The National Lawyers Guild Credit Union: A Proposal

By Deborah Lagutaris, UC Hastings 2004

In the spring of 2004, various Guild members expressed dissatisfaction with the Guild-affiliated credit card supplied by MBNA.  This email discussion reminded me of an idea that had been brewing.  As government support for legal education disappears, it seems critical that organizations like the NLG create an extra-governmental means of funding progressive law student and attorneys.  At about the same time, I heard a lecture by Professor Howard Richards, a Stanford-trained attorney who was Cesar Chavez’ first movement attorney and professor of Peace and Global Studies at Earlham College.  Professor Richards reminded those at the lecture that the free flow of capital defies any attempts at constraint.  Furthermore, capital flight impoverishes nations virtually overnight.[1]

So, what does this have to do with the Guild?  First, the Guild is a professional association of progressive people who have some assets and savings.  Second, those savings are sitting in banking institutions that feed capital mobility and capital flight, leaving communities and states without the resources to maintain a social safety net.  Third, there is a practical and reasonable alternative to providing savings to commercial banks--a Federal Credit Union.

It only takes 250 people to commit to supporting a Federal Credit Union to begin the process.  One thousand people making the commitment would incline regulators to look more kindly upon the application, as small credit unions are more likely to fail.

Why should the Guild support this project at a time of terrible struggle?  Precisely because it is a time of terrible struggle we must consider this.  Capital mobility is the key to supporting socialism for the rich.  In other words, every dollar taken out of the commercial banking system is a victory. 

Dramatic increases in tuition at law schools all over the nation, including the public schools, have occurred regularly over the last 60 years.  The University of California law schools charged no tuition for many years.  More recently, tuition at my institution, UC Hastings, was a mere $700 per semester in 1982.  Even accounting for inflation, the present UC tuition of $20,000 a year is unjustifiable and unmanageable.  Thus, anyone contemplating a legal education is also contemplating a debt load of $60,000 at minimum.  This is a daunting prospect, indeed.  It is also clear that conservative elites will continue to create funding shortfalls that cause public universities to raise tuition, and eliminate funding and grants for higher education, as they have done steadily for the last 30 years.  The document some call the Powell Manifesto outlined the processes and strategies that the right wing has deployed to disastrous effect over the last thirty years. [2]  

Regardless of the reasons for the increases, the results of these increases will seriously limit the number of public interest-minded students who can seriously contemplate attending law school.  The results of a lack of support will begin to be felt in the very near future, I speculate.  As social, environmental and economic injustice increases in the US and internationally, lawyers trained in this globally-hegemonic legal system will become increasingly more valuable.  More of them must be available for the vision that we wish to bring to life. 

The CU would be operated initially as an online institution to keep capital requirements low. 

Steps to bring the credit union into being:

• Form a volunteer board of directors.
• Conduct a survey and get 1,000 members to sign on as supporters who will commit to depositing in the credit union.  This can be done online, for the most part, at minimal cost.
• Submit forms to charter credit union. 
• Develop relationships with other institutions such as socially responsible investment companies. 
• Seek Federal Deposit insurance coverage with NCUA (an organization like the Federal Deposit Insurance Corporation.)

FAQ

1. How does a credit union make money?

A credit union earns revenue by managing the funds of depositors.  The difference between the interest that the credit union can earn from funds on deposit and what the CU pays depositors in interest represents the revenue.  In the NLG CU, this difference should always be known by depositors and controlled by a Board of Directors made up of and chosen by NLG members.

2. Why would members want to deposit funds in the NLGCU rather than a commercial bank?

Credit unions are generally able, because of their non-profit organization operating methods, to pay higher interest than a commercial bank, and charge lower fees.  In addition, the revenues earned by the credit union would not go to corporate shareholders, but to Guild-directed programs, such as loan forgiveness and community development and organization.

3. How would members access their funds?

Initially, deposits and withdrawals to saving accounts would be made by mail or automatic transfer.  As the NLGCU earns more revenue, checking accounts, ATM access, and other services would be made available. 

4. What about the credit card?

Other autonomous community CUs are experimenting with their own credit card operations now and we are in touch with them as they assess the outcome of their experiments.

5.      Who would be able to join?

National Lawyers Guild members and friends of the Guild would be able to join the Credit Union.  In this way we would be able to expand the membership while retaining control of the Board of Directors.

6.      How would loans for law students and loan forgiveness work?

Tentatively, we conclude that the Guild would eventually have to set up a nonprofit organization to lend and consolidate education loans.

7. How would internal controls be maintained? 

One of the proposal committee members has 14 years of commercial banking operations experience in loss control and banking office management in operations and lending.  Her background includes a stint as a banking office auditor for a regional division of a major commercial bank. Other committee members can lend other financial expertise.  We hope to recruit others with experience and enthusiasm for this project.