Secretly Incredibly Fascinating - Credit Unions

Episode Date: November 27, 2023

Alex Schmidt and Katie Goldin explore why credit unions are secretly incredibly fascinating.Visit http://sifpod.fun/ for research sources and for this week's bonus episode.Come hang out with us on the new SIF Discord: https://discord.gg/wbR96nsGg5

Credit unions. Known for being money stuff. Famous for being non-profit stuff. Nobody thinks much about them, so let's have some fun. Let's find out why credit unions are secretly incredibly fascinating. Hey there, folks. Welcome to a whole new podcast episode, a podcast all about why being alive is more interesting than people think it is. My name is Alex Schmidt, and I'm not alone because I'm joined by my co-host, Katie Golden. Katie, what is your relationship to the topic or opinion of the topic of credit unions? Big fan. Big fan of credit unions. I am part of a credit union. Oh, me too. I feel like I'm biased. I'm going to be real with you, Alex.

I don't really know so much about it. I feel like this is going to be very educational because for me, like a bank or credit union is kind of a magical space where I go in. I give them my money and I feel like they put it in a vault with a bunch of other money. And like they tuck my money into bed every night, give it goodnight kisses, warm milk. And then when I come, I can come and come pick up my money. And I'm like, how was your day at bank money? And they're like, it was great. It was great, mommy.

That's how I think banks work. Yeah, I share some of those things. And don't worry, folks, we're not in the tank for credit unions or whatever, but we both are members of one separately, turns out. Yeah. We got our mortgage through one. So I've only been part of one for a couple of months now. Wow. Mostly picked it because the loan officer was less weird than the other loan officers and the rate was a little better. Like this was not a

moral decision, but I think there's a moral vibe around credit unions. There is, right? And now I actually understand that after researching it. So that's nice. Great. Yeah. Cause like, i do know sometimes banks are bad um yeah because instead of tucking your money in and giving it good night kisses the banks do weird things with your money unspeakable things like good morning kisses that's as weird as we're gonna go on the show folks we're not gonna go weirder uh man good morning kisses are not as good as good night kisses because good night kisses, you brushed your teeth, everything smells good and minty. Good morning kisses smell like butt

because the mouth, when you sleep, the mouth slowly becomes more and more smelling of the butt. It's true. And then by the morning, the good morning kisses taste and smell like butt. Good night kisses are minty fresh. That's true. Yeah. For some reason, the mouth spends eight hours being like some kind of bog or marsh or swamp. Exactly.

And then it's a nightmare. But I was just laying there having dreams about high school or something, you know? Bacteria gets busy in your mouth at night. But that's not the topic of the show. We're going on a tangent. We're talking about credit unions. Alex, how dare you get us off a topic? It's, you know?

Yeah, the topic is not mouth bugs. It is credit unions. Credit unions. And many thanks to Alice Greger for this suggestion. It's such a perfect topic for this podcast. As folks might expect, this is kind of a money topic. And so there's tons of stats and numbers. Money, money, money.

But also, like, it turns out this topic is really the entire history of banking and the entire history of money. It's like many of our stiff topics where it turns out it's about everything. Oof. So the structure of this episode is one mega takeaway and then just a million stats and numbers. Alrighty. Let's get into mega takeaway number one of one. Mega takeaway. Mega takeaway.

Credit unions are both more positive than a regular bank and the same as a regular bank because all banking is a bizarre 1300s form of time travel. That was long. Don't understand it. Don't get it. Yeah, because it was long. One more time. Credit unions are both more positive than a regular bank and the same as a regular bank. And that's because all banking is a bizarre form of time travel that we developed in the 1300s. OK. And then we'll talk about how credit unions are different from that in four ways, but they are also fundamentally doing the same stuff a bank does. OK, OK.

So it's financial time travel, less exciting than dinosaur time travel, but let's go for it. We got our mortgage through Jurassic Credit Union. I can share that because the officer was a velociraptor. That was very exciting. They're very smart. You want a smart loan officer, right? That's good. We're going to put this money into escrow. Okay. So you said that credit unions are both better in some ways than banks, but also the same as banks. How can that be true? The way that they're the same is that all banks are basically doing two things. They are storing money and they are letting people borrow money.

And we'll talk about how that was invented and created and only began to exist around the 1300s. And then later we'll get into a few ways that credit unions try to be different and in practice probably are. It's also weirdly difficult to research credit unions for something like this, where we're looking for the most interesting stories, right? And what are some amazing ways a credit union helped an individual was something I wanted to find. And because of people's financial privacy, you can't really find that. So this is going to be a very large scale

and global look at credit unions. And also credit unions are all over the world, whether they're called credit unions or cooperative banks or a similar name. They're in basically every country. It's what's in the it's a wonderful life, right? The Bailey's. What is it? Housing and loan. That's a credit union, right? You know, it could be. And we'll talk about how you could check. Like, the main reasons are if it's owned by its members and a few other qualifications, then it would qualify. But it could be a private bank that just has that name.

Yeah. So the jury's out on that Bailey fella. I don't know if the angel should have helped him or not now. I know. Who knows? But Mr. Potter, probably not a credit union. Anyway. Probably not.

Man, they should have kicked his ass at the end of that movie. Anyways. Right, the Schwarzenegger ending where he destroys him and then says a pun. And then that's the end of the movie. Every time a bell rings, I kick your butt. And then he flies away. Arnold is an angel in the movie. Yeah.

Everyone's wondering why I'm not famous for my celebrity impressions now. Yeah. Like given that you've just heard such an incredible Arnold Schwarzenegger. Yeah. I mean, how would you experience Austrian culture? You live in a country that's so wildly far from Austria, right? You would never meet an Austrian or hear an Austrian. I don't understand what you're saying, Alex. My Austrian accent was perfect.

So credit unions, we're diving into history, right? Yeah. So before we get to time travel, we're just going to start with money. Okay. And I swear we're getting to credit unions, but it's bonkers to just talk about money. There are one million podcasts about money, and all of them wrestle with a basic idea that money is both real and fictional. It's something we made up, and also in pretty much every practical sense, it's real. So it's a really weird concept.

Yeah. No, I mean, it's a really weird concept. Yeah. No, I mean, I hear a lot about money. My husband is an economist. Yes. He's always going on and on about money and dollars. And no, I mean, it's interesting because honestly, like money, like from what I have learned, economics is kind of a it's like psychology on a really large scale. And so money is very much social psychology, or the, you know, economics is really kind of a study of human behavior. So money is a reflection of human behavior. Economics is also a reflection of like,

sort of social behavior, human behavior. It's all interlinked. It's not when people are doing studies on the economy or on money, it's like so much of it has to do with mass human psychology and human behavior. But that doesn't mean it's fake. It's still real, but it is something that is inextricably linked to human psychology. Absolutely. Yeah, what a cool field. It's something that I don't think about a lot, except when researching something like this. And then I have an amazing time thinking about it. And two key sources this week are the book, Money, the True Story of a Made-Up Thing, which is by journalist and Planet Money co-host Jacob Goldstein.

And then the book The History of Money by Macalester College cultural anthropologist Jack Weatherford. And both of them talk about that thing you talked about, Katie, which is that money is an expression of our psychology and our relationships to each other. And part of why it took a while to invent banks is that a lot of our first money was not the thing we imagine in modern times as money. Maybe the very first money was community status. And that's still a form of currency in a big brain way today, and in many groups today. But it was often the only form of money in closely knit small group societies. Because if people are making their own clothes and shelter, growing their own food, and all know each other in this small community, what would cash be for? What would you do with that?

Right, right. It's essentially, the way I understand it is money is sort of a stand in for I have done some labor. Right. Like I have done something. Yeah. and I give them to you and then you give me some salted pork. Like that's like bartering. Whereas like social standing is like, hey, you know me, like I'm the guy who always is making those great candles. Can I have some salted pork? And it's like, yeah, man, my house is full of the candles that you make. And here's some salted pork. Exactly.

And yeah, a lot of modern money is trying to take the friction out of that because there might be a situation where one person doesn't want pork or the other person doesn't want candles. And so, oh, what do we do? In trying to make it frictionless, most all of the money we use today is just promises. There's no gold or other sort of tangible thing behind it. A U.S. dollar is a note that says the government promises this is

money. Cryptocurrencies are a promise that a group of internet users say it is money. And there's even like gift certificates from companies with money qualities. We'll link a long ago SIF episode about tires, where we talk about Canadian tire money, which is script from a business in Canada called Canadian Tire, and weirdly popular there because it's its own subculture of being a form of money. But all of that is just promises. And it is trying to make it so bartering is easier. Is this where you launch your new currency Schmitty Bucks, where you can trade in Schmittybucks, where you can trade in Schmittybucks for cool facts about things that seem mundane. Yeah. See, three Slurp Schmitties can be turned into one Schmittybuck.

It's pretty easy to understand. I don't know why everyone's asking me questions about this. All my Schmittybucks gone. And so like status in some ways is a more stable form of money. It needs to be stored in the minds of the people around you. But lots of communities developed basically a big ritual gathering where people give each other gifts in order to receive status. And then that is fungible for future goods or services or whatever you need. One of the most amazing examples is potlatch gatherings in the northwest coastal part of North America, which still happen today, mainly in native communities. And it's people giving each other lavish gifts like canoes and furs.

And that was in a way that exchanged wealth in a community and ritual way. And that was in a way that exchanged wealth in a community and ritual way. These gatherings were so big and so confusing to colonizers. In the 1880s, the Canadian government banned them by law and called them uncivilized because they just found it too weird that people were freely giving each other a bunch of stuff. That's the most capitalist brain thing I've ever heard. Like, yeah, no, you guys can't give each other gifts. That's making me uncomfortable. This is too nice.

You're being too nice. That's kind of funny for Canadians to do. Like, oh, no, sorry. You're being too nice. You're being too polite. I know, though, Canada has a long history of racism against natives. It's pretty bad. Pretty bad. And they really made this a law. They banned potlatches from 1883 until 1951.

So nearly 70 years. And it was a harsh law. There was one attempted potlatch in 1921. The police raided it, arrested 45 people and jailed 21 of them. Oh my God. Who were the 21 who refused to give up their potlatch stuff when ordered to.

Oh my God. Can you like, just imagine someone like the police breaking down your door during like a birthday or Christmas or something as people are opening presents and being like, this is illegal, knocking you over, you know, maybe shooting the teddy bears. I don't know. It's that's so disgusting. That's so disgusting to criminalize cultural gift giving. That's yeah.

That's just horrendous. Yeah. And it's tragic and really speaks to this range of ways we have done money as humans. This was perceived as completely alien to white Canadians, even though it was what native people in Western Canada had been doing forever. Like such a fragile state of mind. Like, well, once people see how cool a culture is where you're giving gifts and stuff, they're not going to want this dumb green paper that you use for stuff, you know? Actually, I don't know if Canadian money is green, but whatever. It's still dumb paper.

The only Canadian money that's top of mind to me is a blue $5 bill. And I think it's because you can draw ears on the guy on it to make him look like Spock from Star Trek. Oh, okay. That's pretty good. Yeah. And so this status-based money, you don't need a bank, right? You could write it down if you want to, or you could keep it in your memory. But this is one of many societies that didn't need banking. Well, you need to have a pretty close-knit society to do this, right? You can't have too many people, or at least if you do have a lot of people, you need to have it being segmented into specific communities because you have to kind of like know what people have given to the community

for this exchange to work. Or, I mean, I guess you could have like a large community and just have these events and assume everyone is participating just as much in good faith and not worry about exactly keeping track. But in terms of having it as a currency, like having social goodwill as currency, it's like you have to have like a strong community because it's like you have to know who gave you the boat and, you know, know their names and know like kind of be able to keep track like that. I had never thought of that, but I guess something like a universal basic income, it's almost like status based money. It's just a humanist perspective of everyone has value as a human. So everyone gets a minimum amount of money.

Like I can have faith that they're going to participate in society in a good way. I think that's a really nice kind of way to look at things. This idea of, hey, you know what? I assume that you're probably going to do good in society and then act accordingly. And that, yeah, that really fits the kind of money. Another type of money people have developed is what's called commodity money. That's different from another type, which is where we use something like rare metals as a basis for money, like gold or silver. Commodity money is more of a situation where the thing we're using as money also has some practical purpose. You can't decorate with gold and silver, but commodity money is usually something that you can eat or dress in or other thing you can use.

How is this different from, say, like bartering? Perfect question. Yeah, there's a great example in Jack Weatherford's book, and it comes from the Triple Alliance, which is the Nahuatl-speaking empire often called the Aztecs. the Nahuatl-speaking empire, often called the Aztecs. And it turns out the Aztec economic system had a lot of government regulation. And the main thing the government regulated is a standardized price for cacao seeds. And so you can use cacao seeds to grind down and make the delicious chocolate beverage of Mesoamerica that everyone loves. But also there was a lot of just trading of giant bags of cacao seeds because the government was saying that has a set price and a set value that everybody knows. I see. So it's like it is it's a thing that is used as a currency, but you can also just directly use that thing. Yeah, That's cool. I love that. I'd love to be able to eat money.

Truly, yeah. Like, I guess one of their other main forms of commodity money in that society was cotton cloaks. And it was a standard kind of cotton cloak called a quachli. And then its value was pegged to a value of an amount of cacao seeds. And so that was lighter weight and, like, more physically manageable often as a value of an amount of cacao seeds. And so that was lighter weight and like more physically manageable often as a form of currency. But if the government went away tomorrow, you could make chocolate drink out of your seeds or you could wear your Quatchly. You know, it's different from, I guess, the wallpaper use of American dollars if the

government goes away tomorrow? It's something that's still something for you. Money suit. Gonna sew me a money suit. Wow. Now I want the government to go away so I can wear that money suit, baby. Gonna look great. So how does inflation work with commodity currency? Because there's a certain point at which you got too many barrels of cacao seeds.

Yeah, that's a good question. And it's broadly driven by how easy or hard it is to make the commodity and how the government responds to that. So it's a little more chaotic than promise money, but it's still something they can manage a bit. It's more delicious, though. That's right. I can't make a hot promise drink, you know? Right. I mean, that sounds kind of like, hey, you remember me from last year. I was giving out boats like crazy.

So you've got kind of the social currency in terms of receiving goods. Then there's the commodity type currency where it's like cacao beans or something where it's like the money. You can use the money for non-money things. Then how we get to money dollars? Yeah, the main way is precious metal money, because that could really directly be made into stuff like coins. And so that was an easy way to have a money that people felt was worth something without a government needing to manage it very much. And then once we have precious metal money and later promise money, both of those lend themselves to a banking format.

So now we're getting into banking. Banks basically come from the invention of two tasks for people to do with money. There's two more steps that get us from money to the specific institution of a credit union, which I swear we are talking about by talking about this. Okay. Okay. How are we going to get from chocolate money to credit unions? This task you still can kind of do with commodity money too, but one of the tasks is money storage, right? It turns out people start to say, hey, I could use help storing my money. Yeah, man.

It's so big or bulky or seedy or something, you know? Help. Yeah, like, I mean, it especially makes sense when people had coins, right? Because dollars you can kind of stack pretty good, put in a mattress. Not saying I have money in my mattress. Don't look.

But yeah, if you have like a huge amount of like gold coins at a certain point, not only is it take up space, but it's probably also the security risk because if someone breaks in, takes all your gold, that's it. You're done. You're donezo. Yeah. But if you have it stored somewhere more secure, then you're not as much of a target for like being raided and having all of your wealth taken from you. Exactly.

There's security. And on top of that, there's not wanting to use up space in your home for it. There's not wanting to lug it into town necessarily. There's all sorts of reasons to want help storing money. And writing systems help track like favors and status and the concept of debt. But then also in Europe, there were goldsmiths who started running a side business of storing valuables like gold. Because goldsmiths realized I'm already locking down my shop and all the material I work

with. Why don't I just collect a small fee from people to hold on to their stuff too? This is easy extra money for me. Yeah. And then you can melt the gold into, I don't know, what did people use gold for? Rings? Sure. Tiaras? Yeah. Yeah, yeah, yeah. Yeah. Realizing the tiara is the ring of the head. Anyway, that's great. And the ring is the tiara of the finger. So you got goldsmiths now kind of storing gold for their customers. Yeah.

their customers. Yeah. And my favorite example of people needing this kind of thing was copper money, especially in 1600s Sweden. Sweden in the 1600s used copper as currency, but it's a lot less valuable by weight than gold or silver or something else. And so it led to humongous money. There was the biggest denomination was called 10-daylers. I don't know if I'm pronouncing it right, but D-A-L-E-R-S, a dayler was the currency type. A brick of copper worth 10-daylers weighed 43 pounds, which is almost 20 kilos. Man, they had to have such upper body strength just to go shopping. Man, they had to have such upper body strength just to go shopping. I think they lifted from their legs or back because what they would do is this was about a two foot long brick of copper.

And people would carry it on their back with a set of straps. Wow. To like go bring their money to town. And so that was also kind of secure because it's just so heavy, you know? Yeah. Like a mugger is going to get tired and you just wait for them to get tuckered out and go retrieve your huge copper chunk so was it just like a brick or was it like a uh cylindrical coin like what was it like a like a too big ingot kind of thing i see yeah ingot yeah man i'm i miss ingot money of thing. I see. Yeah. Ingot.

Yeah. Man, I miss ingot money. That was really good for... Then you don't need a gym membership. The gym membership is just carrying your money around. It's really true. It's probably why Swedish people are so attractive now. Ah, we figured it out.

Now it makes sense. But so, so the task of money storage starts popping up on its own, like just help me put my money somewhere. And then people would collect a small fee for, for the help. And then the other innovation was lending. And that's where we really start to get banks. We also get the word bank from 1300s Venice, where they really get this going. The Italian city of Venice was its own country for a lot of history, including the 1300s. Venezia. Yeah, those guys. Very rich country. Yeah, and they had a whole industry of people who were currency changers, and they had offered the service of money storage for a small fee. In the 1300s, some of them realized that they could lend stored money to other people for another fee.

So you can make a fee storing money, and you can also make a fee lending money and getting interest or a fee for that. And you can also make a fee lending money and getting interest or a fee for that. Yeah, it's really interesting because it's kind of a symbolic throwback to the social system, right? Like lending money to someone. It's like, hey, I'm good for it. I'm an upstanding member of the community. You can lend me money and know I'm good for it in the future. Plus, you'll get a little bit of interest. And now I guess everything's become just like it's turned into a weird credit score system, which look, we need to do an episode on credit scores because I don't understand those.

They might as well be they might as well be like a horoscope kind of thing where it's like, oh, you know, Mars is in rotation or whatever. And therefore your credit score just went down 20 points. It's like, but I didn't do anything. It's like, you know, when Venus crosses Mars and it's like, well, you paid off too much debt or you don't have enough debt or you have too much debt. I don't get it. Anyways, I think it might have been better when we had a system when it was based on like how many cool boats you gave people. Yeah. Started talking about lending as an idea in the 1300s here, but it's basically as old as our species. Yeah. Because it started as just promises and it can be as simple as an IOU. Apparently the first written IOUs were clay

objects from Mesopotamia made about 5,000 years ago. It was a hollow clay ball with clay tokens inside, and the tokens meant stuff people owed each other. So lending is that old. There was also encryption back in the day, too, because what they would do is they would put things like contracts inside a clay vessel, right? And you would have to like break open the clay vessel to get to the contract. You would write some contract, right? And you both parties would see it. They'd know what's on it. You put it in the clay vessel and you'd know if it's broken. And therefore, it's like, oh, wait, this was broken? Did you alter this contract when it was broken?

So it's very cool how clay was used in so many different inventive kind of ways. Yeah, they had security against people drawing extra cuneiform wedges to mess with the deal. It's so cool. Exactly. All these wedges are from before. That's good. That's good. And so we have people separately thinking of the money storage service and thinking of a lending activity.

And then in 1300s Venice, money changers put it together. They say, I could do the storage and the lending at the same time. And I could use the stored money to do lended money. Then I can lend so much money. It's crazy how much I could lend. Yeah. No, that's, I mean, that makes sense, right? Yeah.

And now, isn't that, that's essentially just how banks are now. Exactly. These 1300s Venetians are not very different from your bank today. It's those two purposes. And emphasis more on the lending these days, but it's those two purposes. Was Venice like the first, did they kind of invent the bank? Pretty much. Like other than maybe some financial arrangements between people and their governments or some

very small scale versions of this, Venetians were kind of the first, what you think of as a modern person whose entire job is storing money and lending money and exploiting that to make money and scale it up as much as they can. Is that why Shakespeare's The Merchant of Venice was like based in Venice? Yeah. Yeah. We're only really starting to think of other world cities as being banking centers. Right. Bit of a problematic play. A whole bit of the old. It's interesting because I saw I actually I saw a production of the merchant of Venice where they

took the Shakespearean play and through like stage direction actually kind of flipped it to be more of an indictment of the anti-semitism and cool I know there's like some debate like some people argue that Shakespeare was trying to make a statement against anti-Semitism through the play, but I don't think that really holds up so well. But I did see a version. They really made Shylock the very sympathetic hero of the story. It was interesting. That's awesome. Yeah.

There's also, I mean, that's a whole other thing, right? And there's also, I mean, that's a whole other thing, right? Like Jewish people being forced into basically money lending because they couldn't own land. And also like it was something that now I'm out of my depth, but I think like Catholicism or other kind of Christian religions like, oh, we're not supposed to do money lending. And so, but it's okay for someone of a different faith to do money lending. Yeah, there's a saying, neither a borrower nor a lender be. And then all those people smugly benefited from Jewish people doing the borrowing and lending that makes the economy go. Right, exactly. And so since then, you've had like this kind of... Isn't that cool? I don't know. I think that's also where a lot of the anti-Semitic, you know, associations of like, oh, Jewish people and money came from because like, essentially, you've created this niche where Jewish people kind of don't have that many other options to generate wealth in the society other than money lending.

Yeah. And then it's like, oh, well, you know, Jewish people are money lenders. And it's like, okay, but you made it that way with your with your laws. Like, yeah. Like, let me own a winery or whatever you do. Right. Exactly. Yeah. And even the name bank or banking banker, it is specific to one bridge in Venice.

Whoa. A lot of the people doing this, some of them Jewish, as we said, they did a lot of the business in the open air. They might have had a room or an office somewhere, but they tended to gather on a key bridge over Venice's Grand Canal. And they would sit and do business on benches on the bridge. And so people started calling these people bench sitters. And the Italian word for that was banchieri. I don't know if that's still the current Italian word. Oh, that's funny. And then banchieri has been like retranslated and in our language anglicized to become banking from banchieri. Banchieri. Yeah, that's really interesting.

Banchieri. Right. That's that correct pronunciation makes it clearer. I like that. If it's a C-H, then it's a hard sound. Yes. Yep. So, yeah, so that's where we get this whole thing.

And it really supercharged economics. People who are able to massively lend because they are using other people's stored money, it transformed the world in a way that could be a million podcast episodes. And that practice is what we call finance. One source is Bloomberg finance writer Matt Levine. He describes it as, quote, the essence of finance is time travel. Saving is about moving resources from the present into the future. Financing is about moving resources from the future back into the present, end quote.

Man, back to the future would have been so much more exciting if it was just about Doc giving a loan to a little, what's his name? Oh, Marty. Yeah. Like, you got to invest, Marty. You got to invest in Apple. Just shouting more interest back to him, but he's shoving stuff into the car. And Marty's like, I don't want to pay more interest. This seems bad. Oh, well, I've been too deep. Oh, well. The DeLorean's going to be big someday, Marty. Just you see. Yeah, and this one idea, it's created vast new opportunities. It's invented economic collapses, raised standards of living, caused imperialism. It's profoundly bad and profoundly good all at once.

Right. And it is what banks do, and it is what credit unions do. Both of those are businesses that are financial time travel machines. They're exactly the same that way. But it's still it really still comes down to promises, right? that in the future you're going to be good on the money that you're lent or the bank is promising that it will, you know, keep your money safe. So it's all about sort of a social contract. So throughout history, regardless of what we call it, it's about social contract. But I think the power of the banking system is that it is, you're able to nest social contracts like much

more easily. Like you can condense the social contract into, you know, numbers and systems and patterns that are much easier to kind of like nest and like do on a mass scale. It's both powerful in terms of how that can, that can convert human behavior and past and present and future human behavior into numbers. But of course, that's also imperfect, right? Because you can't actually condense human behavior down into numbers perfectly. I'm sure Brett's not going to mind me saying this. That's one of the issues with economics is you make some assumptions about human behavior in order to make it fit within a certain like model or framework. And it's hard to do that perfectly when you're when

you have to make some assumptions in order to make math work. Wow. And that fits perfectly with the credit union difference. Because it's basically human behavior that we are either hoping is a thing or we've created a few laws to make a thing. And at the top of the mega takeaway, I said there's like four ways a credit union can be different than a bank. Here's the list. Number one, credit unions often limit their business to a set of members. their business to a set of members. So a bank is theoretically trying to become the one bank that is the world's, like they're theoretically trying to grow forever. And a credit union is usually limited to some specific but broad group of people. Like mine is for only specific New York

state counties. Right. Yeah. My credit union is like a college. So like a lot of colleges will have credit unions. Yeah. There you go. Yeah. Yeah. And yeah union is like a college. So like a lot of colleges will have credit unions. Yeah. There you go. Yeah. Yeah. And yeah, the one with the most members in the U.S. is Navy Federal, which is for military people and a few other categories of people. Yeah. It's a lot of them are like that. And then number two difference, credit unions are usually owned by the members of the credit union, which is a form of cooperative banking. Yeah. A co-op, you say? Yeah. What's another example of a co-op, Alex? Just one podcast network. Boy, it'd be great to be on that one. Oh, wait, we are. Maximum Fund.

It's great. Yeah, they're an employee-owned co-op, which is so fantastic. And I think I'll just link about it because I don't want to make people confused and think it's a credit union, but it's great. It's a cooperative company, which is awesome. And yeah, and so that can be really awesome, right? Like all the people who are using the credit union have potentially a vote on its decisions or can elect leadership of it or become leaders themselves. That super varies in practice, but it's different from the bank being owned by stockholders and being a corporation. Right. Yeah, that's cool. I like that. Yeah. And then third difference is some credit unions are tax exempt or pay different or lower

tax rates. And that really, really varies by country. But that is usually dictated at the country level. What's the case in the U.S.? In the U.S., they are exempt from corporate taxes. And then in Canada, they're not exempt from that, but the small ones can apply for specific small business rates. And then other countries do it other ways. And there are credit unions in more than 100 countries. So this varies a whole lot. And so is the ethics argument about credit unions that it's because they're often like

a co-op and they're smaller than big banks? Is that sort of the main reason that credit unions are considered more ethical? Or are there other reasons? Perfect question because it's that and it's this fourth and final difference, which is that credit unions might have a charter directing them to operate with a motivation beyond profit. They might have a founding document that says, we do not just exist to make profits, We're trying to do a second thing. Which, by the way, perfect naming system for the Italian couple in a 1950s movie.

Just like, of course, they're named the Martinis. That's excellent. The time when Italian-Americans were still novel. Very fun pop cultural time. Really, really weird and probably prejudicial. I'm sorry, but weird. Yeah, it's like here's the one Italian family. Really weird and probably prejudicial, I'm sorry, but weird. Yeah. Yeah, it's like here's the one Italian family in the movie, and they're the meatballs.

Right. By the way, meatballs are not really a big thing in Italy. It's not meatballs and spaghetti. They'll have a— Oh, you guys are in terms of beef mounds like we are? That's weird. No, they love beef mounds, but usually the beef is mounded in a different way. Like there's raw beef pucks, like a hockey puck of raw beef here in Turin, which is quite popular.

But yeah, they have like polpette, which is like, you know, like meatballs, but they don't usually serve it on a pile of spaghetti. Okay. I can support that. Yeah. Good. As long as there's beef mounds, USA. It's always going to be beef mounds. I wonder, has beef, have beef meatballs ever been a currency, like beef mound currency? Yeah. I feel like it's got to be like either pre-Roman or something where beef is money. I think there's probably almost every culture that has livestock trading the live version as currency. Right. Or aurochs. Probably back then it was aurochs, those like ancient cattle. Right. Aurochs currency. Yeah, weird big cattle. Yeah, yeah. Anyways, anyways, the difference is this charter. And so like a credit union will have like a charter where we're like, we promise not to be evil.

And then banks don't have such a charter. Yeah. And I found a confusing thing in the research. I don't want to call it misleading because I don't think anybody's up to something. But when you research credit unions, you constantly see stuff describing them as nonprofits. And that is only true by one specific meaning of that, because credit unions are not charities. They don't receive donations. They also need to lend and save in a way that brings in more money than they are spending on employees and branches and stuff. So they are quote unquote non-profit in the sense

that they usually have a founding document directing them to aim for minimal profit and then aim for general social good or a specific one. One shorthand for that is the phrase, not for profit, not for charity, but for service. Okay. So it's like not maximizing profits, but still aiming to get some profits. Yeah. Because I think I've heard occasionally people talk about credit unions as if it's like saving puppies or something. And maybe your credit union does like dog events or something, but that's not necessarily it. It's a bank. And then on paper and hopefully in practice, they are trying to bank in a way that's

communally beneficial while also still keeping the bank afloat as a business. Now I can, from my credit union, get a checkbook where the background of the checks is a basket of puppies. So I feel like they are saying that this bank is for the puppies. Legal promise to let puppies bank. They can open accounts. They have to. But I guess my question would be like, you can have a charter

that's like, we promise to be good. We're going to like, not, our goal is not profits. It's people or whatever, but what's actually holding them to that? Yeah. You know, like, is there, cause if the incentive structure is still for them to turn a big profit, it seems like they would still go for the profit. Like, despite what your charter says, it seems like they would still go for the profit, like despite what your charter says. It's like when Google is like, hey, don't be evil. Like there's nothing actually preventing Google from being evil. Like they just say that. I think they quietly removed that from their website at a certain point. But anyways, the point is like how, how, what is actually the enforcement of we're not really aiming for big profits?

That's the biggest question of this entire topic. And it varies globally and locally. One way can be governments or regulators that are keeping an eye on their books and saying like, are you guys making massive profits? Like you should turn some of that into lower rates or something. Because like would they no longer count as a credit union and then get taxed at a different rate? Okay. Yeah. So that's one limit. And then another limit is if the members of the credit union use their voting power to command better behavior. That's another way that can happen. Probably the main way and the biggest way is just if people decide to pursue

that mission. It's very behavior driven. It's very promise driven. It's very what is in the hearts of the people working at the credit union, because most of us are not monitoring what our bank or credit union does policy wise. And the tradition of the credit union, because most of us are not monitoring what our bank or credit union does policy-wise. And the tradition of the credit union or the culture of the credit union is hopefully positive. And that means if you, the listener, are looking for the most moral and exciting banking option, it kind of becomes a project for you to figure out whether your credit union is simply in a tax classification and small, or also doing some stuff where they are lending to someone who couldn't otherwise get a loan or they are inclusive or they are going out of their way to keep rates low to support people, stuff like that. I don't want to be the information show that says, and now you have a bunch of homework to do to fix society. That's not like great or positive. So, so it's, I think, I think it's exciting to know that a credit union is

simply a bank and potentially better because then you like actually know what's going on. You like, will maybe be more wary of whether you're banking right or not, hopefully. maybe be more wary of whether you're banking right or not, hopefully. Yeah, it's yeah, it's tough. But yeah, it does seem like on average, credit unions are going to be more at least more ethical than a bank. Worst case scenario, it's a bank like any other bank, which is fine. Right. It still does the things you need it to do if you work with them.

So cool. Great. Yeah. And that's and that's why we needed to know where money comes from to understand that because it's still all money at the root of it bring back the chocolate money oh and then and then the bank and then a credit union could be like willie wonka's credit union. And then Augustus Gloop gets like sucked into one of those pneumatic, you know, those pneumatic tubes that take your money and stuff. My childhood bank had that. Yeah, yeah, yeah. Yeah, yeah, yeah.

God, those were so fun. I always wanted to stick my face in one of those. That was the good era. Boy. Willy Wonka and the chocolate credit union. Trying to teach these kids what's fungible, what's non-fungible. Wow. Well, I'm just going to try to find a way to bank at that bank. And so we'll take a break while I research that. And then we'll be back with mega stats and numbers. Stick around. Mega Stats and Numbers.

I'm Jesse Thorne. I just don't want to leave a mess. This week on Bullseye, Dan Aykroyd talks to me about the Blues Brothers, Ghostbusters, and his very detailed plans about how he'll spend his afterlife. I think I'm going to roam in a few places. Yes, I'm going to manifest and roam. All that and more on the next Bullseye from MaximumFun.org and NPR. Hello, teachers and faculty. This is Janet Varney. I'm here to remind you that listening to my podcast, The JV Club with Janet Varney,

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Folks, welcome back to the Mega Stats and Numbers about this topic. This week, they are in a segment called... Stat by stat. Oh, baby. Gotta get it to the numbers. Yeah, man. Yeah, that name was submitted by Christian Lopez. Thank you. And we have a new name for this segment every week.

Please make it as silly and wacky as possible. Submit through Discord or to SipPod at gmail.com. I feel like I need to learn the saxophone just for this podcast. Drop a little background. I mean, for any podcast. Every podcast would benefit from Saxophone. Every podcast would. What are we doing out here without it?

What are we doing? Ridiculous. It is a waste of time. So first number here is just giant. About 80,000, 8-0-1,000. That's the number of credit unions or cooperative banks in the world. Wow. And they're in the world. Wow. And they're in more than 100 countries.

So this is a really global topic. It's everywhere. Everywhere. That's pretty cool. Yeah. Where are the most credit unions? Like which country is the most credit union-y? Do you know?

I couldn't find super solid numbers on it, but one of the biggest countries for membership is actually the United States. Oh, that's interesting. We have for membership is actually the United States. Oh, that's interesting. We have many credit unions and a big population. So it's actually a lot of us doing it, even though you think of us as so capitalist, you know? Yeah. Well, yeah, but that's pretty cool. Yeah. And it's also especially popular in Central Europe. And it turns out credit unions got parallel invented in many places, but especially Central Europe in the mid to late 1800s. Oh, that's really interesting. So like,

which countries in Central Europe? The first number there is 1845. That is when Samuel Yurkovich established a credit cooperative for poor farmers in his region of Slovakia. established a credit cooperative for poor farmers in his region of Slovakia. Okay. And that is potentially the first credit union-ish thing, but some of my sources said that it wasn't a huge departure from mutual aid among Slovakian farmers that already existed. It was just more of an umbrella for what they were doing. It's weird to think of credit unions being that recent,

because I would have thought that credit unions would have popped up around, you know, the time that just like the concept of money and banking came around. But I guess, I guess not. but also from just adapting existing mutual aid. And there's thousands and thousands of years of people just doing mutual aid without creating organizations and letterhead for it. Right, right. So that's part of why this took a while is people just went ahead and helped somebody. Right. That's really interesting. So Slovakian Bailey's building and loan. Yeah.

And then in parallel, a more influential one happens, 1849. A few years later, 1849, that's when a Prussian mayor, which is part of modern Germany, his name was Friedrich Wilhelm Reifeisen. That's so Prussian, man. I know. Oh. That's so Prussian, man. I know. Oh, that's like, that's so Prussian. And he started a charitable credit cooperative. And it was partly as a recovery effort from a war.

Which war? He did this 1849. One year earlier, there was a wave of pro-democracy revolutions in a lot of German-speaking kingdoms, including Prussia. So it was a revolutionary war. And pretty much all of them failed to achieve democracy in their kingdoms. Whoops. Yeah. But that resulted in a lot of emigration from Germany to countries like the U.S. A lot of German-Americans came here in the 1840s from that. And then there was also chaos, property damage, worsened economic trouble. A lot of German-Americans came here in the 1840s from that.

And then there was also chaos, property damage, worsened economic trouble. And Friedrich Reifeisen was weirdly the mayor of several towns all next to each other. He was just really into being a mayor and helping the community. And now I'm the mayor over here. And now I'm the mayor over here. And now, oh, you guessed it, I'm the mayor over here. And now I'm the mayor over here. And now, oh, you guessed it, I'm the mayor over here, too. All the names are stuff like Weyerbach und Flammersfeld. Like, they're really German savage names, too.

It's great. And so in 1849, he got donations from wealthy locals and then loaned the donations to people in the town of Flamersfeld at a much lower rate than private banks. And that was so fun to him that he and a collaborator set up permanent cooperative banks that didn't need donations after that. So it started as fully charity, but with like bank logic. And then he said, why don't I just make a bank that is always charity logic? Right, right. So it would be it would lend people money at a very like low interest rate. Yeah. So they could kind of get on their feet, like like almost like what maybe a family member would do for you of zero. They were like, it's more than zero. So we can run. But I'm doing this charitably. And so.'s hope. Right, right. Cool.

Then other community leaders either borrowed this Prussian idea or parallel invented it in Italy, France, Austria, and the Netherlands right around that same time. And all those countries have a pretty strong credit union tradition now. Apparently 45% of French people use one of the three biggest co-ops in France, and just one co-op bank in the Netherlands has a 40% market share all on its own. So it's very standard in those kind of countries. That's interesting. You know what? I actually have no idea if the bank I use here in Italy is a credit union or not. I suspect it's not. Okay. idea if the bank I use here in Italy is a credit union or not. I suspect it's not. It's very difficult to figure out financial things here when you're bad at the language.

Oh, no. And you keep trying to trade the meatballs and they're like, we're not such a meatball country, actually. Yeah. They're like, please. We're more into like the raw beef hockey puck. Have you heard of that? And so this is a pretty 1800s European idea. And then that means it reached European colonies. That's part of how it spread worldwide. And the next number there is 1900. That is when a man named Alphonse Desjardins tried to start a community lending program in rural French Canada. Okay. So in Montreal, Quebec, where? Yeah, it was a very rural area and it has morphed into a modern credit union group called the Desjardins Group based in Montreal. Yeah. Oh, okay. French Canada really led the way for North America in credit unions.

So they got rid of the native tradition by making it illegal to give cool gifts to each other. They're like, we've come up with this cool idea called a credit union where we all own sort of community property and money. And it's like, wow, really? Is that you came up with that, huh? Yeah. Same country, same time period. How about that? They banned potlatches and then they did this. Yeah.

Cool. Like, hey, instead of this fun potlatch, would you like to go to a credit union instead? You won't get a boat or a jacket, but you will get to stand in line. You won't get a boat or a jacket, but you will get to stand in line. Yeah, and this was weirdly almost a cultural practice, more than a financial practice, too, because Desjardins did it for poor farmers in Quebec and mainly ran it out of his local Catholic church. The other office was his own house, but spread among Catholic French Canadians. And also Desjardins' idea bled south to New Hampshire. And in 1908, New Hampshire started the first credit union in the United States, basically just copying

French Canadians. The other North American number here is 1907. One year before that, New Hampshire, Canadian-based credit union. 1907 is when an American businessman named Edward Filene visited British India. I see. So British colonized India. So there's two colonies talking to each other. Yeah. Yeah. Edward Filene is weirdly important for two ideas. One is that he made credit unions a lot more popular in the U.S. The other is that the Filene family store, he had the idea to put a discount section

in the basement where goods just automatically went to the basement. And then that was such a hit. It became an entire chain of stores called Filene's Basement that only recently went out of business with a lot of other department stores. I feel like that when I hear Filene's Basement, I think two things. One, essentially a cracker barrel or two, a sex shop. It is very neither of those things that's supposed to close and stuff but uh so filene's name is famous now from that but edward filene visited bengal in modern india and bangladesh it was all one british colony and the british government had sort of imposed the idea of rural credit unions for farmers, like many people had been doing in Europe. Edward Filene, within one year of that,

is so inspired, he goes from India back to Massachusetts, sets up that state's first credit union, and then one year later convinces the Massachusetts legislature to pass a law supporting the formation of credit unions. And then in 1934, the federal government copied that idea. President Franklin Delano Roosevelt signed a federal credit union act. So that laid the legal groundwork for basically all credit unions today in the U.S. That's a lot of how the U.S. got them, is the filings basement guy was really passionate about it. And then there's an interesting other connection where the Filenes are here partly because of that same 1848 German revolution that helped get them going there. Edward Filene was a Jewish German American and his father left Prussia in the year 1848. But probably partly due to the anti-Semitism, but also because of the democratic revolutions stirring everything up.

Yeah, yeah. For people who don't know, like pre-Holocaust, there were a lot of pogroms and anti-Semitism in Central Europe and Eastern Europe. In Central Europe, in Eastern Europe, a lot of Jewish people were either forced out or would voluntarily try to, I mean, quote unquote, voluntarily leave. Yeah. And that trouble and that awful experience that helped William Filene, who started the Filene store, and then his sons, including Edward, who did all this credit union stuff that helped them care about, can banking be social? Can banking be positive? Because let's just do things that are social and positive. Yeah. And that's a lot of the kind of modern story of credit unions, too. I'm going to link about Catholic churches in Latin America, because in the 1940s, some of them pursued what's called liberation theology, which is a goal of serving God through economic and social justice.

Interesting. So Catholic churches set up a bunch of credit unions across Latin America. That was one of their ideas for doing that. Hey, you know what? All right. Not the worst thing missionaries have done. Not the worst thing missionaries have done. Very last number is 2006, a Bangladeshi economist and banker named Muhammad Yunus won the Nobel Peace Prize.

And not the economics prize, the peace prize, because he's done innovative work with microfinance, where it's very tiny loans at low rates to people in Bangladesh where he's from. The institution that developed into is called Grameen Bank. It's co-owned by its borrowers and by the government of Bangladesh. So that is credit union-ish, but also government run. Either way, it's one way this idea has evolved. And this idea will probably keep evolving. There will probably be new kinds of credit and credit unions to talk about in the future. That's really cool. Yeah. So that's the topic. And now I feel differently about my mortgage. It's nice. I feel differently about your mortgage too. Really, really brought me around. Okay. But only we get to feel about it. The rest of you stay, stay away from it,

Okay, but only we get to feel about it. The rest of you stay away from it, I guess. Privacy. Daniel, get away from my mortgage. You know, we don't have lawns anymore, but we still got mortgages, so we got to tell the kids to stay off our mortgages. Hey folks, that's the main episode for this week. Welcome to the outro with fun features for you, such as help remembering this episode with a run back through the big takeaways. Mega takeaway number one of one, credit unions are both more positive than a regular bank

and the same as a regular bank because all banking is a bizarre 1300s form of time travel. We also broke down four ways credit unions are different from the storing money and the lending money of a bank. Credit unions are limited in their membership. They are usually owned or run or managed by members. They often have a different tax burden, and they often have a charter that directs them to do something beyond profit. It's not quite non-profit, but something beyond profit. That mega takeaway also unspooled the entire history of banking, you know, the Venetian bridge guys and stuff, and also the entire history of money, plus a lot of Easter eggs within that.

And then in our numbers and stats, we explored the mid-1800s origin of credit unions, the modern spread of them, and new ways their philosophy is evolving. Those are the takeaway numbers and stories and stats. Also, I said that's the main episode because there is more secretly incredibly fascinating stuff available to you right now if you support this show at MaximumFun.org. Members are the reason this podcast exists. So members get a bonus show every week where we explore one obviously incredibly fascinating story related to that main episode.

story related to that main episode. This week's bonus topic is how Andrew Jackson made U.S. paper currency totally bonkers for 30 years. Visit sifpod.fun for that bonus show, for a library of more than 14 dozen other secretly incredibly fascinating bonus shows, and a catalog of all sorts of MaxFun bonus shows. It is special audio. It is just for members. Thank you for being somebody who backs this podcast operation. Additional fun things, check out our research sources on this episode's page at maxfunfun.org. Key sources this week include the book Money, the true story of a made-up thing by journalist and Planet Money co-host Jacob Goldstein. Another book called The History of Money by Macalester College cultural anthropologist Jack Weatherford, plus tons of digital resources from the Virtual Museum of Canada, Lapham's Quarterly, the Cornell Law School, and more.

That page also features resources such as native-land.ca. I'm using those to acknowledge that I recorded this in Lenapehoking, the traditional land of the Munsee Lenape people and the Wappinger people, as well as the Mohican people, Skadagoke people, and others. Also, Katie taped this in the country of Italy, and I want to acknowledge that in my location, in many other locations in the Americas and elsewhere, Native people are very much still here. That feels worth doing on each episode and join the free SIF Discord where we're sharing stories and resources about Native people and life. There is a link in this episode's description to join that Discord. We're also talking about this episode on the Discord. And hey, would you like a tip on another episode? Because each week I'm finding you something

randomly incredibly fascinating by running all the past episode numbers through a random number generator. This week's pick is episode 39. That's about the topic of playing cards. Fun fact there, the first playing card technology spread across the world in a clear east to west pattern. So I recommend that episode. I also recommend my co-host Katie Golden's weekly podcast Creature Fe, about animals and science and more. Our theme music is Unbroken Unshaven by the Budos Band. Our show logo is by artist Burton Durand. Special thanks to Chris Souza for audio mastering on this episode. Special thanks to the Beacon Music Factory for taping support.

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