Jun 06 1997 |
| Number of topics: | 1041 |
| Total number of notes: | 18759 |
The following is simply a thought exercise. It is up to the
reader to determine the plausibility of the exercise, and
the extent of any application to possible real life situations.
Joe and Mary's Credit Union
Joe and Mary belong to a Credit Union. There are 18 other members
of this credit union, making 20 members in all.
Joe and Mary are large depositors. Each has placed a substantial
amount of their assets with this Credit Union. So much so, that
together, Joe's and Mary's deposits represent fully two thirds of
the capital on deposit.
Recently Joe and Mary have approached those in charge of the credit
union. They've noticed that the other 18 members, while contributing
a minority of the capital in the credit union, are the cause of 95%
of the costs associated with running the institution. They suggest
what they see as a reasonable change: institution of a small monthly
service charge. They perceive that although it will cost each of them
a small amount per month under the new system, the credit union will
also take in a much larger sum each month from the smaller depositors.
All the income resulting from the new charges will be available for
distribution to (all of) the credit union's depositors as interest.
Joe and Mary each perceive that although the charges will cost them
a small amount each month, they come out ahead overall, because their
large deposits earn two thirds of the interest paid by the credit
union. While together they will pay only 1/10 of the service charges,
they will reap 2/3 of the income derived from them.
You are in charge of this credit union. Questions:
1) How should you react to Joe's and Mary's proposal?
2) What (if anything) should you tell the smaller depositors
should you decide to implement it.
3) What about if you happen to be Joe or Mary?
4) Suppose you don't implement Joe's and Mary's suggestion,
and Joe and Mary go off in a huff, taking their two thirds of the
credit unions capital elsewhere. Is this "disastrous" for the
credit union?
| T.R | Title | User | Personal Name | Date | Lines |
|---|---|---|---|---|---|
| 393.1 | GUFFAW::GRANSEWICZ | Someday, DCU will be a credit union. | Tue Nov 19 1991 10:14 | 50 | |
Interesting credit union! Though I would propose a name change: Dick &
Mary's Credit Union... ;-)
> 1) How should you react to Joe's and Mary's proposal?
Depends what "in charge of this credit union" means...
If I'm the President of the credit union, I see a wonderful chance to
increase revenues immediately and at no additional cost. MY performance
will be viewed as "helped make DCU even more profitable".
If I am on the BoD then I must ask what are the risks of driving away my
"customers" to other competitors? Then I realize that I really don't
care about these people who aren't pulling their weight and are leaching
off my other depositors. Besides, these leaches are also defaulting more
and aren't borrowing money from my credit union at 15% interest. Good
riddance to them I say.
> 2) What (if anything) should you tell the smaller depositors
> should you decide to implement it.
I would immediately order up a slick marketing brochure that tells
everybody how good they are doing and that we now have an even better
deal for them. We'll call it "More, More, More". People will think
they are getting more when in reality it means the credit union will be
taking more.
> 3) What about if you happen to be Joe or Mary?
I say I have a right to get as much as I can on my deposits. After
all, this bank will go out of business without me. Remember the golden
rule!
> 4) Suppose you don't implement Joe's and Mary's suggestion,
> and Joe and Mary go off in a huff, taking their two thirds of the
> credit unions capital elsewhere. Is this "disastrous" for the
> credit union?
This one is easy. The "bank" is suddenly transformed back into a
credit union! Where members are owners and not leaches! Where
people's accounts aren't micro-managed on a profit and loss basis.
Where net income and equity ratios don't supercede the primary purpose
of the credit union. Where money is loaned TO MEMBERS instead of Joe
and Mary's developer friends and everybody prospers because the credit
union is functioning as it was designed to function.
Wow! What a bad dream. This could never happen in reality.
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