Banks and Lending II. Self Help Credit Union

From the Economic Justice Task Force. February 2014. Edith Sylla

Banks and Lending, Part II. The Self-Help Credit Union.
Part I of “Banks and Lending” described the loan that Wachovia Bank gave CUCC to carry out our “Renovation for Renewal” building project during the 1990s. The interest rate on Wachovia’s loan depended on market rates, and worked out to 8.75%, but we were able to recoup some of that interest, because the Wachovia money market account, in which we held the money between borrowing it and spending it paid us 4.7%. We were very satisfied with Wachovia’s service. At the same time, in order to pay off the mortgage on what is now the Pilgrim House, we borrowed $45,000 for two years from several congregation members at a rate of 6%, compounded annually, thus benefitting both the members doing the lending and the church. We had $40,000 in our “Parsonage Fund” to serve as collateral.
The “Parsonage Fund” remains among CUCC’s “reserve funds.” It was created at the time CUCC sold the church parsonage, the idea being that earnings on this fund would go towards the housing costs of future pastors, who would have more flexibility in choosing where to live. Over a period of years the Parsonage Fund was invested in U.S. Treasury bonds paying on average 12.5%, contributing $5000 in income to the annual budget. Today, alas, there are no safe fixed-income investments that pay anything close to 12.5% (the very high interest rates at that time were the result of Paul Volker’s actions as head of the Federal Reserve to bring down inflation – see You Tube video listed below*). In the proposed 2014 budget, passed at the last Congregational meeting, the income from the Parsonage Fund is expected to be a measly $550, because of today’s very low interest rates. The 2014 budget includes the budget line “’Parsonage’/Self Help,” indicating that the Parsonage Fund is deposited in the Self-Help Credit Union (SHCU) in Durham.
Why does the Economic Justice Task Force think this is relevant to economic justice? It is relevant because keeping church reserve funds that are not part of the annual budget at the Self-Help Credit Union rather than at Wells Fargo or some other big bank helps to promote economic justice. While the church’s money is just as safe at the Self-Help Credit Union and earns a rate of return about the same as we might earn at other banks or credit unions, the SHCU loans their money out in a way to create and protect economic opportunity for all. In their own words, it “creates and protects ownership and economic opportunity through loans for home ownership, small businesses, and community facilities; downtown revitalization and affordable housing development; and responsible consumer financial services.” See more about what they offer at <>. The Center for Responsible Lending, affiliated with the SHCU, has led a repeated effort to rid North Carolina of what amount to pay-day loans. As reported on CNN, “Wells Fargo, U.S. Bank, Fifth Third and Regions announced last week that they would discontinue their so-called deposit advance products.... Banks have defended the loans, saying they help customers when they need an emergency line of credit but can’t qualify for a traditional loan. But consumer advocates, like the Center for Responsible Lending, call them ‘predatory’ and have called on federal regulators to ban the products.... A report from the Center for Responsible Lending found that advance loans issued by banks carried an average term of 10 days, with a fee of $10 per $100 borrowed – amounting to a 365% APR. Customers remained stuck in the loan cycle – meaning they owed money to the bank – for an average of 175 days per year.” Our deposit at SHCU not only earns a little interest, but also counts as part of CUCC’s mission to work for economic justice.
*On the Federal Reserve and interest rates, see “James Grant and Richard Sylla – The Great Fed Debate!” Wealth Track with Consuelo Mack, December 20, 2013.