Cooperative Finance

Some banks and other finance companies exist specifically to provide capital to cooperative businesses in the U.S. These include the National Consumer Cooperative Bank, an Association of Corporate Credit Unions, the Cooperative Finance Corporation, and the Federal Home Loan Bank System. Arguably, we could also include the Farm Credit System in this subsection (because one of its member companies lends specifically to agricultural cooperatives), but we have elected instead to keep it in a separate subsector because the Farm Credit System also provides banking services directly to farmers. In this section, we briefly describe each of these organizations and systems, and report on their aggregate economic impact.

The National Cooperative Bank (NCB) is a U.S. government-chartered corporation organized under the National Consumer Cooperative Bank Act in 1978 and privatized in 1981 as a financial services company. The bank, which is structured as a cooperative business with >2,500 member owners, also operates an affiliate nonprofit organization (NCB Capital Impact) that provides community lending and business development services, and a subsidiary federally chartered thrift (NCB, FSB) that provides banking services to NCB's national customer base. NCB lending initially focused on natural food and housing cooperatives, but has subsequently broadened to encompass a wide variety of sectors including healthcare, childcare, education, energy and manufacturing, and retail goods and services.

Corporate credit unions (CCUs) were formed to meet the liquidity needs of credit unions, diminishing their reliance on banks and other vendors. Today there are 28 CCUs that serve >8,000 natural person credit unions in the U.S. Each CCU has a specific geographic region and serves the credit unions within its jurisdiction by offering operational support, product service, and delivery. U.S. Central was created in 1974 to be a centralized banker bank of the CCUs; its membership base includes CUSOs and CCUs. 

The National Rural Utilties Cooperative Finance Corporation (CFC) is a cooperative company owned by 898 electric utility systems, 511 telecommunications organizations, 66 statewide and regional service organizations, and 63 associates. CFC provides financing, investment, and related services to its members. It raises funds for loan programs with the support of its owners' equity and investments and through the sale of multiple financing vehicles in the private financial markets.

The Federal Home Loan Bank System (FHLBS) is composed of 12 cooperative banks, each with its own president and board of directors, and 8,100 member lenders who collectively own the banks. The system and its members are the largest source of residential mortgage and community development credit in the U.S. Members borrow money from the system using mortgages they issue as collateral, and the system secures loan funds by issuing debt in private capital markets. The FHLBS is a Government Sponsored Entity with the implicit backing from the U.S. government, but no formal guarantee. The FHLBS does not pay Federal income tax and borrows at low rates due in part to the implicit backing of the U.S. government. In return for this special treatment, the FHLBS must pay 20% of its net earnings to help cover interest on debt issued by the Resolution Funding Corporation (which paid for the Savings and Loan Bailout), and contribute 10% of its earnings to affordable housing loans and grants (Ashcraft, 2008).

Population Discovery and Data Sources

The list for cooperative financial institutions comes from primary research. All economic data comes from 2007 annual reports of the individual financial institutions. The data collection and survey methodology is discussed in detail in the Data Collection section in the Appendix.

Economic Impacts

Table 4-4 summarizes our data for the Cooperative Finance subsector. There is >$1T in assets, $72B in sales revenue, and nearly $1B in wages and benefits pay. There are approximately 27,000 memberships and 6,000 employees. Adding direct and indirect impacts to this activity, Table 4-4.4 shows that cooperative finance lenders account for >$77B in revenue, 39,000 jobs, $2B in wages paid, and nearly $6B in valued-added income.

Table 4-4.4: Economic Impacts for Cooperative Finance
Economic Impact Multiplier   Units Direct Indirect Induced Total
Revenues 1.067   millions $ 72,691 2,130 2,707 77,527
Income 1.756     3,381 1,079 1,477 5,937
Wages 2.987     757 669 835 2,261
Employment1 6.254   jobs 6,251 13,035 19,805 39,091
1Business to Business financing results in patronage refunds dwarfing wages resulting in a high employment multiplier. Basically we are saying this level of income should produce a very large employment effect.