Nationwide Insurance long sponsered a large and successful credit union for its associates. Known as the Nationwide Federal Credit Union, it provides many banking services at low or no cost to its members, while paying favorable interest rates on deposits. The credit union is wholly owned by its members, who vote on directors and major policy.
It turns out that the credit union is worth quite a bit of money to someone who wants to start a bank and get a fast start on things.
Now, Nationwide is going into the banking business by forming Nationwide Bank and wants to acquire the credit union by paying the members a 15% premium on their balances on deposit as of the end of March. Sounds pretty good until you read the newspapers and see what other banks are paying to acquire similar financial institutions — over 30%!
Specifically, National City Bank, in Cleveland, is paying over 30% on assets to the owners of two Florida institutions so that it can get started in that state. Makes you want to ask how Nationwide and the credit union agreed on 15%, less than half the going market rate.
Well there are a couple of major factors that went into this low bargain price: One is that there were no outside consultants working on valuing the credit union — the price was entirely cooked up inhouse. Two is that the individuals representing the credit union in the negotiations are all paid by Nationwide itself, in salary or pensions.
There was absolutely no independent valuation of the transaction. The members were sold out by Nationwide's own henchmen. Now the members are out in the cold. They can either accept a paltry payment of less than half the market value for their credit union, or watch it whither away as Nationwide pulls its support in favor of its own business interests.
This is a major rip-off of Nationwide's own employees and credit union members. There is still time left to do something before the November vote of the members.
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