Chip Filson
The Seated Boxer, an iconic ancient Greek work of art, shows a grizzled veteran of the ring, equal parts resigned and ready to spring into action.
What I like is a sense of respite from competition, the powerful athletic physique and the tiredness that surrounds his humanity. Is he a winner this day? Are there more fights to go? How will his efforts be remembered?
These are questions that all of us encounter, in literal or figurative ways, in our daily efforts.
Bank of Dave, part 2 was released on Netflix today. In this sequel to Bank of Dave, Dave Fishwick takes on a new and more dangerous adversary: the Payday Lenders. A trailer.
(https://www.youtube.com/watch?v=sled6bgiK78)
From George Bernard Shaw:
On elections: Democracy substitutes election by the incompetent many for appointment by the corrupt few.
On due process: The theory of legal procedure is that if you set two liars to expose one another, the truth will emerge.
The more things a man is ashamed of, the more respectable he is.
On the outlook for 2025 by J. K. Galbraith, Harvard economist: The primary function of economic forecasts is to make astrology look respectable.
The American economy’s challenge: Can capitalism solve the problems created by capitalism?
A life of meaning and purpose
This 1980 official portrait by Robert Templeton is in the National Portrait Gallery.
Yesterday I received the following email signed by Patelco’s CEO Erin Mendez. It read in part:
Dear Charles,
As part of a member-owned credit union, you benefit from our commitment to your financial wellness. Our volunteer Board of Directors helps guide the credit union – and you can allow them to vote on your behalf, making decisions to benefit you. Our Board of Directors and senior leadership work together to guide Patelco and provide the best service and benefits for you.
To help things run smoothly, we use proxies, which give authority for the Board to represent your interests when they vote. (A proxy is a person you designate to vote for you at meetings. By designating a proxy, you allow that person – in this case, a qualified member of our Board of Directors – to cast votes on your behalf.)
Update Your Proxy Today
Clicking the update proxy link brings the following instructions:
Updating your proxy only takes a few seconds and remains in effect for three years. By updating, you will:
Your current proxy expiration date is 10/11/2023
The email was sent from a no-reply@email.patelco address. This is a one-way message and recipients could not respond to the CEO’s signed request. Therefore I am taking this public route to voice my concerns about members transferring their basic franchise responsibility to incumbent directors.
Proxy voting is prohibited for federal credit unions. It eliminates the concept of the member-owners democratically (one-member, one-vote) electing their representatives. While a small number of states, like California, permit proxy voting in board elections, these statutes were passed before the 1934 Federal Credit union Act was in place. These initial coop governance models were lifted from existing mutual savings statutes that permitted proxies.
Proxies give existing leadership who already control the nomination process and the candidates selected, absolute control over director choice. Instead of empowering members, proxies further entrench existing directors. The process removes member-owners from any meaningful role in choosing their leaders. The unique democratic design of credit unions is rendered meaningless. Proxies shield directors from accountability to the coop’s owners via elections.
The annual meeting should be a celebration of member-ownership and institutional progress. Owner participation should be encouraged. Member voting is one of the ways this engagement is meaningful, not just a coronation. The second largest credit union in the country SECU NC has demonstrated that individual member voting is feasible in even in the largest coops.
Voting is a fundamental right of ownership. Credit unions should be leading examples of democratic governance. As the general public feels increasingly distrustful of elections and democratic processes for public institutions, credit unions should be an example of how this form of governance works. It can function well even when it comes to the management of their most critical matters of personal finance.
In the last several years Patelco has expanded aspects of its annual meeting agenda to encourage member engagement. Last year there was an extended Q&A with the Chair and staff responding to pre-submitted questions. The prior year CEO Mendez prepared a lengthy live presentation distinguishing Patelco’s liquidity and funding strategies from the recent Silicon Valley and other bank failures.
In 2024 Patelco suffered a major cyber attack. Some member services were limited for weeks. Much time and resources were required to stabilize the situation. Direct, open conversations with members at the Annual Meeting about this and other performance challenges are a way of sustaining member-owner confidence.
More importantly member enthusiasm for their coop is enhanced if the meeting includes both business and celebratory events. This gives directors the chance to connect with and be seen by members—not just spectators watching scripted formalities by the Chair presiding over a required agenda.
Rather than requesting members hand over their most important ownership role to the existing board, why not instead survey members about their experiences at the credit union? Give them the opportunity to become involved, to raise their issues (e.g.why is my HSA account dividend only .25%) and to encourage thoughtful engagement and attendance at the meeting.
A brief survey would show respect for members’ opinions, create interest in the upcoming meeting, and promote the cooperative difference of member-ownership.
The credit union advantage is the capacity to create long standing member ties. Credit unions should welcome participation. It would educate the owners about the credit union’s performance and their critical role in its success.
In brief: Drop the proxy solicitation. Seek member input. Demonstrate the credit union democratic governance model in action.
A closing suggestion: Please include your direct contact information in these kinds of member communications to show your openness to hearing our point of view to your message.
During the January 6 WOWT’s First Alert news program, the station presented a report titled Watchdogs Say $13.6 million is missing from recently-absorbed Omaha-based credit union. The TV Reporter, Michael McKnight, had contacted me for comments on the case.
The TV story told of the $13.6 million dollar loss at Creighton FCU leading to its subsequent merger with Cobalt FCU in August 2024. Cobalt said this was the result of the “CEO’s retirement.” Both Peter Strozniak’s Credit Union Times article and I had written about this forced merger and the loss in its final June 2024 quarter of operations.
The merger was caused by an enormous deficit equal to 20% of assets uncovered following the CFO’s death in April. NCUA gave no explanation of what happened, where the money went or who was responsible for the follow-up. NCUA and Cobalt refused to answer any questions about the event. Problem resolved, no questions please.
But the TV news triggered immediate additional facts that NCUA has refused to provide the press and public about its actions. The TV reporter received a letter NCUA’s Inspector General (IG) sent to Omaha Congressman Mike Flood responding to his inquiry about the circumstances of the loss in November.
The IG response is linked here. The letter opens with an unusual disclaimer of direct responsibility as the IG and NCUA are not required to investigate this situation any further:
Because there was no loss to the Share Insurance Fund, my office was not required to perform a material loss review. Additionally, NCUA informed us that the agency was not required to conduct a post-mortem review for the same reason.
But the IG then proceeds to state facts from the public 5300 call report and details of all the external resources and NCUA officials who became involved when the CFO died in April. Those listed include a local CPA firm, the NCUA’s supervisory examiner, the regional director, associate regional director, the director of special actions and a problem case officer. NCUA requested the credit union hire a bond attorney, fraud auditor and an interim CFO to work with its problem case officer. On May 3 the case was transferred to the Western Region’s Special Case office on May 3.
The only NCUA offices not listed are those ultimately responsible for the oversight of NCUA’s federal credit unions: the Executive Director, the Director of Examination and Insurance and the NCUA board. By omitting any mention of their role, they are apparently excused from any accountability.
In October 2024 Cobalt reported to NCUA that the “former CFO understated expenses related to the ATM network to artificially boost Creighton’s income statement to appear to achieve a steady net income.” The IG’s explanation also includes this assertion of agency’s due diligence:
When reviewing the deceased CFO’s family financial records and computers that:The regional director also said the fraud auditors looked for all ways cash could have left the credit union and found no instances of cash removal.
The IG’s concluding paragraph provide NCUA’s theory of the case:
In summary, NCUA officials believe the credit union failed due to bad accounting and financial statement fraud. The large deficit was hidden by the former CFO who exploited Creighton’s weak accounting system that allowed back posting, forward posting, deleting transactions, and hiding general ledger accounts when generating reports. Because no money was found to have left the credit union through this, NCUA officials believe the former CFO committed the fraud not for personal financial gain, but to make the credit union appear to be thriving in the eyes of its Board and membership.
Several observations from the IG’s summary. First all the information is second and third hand. The IG did not complete any direct review, but solely reported what others have said and done.
If this preliminary description is accurate, one has to believe this accounting coverup occurred over at least 26 years with an average operating shortfall of $500,000 per year between reported and actual net income.
To accomplish this alleged coverup, the CFO would have to keep two complete sets of books. As the deficits were recorded from share balances this would require hundreds of individual entries each quarter to balance out the shortfall but keep member statements accurate. Then these two sets of books would need to be updated quickly whenever external NCUA examiners and auditors arrived on site. Or whenever there was any external loan and share verifications.
A person capable of this legerdemain bookkeeping effort for over 26 years was however not capable of managing the credit union’s financial performance with positive net income?
There is no explanation of how such a consequential scheme could have gone undetected from annual CPA audits, NCUA examinations. supervisory committee share and loan verifications and traditional separation of duties in the accounting shop. It was not discovered until the CFO’s death in April. New people quickly found the out of balance situation and the $13 million shortfall. The fact that the share shortfalls were recovered so rapidly and then transferred in full to Cobalt, suggests these two sets were readily available. An internal defalcation involving member share balances over three decades would normally be an auditing and forensic nightmare to reconstruct. But in this case resolved quickly.
Finally, it strains credulity to believe there was no shortfall of funds. The cash had been received from the incoming share deposits. But the IG’s letter presents the assumption that the CFO just used “suspense accounts” to cover unrecorded continuing operating losses—that would average at least $500,000 per year. Why would a person go to this much trouble to just cover operating losses for which he was not directly responsible? If in fact it was failure to balance out ATM deposits and withdrawals—one suggestion—how could such a continuing imbalance go unnoticed for over three decades?
The IG report describes the accounting coverup: Specifically, the CFO had understated expenses related to the credit union’s ATM network to artificially boost Creighton’s income statement. And, The regional director stated that the ATM accounting was extremely complicated due to Creighton having over 150 ATMs and the multiple ways in which income and expenses could be divided.
A credit union of this asset and member size managing a 150 ATM network seems highly unusual. What happened to this system after the merger? Why were examiners and auditors unable to balance out this system for decades?
Assuming the CFO’s only rationale was to hide a continuing operating loss and that he received no benefit from his actions, one must ask who also might benefit from such a coverup? Who supervised the CFO? Is this just a situation of two country bumkins fooling all exam and auditing experts for decades?
Until the IG’s December response to Congressman Flood’s inquiry, all responsible parties have said nothing about the situation. Press queries are referred to call reports and to Cobalt’s press release saying the merger was due to the CEO’s retirement, a completely false account. Why would the NCUA and Cobalt put out such a blatantly false and easily contradicted explanation? Was it to avoid addressing the $7 million or greater shortfall that Cobalt members will now cover?
One fact is clear, everyone, including the IG is distancing themselves from any responsibility for getting to the bottom of this $13 million loss. The IG presents second hand information and lists multiple NCUA involvements with everyone handing off the ball to someone else-either internally or externally. Cobalt does the cleanup. The IG quotes Cobalt’s theory of the loss from October, not NCUA findings, for the missing funds. The IG washes his hand because no “material loss” review is required, but he will consider adding a review to his 2025 “to-do” list.
When people in positions of responsibility have nothing to hide, they will speak up with their understanding of events and what more needs to be done. In this case there is silence for all parties, but most especially the highest levels of NCUA. The initial explanation of multiple decades of accounting coverups creating a $13 million shortfall seems unlikely and inconsistent with some of the data reported. It feels like there must be more to the story.
NCUA’s lack of public candor is the real problem. No one at NCUA wants to take responsibility for the agency’s most fundamental role of overseeing a credit union’s safe and sound operation. Noticeably absent from IG’s account is the role of the three-member board, the information they received and the actions they did, or did not, take.
Did the Board approve the forced merger without member vote? If so, what was in the Board Action Memorandum about the situation and alternatives? Why was Cobalt FCU willing to absorb this accounting and operational mess with a $7.0 million loss which their members must now cover? Where is their upside, if any?
Why weren’t the previous NCUA annual (?) exam papers reviewed for how so-called unrecorded expenses could be disguised in other accounts (suspense and office expenses)? The three quarterly call reports clearly show the credit union reporting positive net income, but no increase in net worth until the yearend. Don’t examiners first review the accuracy of call reports as one of their first verifications? Etc. etc.
The Creighton case is an example of institutional failures. The most serious is not the $13 million unexplained loss shutting down a federal credit union. But the total lack of responsiveness to the members and the public by NCUA’s leadership. In a crisis, leadership should come from the NCUA board members, not the professional staff. They are merely foot soldiers. The leaders are missing in action.
Is the best explanation NCUA can provide Congress and the public an IG summary of second-hand agency actions, a listing of all the professional resources sent and offering a third party’s partial explanations of what may have happened?
The buck should stop at the Board’s three desks. The board members are nowhere to be found or heard on the most significant failure in 2024. A long standing, apparently successful federal credit union collapses overnight and costs its members their institution and $13 million in combined resources.
The NCUA board member’s inaction and silence when facing real problems in an open, prompt and responsible manner is a failure of leadership. Hiding from issues and accountability leads to internal coverups. It creates a lack of public confidence in the agency’s oversight. The perception that board members are not up to the agency’s most basic responsibility raises questions about their competency supervising other areas of credit union activity in which members good faith and trust (e.g.merger payouts) are routinely compromised.
After the TV investigation was reported on Monday, I received the following from a former Creighton member. It read :
Hi Chip – I ran across your coverage (in November) of Creighton Federal’s large shortfall. I am a customer there and had followed their directives to switch to Cobalt. Now I’m wondering if my money is safe at Cobalt! I liked some of Cobalt’s products (a money market savings account with high interest, for instance) and have been happy with their service so far. Still, your coverage of the slap-dash management at Creighton Federal, and its rescue by Cobalt has me wondering if I should move my money to another credit union in town that doesn’t have any problems (that I know of). Thanks!
Hopefully this case is at its beginning and the three members of Congress on the IG’s response will continue to press for actual facts, updated numbers and direct explanations for what happened. NCUA seems incapable of self-assessments. Credit unions should not expect perfection from their regulator, but they should have honest accountability.
Editorial update at 5:00 PM January 8.
Yesterday the WOWT station published this follow up report incorporating some of the IG’s December letters comments to Representative Hood.
Jimmy Carter’s life is a witness to making a transformative difference in the world by personal example and faith, versus the power of a position. This Thursday, January 9th, his legacy will be honored in a ceremony at Washington National Cathedral.
He has stated that the two great formative experiences of his life were the Great Depression and WW II. Today those events and their lessons seem from another era.
When he first announced his Presidential ambitions in December 1974, a Gallup poll asked voters to rank 31 potential democratic candidates. His name was not on the list. Yet just two years later he won the first primaries in Iowa and New Hampshire defeating nationally known opponents including Senators Scoop Jackson, Ted Kennedy and Robert Byrd.
At the July 1976 convention, he became the democratic presidential nominee.
He was a Southern Baptist who taught a Sunday School class whatever his position—as Governor, as President or as a private citizen. He lived his faith not by telling others what to believe, but by example.
In this official portrait by Robert Templeton (1929-1991), Carter is standing in the oval office as it was during his tenure. On the desk is a crystal donkey statute, a gift from the Democratic National Committee. This oil on canvas 1980 painting is in the National Portrait Gallery.
Credit unions, as in other segments of the economy, were entering a period of regulatory and market transformation. Carter’s one direct initiative for coops was to ask congress to charter the National Cooperative Bank in 1978. The bank’s purpose was to advocate for America’s cooperatives and their members, with emphasis on serving the needs of communities that are economically challenged.
However, the unique role of credit unions in America’s financial system was not a singular focus.
Rather, changes in the industry during his four years were largely driven by credit union’s specific legislative efforts and external economic events. The destabilization of oil prices led to rising energy costs, increasing inflation and ultimately, the highest interest rates seen in the 20th century. These economic factors helped spark the need and response for the policy of deregulation in multiple sectors of the economy.
Within the federal bureaucracy, Congress re-established the National Credit Union Administration (NCUA) as an independent agency in the executive branch on November 10, 1978 (12 U.S.C. 226).
The NCUA’s Central Liquidity Facility Act (CLF) (12 U.S.C. § 1795) was also created by Congress in 1978. The purpose was to provide credit unions their own source of liquidity similar to the Federal Reserve System’s discount window for banks and the FHLB system for S&L’s.
NCUA’s restructure gave President Carter the opportunity to appoint the three initial board members:
Lawrence Connell, Jr. – The Chairman, had previously been Connecticut Bank Commissioner. He served in the office of the U.S. Comptroller of the Currency (OCC) from 1958 to 1968.
Dr. Harold A. Black – A PhD economist, Dr. Black as a board member brought academic and financial expertise. He helped to integrate his 1962 freshman class at the University of Georgia.
P.A. Mack, Jr. – Served as Vice Chairman. Since 1971 he had been administrative assistant to Indiana Senator Birch Bayh. Mack was reappointed to a second term by President Reagan in 1984.
This was the administration’s most direct impact on credit unions. It followed the practice that personnel appointments in government are in fact policy. In his Presidential appointments, Carter tried to make the government more representative of the American people. His domestic policy advisor Stuart Eizenstat stated that Carter appointed more women, Black Americans, and Jewish Americans to official positions and judgeships “than all 38 of his predecessors combined.”
In terms of enhanced member services, in 1977 credit unions lobbied Congress to authorize mortgage lending and share certificates for FCU’s, products that had been available in multiple state charters for years.
Inflation hit 14% in 1980 and led to ever rising interest rates creating financial crises across major industries dependent on energy and sectors reliant on stable interest rates. These sectors were often subject to government regulations that set consumer prices, or rates paid to savers and charged to borrowers. These regulated industries were often limited in the scope of their services and in turn protected from direct market competitors.
Deregulation of these government-controlled sectors was introduced by the CAB in the airline industry, in long haul trucking, railroads and finally, the national monopoly known as Ma Bell, the AT&T phone company. The Carter administration also deregulated beer production, sparking today’s craft brewing industry.
Financial firms reliant on charters and deposit insurance were especially impacted by the sudden and increasingly volatile rise in interest rates. In response, Congress passed the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA ) signed by President Carter on March 31, 1980. DIDMCA had profound effects on financial institutions, including:
In his signing statement, President Carter made only a brief reference to the bill’s impact on consumers: This is not only a significant step in reducing inflation, but it’s a major victory for savers, and particularly for small savers.
Following the 1980 DIDMCA legislation, NCUA authorized Share Draft Accounts, a service that banks had contested when introduced by state-chartered credit unions earlier in the decade.
A final administrative action triggered by inflation was Executive Order 12201—Credit Control of March 14, 1980. In this order, President Carter granted the Federal Reserve authority to control the growth of credit, including all loans extended by credit unions and other financial intermediaries. The intent was to lower inflation by limiting loan demand growth at the institutional level.
Other than the three NCUA board appointments, President Carter’s administration had little direct comment about the cooperative financial sector.
When Ed Callahan became NCUA Chair in October 1981, the agency was still in a period of reorganization. Agency staff was top heavy in DC with 16 separate offices including a consumer examination program run independently of the six regional offices. There were departments doing tasks and reports the same way as ten years earlier, despite the new challenges of deregulation. Examinations were on a two-year cycle, at best. Semiannual call reports were not collected from all credit unions. The NCUSIF was cash poor and used 208 assistance to help credit unions regain solvency. The CLF had only several of the over 40 corporates as agent members, and only a handful of the almost 16,000 natural person credit unions had joined. There was uncertainty about how the CLF itself would be funded. In brief, the NCUA in 1981 had too much regulation and not enough administration.
Most of the changes in NCUA structure, the CLF, and even the enhanced mortgage and certificate services were sought by credit unions and underway before Carter took office in January 1977. Credit unions had seen deregulation work at the state level but implementing that policy on a national basis was at best uncertain.
The combination of economic headwinds and changing market competition led CUNA President Jim Williams to say their primary goal was “survival” at the February 1982 GAC conference. In response Chairman Callahan in his first GAC address said the solution was deregulation for credit unions coupled with a simultaneous upgrading of the agency’s supervisory capabilities.
However Carter’s influence goes far beyond his time as President. While his administrative and policy challenges were not viewed as successful when he left office, his insights and leadership perspective are now being reassessed. For example, his reasons for establishing independent departments for energy and education are now seen as critical to America’s future.
But the most memorable contribution may be his calls to common sense individual accountability. In his 1979 “Crisis of Confidence Speech” he challenged Americans to acknowledge their responsibility for the urgent national economic worries. He said in part:
In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.
His concern about society’s desire for the bigger, the newest, the “always more” is still a dominant motive today. For a person who grew up on a peanut farm in rural Georgia, lived through the depression, and who left military service to run the farm when his father died, character mattered more than material net worth.
Capitalism promotes and relies on consumer demand. This incessant drive has become endemic in society. When credit union leaders talk about progress in terms of billions, have we lost the cooperative focus on member well-being to the market’s alternative ethos of institutional dominance?
The title of his first book when announcing his intention to run for president was Why Not the Best? It was about renewing the can-do American spirit. The question Carter poses for us is can we invert our thinking about credit unions as successful financial institutions and again see them as a movement by and for the people.
by Paul Hooker, a retired Presbyterian pastor, presbytery executive, and professor who lives in northeast Georgia
Goodbye, fierce and gentle warrior,
farmer with your hands full
of good soil. You grew things.
You made your choices for weal and woe,
held your power loosely, let it go;
asked nothing of others
you asked not of yourself.
In extraordinary times, you were an ordinary man —
not a hero, not a saint, not a role model.
You looked into our eyes and told the truth
as best you understood it. We did not listen.
We wanted fairy tales of false greatness,
glib promises of never-ending good times,
eternal morning in a land immune to night —
Lies, all, and so you warned us.
But comforting calumny is easier to hear
than stony fact. We turned away
to worship at their shiny altars
these gods of glory, greed, and gore.
You wavered not an inch from your convictions,
smile undimmed by public humiliation;
you went back to planting crops
in fields where no one else thought they could grow:
Peace in bloodied ground,
homes in urban lots,
love stretched like a wedding canopy
over time and patience and simple faith.
Do not despair.
The fields you plowed still wait their harvest.
See, even now they bear your quiet fruit.
From LinkedIn yesterday:
An unusual approach to assembling a leadership team for a government agency.
Persons interested might review his positions and priorities from a speech on September 9, 2024 to the ACU Congressional Caucus. In the opening paragraph he remarks that his term ends in August 2025 and his search for ideas for his “remaining days:”
Good morning and thank you. This conference is one of my favorites. One reason I’m here is to get ideas on how I should focus the remaining days I have left in this job. Around this time next year, the White House will likely announce a new Board Member. That’s because my term on the NCUA Board ends next August, so I have less than a year left. Whew, I was worried that would be an applause line.
Later he notes his regulatory approach:
in America, you deserve protection from an overbearing government. . .
If NCUA or other agencies ‘get over their skis’ and interfere in the private financial affairs of credit unions and their members, the resulting credit union use of NSF and overdraft services could have the paradoxical effect of limiting access to financial services for those who need it most.
Governments often have coercive powers far beyond any financial institution. . .
I want to mention two fascinating new technologies that we often hear about: Artificial intelligence, and blockchain and digital assets, which includes cryptocurrency. I’ve made clear that the NCUA shouldn’t be a technophobic agency. . .
In reading the full speech, there is no reference to credit unions as cooperatives and any role that design has in his regulatory agenda.
Kiev Symphony and Orchestra welcome all to this season of joy and war, with song.
(https://www.youtube.com/watch?v=vjGM3mtqmv0)
A children’s puppet show.
The Messiah sung on December 9, 2024 in Kiev. Familiar music but a new experience when heard in the Ukrainian language. The promise of peace in a time of war.
(https://www.youtube.com/live/SuALTmDE1I8)
A principle of both internal and landscape architectural design is that “form follows function.” The concept was developed by Louis Sullivan, who used the phrase when he designed the Wainwright building in Chicago. It was utilitarian in design reflecting the office work that would take place within.
Examples of this premise can be found in numerous areas of biological evolution:
More to the point, credit union organizations are subject to this same evolutionary principle. The member owned, self-funded, locally focused, democratically elected leadership reflected the founding purpose of a financial cooperative. That is to combine individuals’ resources to assist those left behind or preyed upon by existing consumer options.
This special economic focus on those on life’s financial margins was supported politically with a blanket exemption from federal taxation. Credit unions were seen as an example of doing good for communities and groups rather than rewarding institutional profit and private ownership.
Today with abundant financial choices for almost all levels of society, the original purpose seems somewhat muted. The middle class of employed workers is doing well. Those with home ownership and savings in ever rising markets, even better. Serving those left behind is hard. These groups today are often the focus of special governmental or nonprofit programs
What happens to credit union design when the original function, or calling, is changed by market forces?
As in many other areas of life, the form changes as the focus of an organization evolves to serve all-comers not just those left behind by America’s promise of opportunity. The previous cooperative design elements are replaced by institutional priorities of growth, increased marketplace visibility and reach. These ambitions are driven by CEO’s and boards who inherited a legacy of financial resources held in common, but who chose to pivot away from traditional community and member investments.
This evolution places profits before people, thus turning upside down the cooperative priority. Growth comes from acquisitions using the collective capital pursuing other financial organizations. Internal value creation for the member-owners is seen as boring. Geographic diversity, new revenue sources and investing in fintech startups are the key to future success.
In short, these new designs make some credit unions indistinguishable from their for-profit privately owned competitors. Members are no more than customers, each a potential revenue or profit center.
This evolution is neither inevitable nor the ultimate outcome. But it does garner the headlines and lots of external brokers, consultants, advisors who introduce credit unions, as their next meal ticket, to the wonders of market capitalism. Credit union boards, executives and even external advisors who have limited grasp of their organizations’ legacies are easily seduced by the thrills of this market-place capture.
Self-awareness and self-restraint are hard characteristics to nurture when one is in a position of power and privilege. However, I believe the leaders of credit unions in the year ahead will be those whose vision may seem modest compared to more dramatic short term activities.
For values that sustain are not the result of temporary market success, but rather the hard-earned relationships nurtured over years. These values shape the functions to which leaders give priority. For those in positions of credit union leadership, cooperative design is still true to the original purpose.
