Edward Filene, Father of the American Credit Union System

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Many may recognize Edward Filene’s name from bargain store Filene’s Basement, but his influence extends far beyond retail.

Credit unions in the United States serve over 100 million members and control $1 trillion in assets. There are 5,174 credit unions in the United States, employing over 225,000 people. They line Main Streets and suburban thoroughfares.

Yet, the first American credit union was only established in 1908. That makes American credit unions younger than some of the world’s oldest living people. What could account for their astonishing growth over the 20th and 21st centuries? The answer comes down to the Father of American Credit Unions, Edward Filene.

Early life of the Filene family

Edward Filene was born in 1860 in Salem, Massachusetts, to William Filene and Clara Ballin. William sold women’s clothing and dry goods. He oversaw a succession of shops in Massachusetts and then New York. The post-Civil War era economy was volatile, and by 1869, the Filenes had nothing but each other. After their unsuccessful New York venture, they relocated to Lynn, Massachusetts and settled in a working-class neighborhood. William set up a small women’s wear shop, positioned so the factory girls could walk past on their way to work.

Location changed everything. The store experienced so much growth William was able to expand to three stores by 1875. Clara handled accounts while Edward and his four siblings handled customer service. Harvard accepted Edward in 1880, but William suffered a stroke the same month. Edward and his brother, Abraham Lincoln (A. Lincoln) Filene, took over operations. William remained de facto manager.

The brothers expanded to Boston in 1881. They opened a 24-square-foot store in the shopping district. While the previous stores focused on serving working customers, this store catered to the city’s middle class. By 1883, they had opened another location. Both stores pulled in $100,000 per year ($2.6 million in 2020 dollars). By 1890, the Filenes sold off the three New England stores to focus on the Boston operations. They invested the proceeds into a five-story building on Washington Street. Filene’s became the largest women’s wear store in the city.

By 1891, William handed the reins to Edward and A. Lincoln. They incorporated the business to William Filene and Sons. They sold Fancy Goods and Women’s Ready-to-Wear Apparel. The store, later shortened to “Filene’s,” experienced exponential growth. It became New England’s largest retail store.

Building a solid foundation 

At this point, you may be asking, “That’s great, but what does all of this have to do with credit unions?” The answer lies behind the scenes. The Filene brothers, especially Edward, passionately advocated for their employees.

Edward instituted:

  • profit-sharing
  • a living wage for his employees (including women)
  • a five-day, forty-hour work week
  • health clinics
  • insurance
  • paid vacations

He introduced the Filene Cooperative Association, a company union (a union under one employer, as opposed to a trade union). He hoped this would encourage collective bargaining and arbitration between employees. The nascent cooperative banking movement in Europe and Japan dovetailed Edward’s policies.

Edward visited Calcutta, then colonized by the British, in 1907. The leader of Bengal’s cooperative credit societies, William Robert Gourlay, took Edward on a tour of rural India. Gourlay explained the operations of the local Agricultural Cooperative Banks. A group of villagers deposited their savings. Then, the colonial government would lend that amount to the group. The group was then able to disburse this loan to its members.

Observing these cooperatives galvanized Edward. He brought the idea to his friend, Theodore Roosevelt. Edward suggested the United States try cooperative banking in the Philippines, then a colony. Roosevelt expressed interest, but nothing came of it. This did not deter Edward.

Edward spent the 1910s campaigning for public transportation and workman’s compensation. Still, he kept an eye on the introduction of credit unions in American society.

The creation of the first credit union

Alphonse Dejardins had opened a “People’s Bank” in Quebec. His “caisse populaire” was the earliest credit union on the continent. Filene invited Desjardin to Massachusetts with Pierre Jay, the banking commissioner of Massachusetts. They collaborated on the Massachusetts Credit Union Act of 1909. It was the first comprehensive credit union legislation in the U.S.

Jay and Filene came up with the term “credit union.” Filene chose “credit” to dissociate from predatory consumer loans. They selected “union” to show solidarity with workers.

Related: A History of Credit Unions

By 1914, Filene and other Boston businessmen founded the Massachusetts Credit Union. The MCU served as a “central agency to help other credit unions” in Massachusetts.

Roy Bergengren started managing the Massachusetts Credit Union in 1920. In his previous career, he worked as a poverty law attorney. He saw firsthand the devastation of loan sharks on America’s working class. Finally, there was someone with the drive to make credit unions accessible to all Americans. Bergengren’s efforts led to the charter of nineteen Massachusetts credit unions that year alone.

Continued support for the movement 

Filene and Bergengren then founded the Credit Union National Extension Bureau (CUNEB) in 1921. The Extension Bureau aimed to:

  1. Bring about the laws needed for credit union development in various states
  2. Organize credit unions in each state to serve as examples to others
  3. Expand the number of credit unions to the point they could create self-sustaining state federations
  4. Combine the federations into a self-sustaining national association.

Bergengren traveled the country, evangelizing for credit unions. Though Edward was now in his sixties, sometimes he joined Bergengren. They spoke to legislators, community organizers, and everyday workers to spread the word. The number of credit unions in the United States went from 199 in 1921 to 1,100 in 1930.

By 1928, Filene’s store stockholders ousted Edward himself due to his “liberal management policies.” Filene was now able to devote himself 100% to his various causes, including credit unions. Though Bergengren was in the trenches, Filene provided financial backing.

Filene’s final years

The Great Depression provided an unexpected boon to credit unions. Trust in banks waned following the stock-market crash, and credit union membership grew every day. In 1932, credit union advocates pushed for national legislation. The Roosevelt administration passed the Federal Credit Union Act in 1934. Credit union leaders formed the Credit Union National Association on August 11, 1934. Overnight, Filene went from financial backer to the Founder of the Credit Union National Association.

Edward spent his last few years traveling. He worried about fascism abroad and the potential for another Great Depression stateside. In 1937, he provided the financial backing for the Institute for Propaganda Analysis. The IPA fought to combat Nazism, communism, anti-communism, and anti-Semitism. The social upheaval of the Great Depression left a vacuum for these forces to take root. He wrote and spoke prolifically, producing pieces on worker’s rights.

While attending the Paris International Chamber of Commerce meeting in 1937, Filene fell ill with pneumonia. He succumbed to the disease on September 27, 1937, only a few weeks after his 77th birthday. The world felt his death immediately. His friend Franklin D. Roosevelt memorialized Edward as “a prophet who perceived the true meaning of these changing times.” Roy Bergengren coordinated memorial meetings at credit unions around the country. CUNA commemorated its founder with the Filene House in Wisconsin.

A legacy that lives on

Edward Filene may have died, but his work lives on. During his lifetime, in addition to his work with credit unions, he founded:

  • The Boston, American, and International Chambers of Commerce
  • The League to Enforce Peace
  • The Institute for Propaganda Analysis
  • The Co-Operative League (now The Century Foundation)
  • The Industrial League
  • Countless other projects

Several credit union forces launched the Filene Research Institute in May 1989. The Institute facilitates new and innovative research on credit unions to this day.

Edward Filene believed in accessible financial services for all people. Every time someone logs onto online banking or goes to a branch drive-through, it’s because of his work. As workers in the credit union industry, we must uphold this commitment.

Edward Filene never could have predicted we would all have tiny computers in our pockets. He never could have known Americans would be living through another pandemic or that we would have two recessions in a little over a decade. He could not have known that our economy shifted from manufacturing to service.

Filene died a man of great achievements. He had founded countless leagues, chambers, and institutes. But above all that, he would have believed his most important accomplishment to be the credit union industry. He believed every American deserved the opportunity to solve their financial problems. Now more than ever, Americans need someone in their corner advocating for them and their community.

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