Losing Their Way? Credit Unions' Embrace of Market-Based Investment Practices

This paper uses event history analyses to identify conditions under which credit unions shift investments from loans to securities and derivatives, pursuing strategies characteristic of banking corporations like JP Morgan Chase. Such shifts carry prospects for greater returns and risk, and for blurring the lines between credit unions and commercial banks. We find that institutional dynamics fueled these shifts, with an invasion of “modern banking” practices from adjacent commercial banking fields and the emulation of big bank exemplars occurring alongside the spread and increasing acceptance of those practices within the credit union field. Yet market logics spread unevenly in that field. Consistent with images of organizational capability and market opportunity, credit unions were most prone to embrace derivative investments when they were older, possessed strong loan portfolios and a wealthier depositor base, and operated in markets where credit unions were gaining ground relative to banks. And consistent with arguments about identity and community, credit unions proved immune to market logics when anchored by members, other audiences and local organizational communities in their traditional missions and identities as cooperative institutions. These findings help expand the focus in the sociology of finance beyond the central tendencies of financialization, trading rooms and money center banks to consider diversity in financial organization and alternative banking systems. They also contribute to institutional research on the spread of market logics, while shedding light on when cooperative and non-profit alternatives to corporations sustain—or abandon—their distinctive identities in the face of pressures for commercialization and conformity.