Prometheus, please bring the credit unions fire!

Implications: Considering the current fall-out in Commercial Lending with the big banks (most of which were deservingly so), such as Wachovia, Chase, and Bank of America, the Credit Union field has such great opportunities to grow their market-share if they just decided to move into the 19th Century, instead of living in the past, with forgotten lending practices and even more archaic management.

Analysis: I have recently sojourned myself to meeting with several credit unions in hopes to persuade them into entering into the field of Commercial Lending. While the N.C.U.A. bylaws prevents credit unions from directly lending to businesses, credit unions can grab this market-share through what is called a CUSO, or Credit Union Service Organization. The opportunities that await the CUSO that has the intestinal-fortitude to actually provide competitive lending programs to Commercial client, will yield such great rewards, that they can become pioneers of the traditional stale Credit Union Industry. Here's why:

-    Recent fall-out in Commercial Lending by the big banks has created a void in the lending community-at-large. Many big banks, including B of A, Wachovia, Chase, Charter One, and Wells, have all tightened their underwriting guidelines for both new clients, and existing clients looking to renew expiring/maturing relationships. The 'banking-out' of average clients from a bank's portfolio is an excellent way of grabbing market-share without sacrificing credit-quality. Many of the businesses being pushed out of bank portfolios are quality companies, just looking for a lending-home.
-    A captured-audience: credit unions have to have what is called a Field-of-Membership, meaning that their organization applies specifically to a preferred group. Many of these groups allow spouses to participate in the credit union programs. Credit unions for such organizations like fire departments and police departments are ripe for small business lending opportunities. A common joke here in Chicago is: what do you ask a Chicago Fire Fighter? What does he really do for a living? Many people have either their own business, or work for someone who owns a business. Credit Unions have the inside-track to grab these people, well-over mass-marketing endeavors by banks.
-    Cheaper Costs-of-Funds: for years, banks have been lobbying to have credit unions pay the same in taxes as the banks do. Credit Unions have fought back, and ultimately, staved off any legistlation attempting to do, and therefore, operate like a non-for-profit, passing on to the members better rates of savings, and typically lower lending rates.

Imagine having a rolodex of clients who welcome you into their homes as a friend, instead of a cold-calling banker trying to win a deal. Imagine having better rates, terms, and the perception of better client services. Wouldn't you think you'd have a competitive advantage over your banking-counterparts? Common sense would dictate so -- unfortunately, the words "Common Sense" and "Credit Unions" rarely collide in the same sentence. The opportunity to strike while the iron is hot is beginning to pass the credit unions by, as banks regain their footing after their respective credit fallout, and resume aggressive market penetration and solicitation. Now is the time for CUSO's and business partners that are aligned with specific credit unions to move from the stale underwriting standards that few (if any) would qualify for or want to have, into a credit-saavy but moderately proactive credit platform, and grab the waiting market share.

Unfortunately, it would appear the impenetrable-resistance (or stubbornness) put up by credit union management, along with the lack of foresight and ambition, will ultimately lead those who have attempted to lend to the business community, back to the financial institutions that most recently shunned them.