What’s with the Statue?

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. 

Continue reading “What’s with the Statue?”

I Wish I Thought of This Tag Line

“When we lose small, we lose big”

This phrase is not about the continual decline of smaller credit unions via merger and the lack of new charters.

Rather it is the advertising lead for Goldman Sachs 10,000 Small Businesses initiative. This is an investment to help entrepreneurs create jobs and economic opportunity by providing greater access to education, capital and business support services. The firm states more than 9,700 business owners have graduated from the program across all 50 states in the US, Puerto Rico and Washington, D.C.

A Simple Cooperative Counterpart

Is it possible for the cooperative system to emulate these “small,” bank-supported start up efforts by repurposing charters under new leadership when incumbents give up? Why not identify groups in the community willing to bring fresh passion and ideas to the existing charter framework?

Despite the pandemic, new business startups are booming. On the other hand, 200-250 smaller, decades-old credit unions close each year. There was only one new charter issued in 2020. The NCUA approval process takes years.

One “big” loss is that credit union entrepreneurs are unable to be partners with local business enterprises pursuing the American dream. More consequential, without the energy and innovation from startups, the ultimate BIG loss could be the ending of the unique cooperative financial system.

Credit Unions: Two Members Debate Cooperative Democracy

Freedom and democracy. Most believe these two concepts are inseparable. How could any society be considered free if the people do not have a real say in how they are ruled?

Government operationalizes these two ideas. There are multiple theories (conservative, liberal, libertarian, et al) and personal views on government’s role and authority.

Combined these foundational ideas are both powerful and fragile. However, current and historical events demonstrate the need for “eternal vigilance.”

The ritual of inauguration, the peaceful transfer of power and leadership changes, is the outward sign of the democratic covenant between citizens and their government.

Credit unions were conceived on these two foundations. Freedom means the opportunity to control one’s resources in community, to enhance economic opportunity. Especially in a market economy dominated by large private firms pursuing their financial self-interest, not the consumers.

Democracy is how this collaborative alternative to private wealth creation is to be governed. One person, one vote, with leaders chosen from and by the members.

A Credit Union Crossroad?

As many countries have shown, economic progress can occur without democratic government. China is a current example. Democracy is not just a set of bylaws or regulations that automatically self-execute. It is a process administered by those in authority. That oversight can be faithful to the concepts or manipulated while all the time professing democratic values.

America’s credit union system is at crossroads in democratic governance. For annual elections are frequently nothing more than exercises in self-selection by incumbent boards. Voting in mergers is a process manipulated to discourage informed choice let alone active member engagement.

The result is that many large credit union boards govern like self-perpetuating “trustees” as for a hospital, university or other not-or-profit organization. Access to leadership positions is tightly controlled. Institutional and individual success supersede the role of member-owners. Accountability is simply executing member transactions safely.

Recently two long standing credit union members exchanged emails on this erosion of cooperative democracy. One’s concern was the absence of board elections; the second member had just experienced the unanticipated downsides of a merger.

Two Members’ Thoughts on the State of Credit Union Democracy

I was copied on their exchanges which are edited for length.

One Member’s Critique of Board Elections

If the credit union directors were challenged, each would probably explain that anyone can serve on the Board of Directors and that is true. A nomination requires a petition signed by 500 credit union members; a completed application packet (with materials only available on request for a short period of time) and the approval by a “Nominating Committee” whose names cannot be disclosed.

The details and application packet are only posted once a year in January and are removed from the credit union’s website in May. The materials must be submitted to the nominating committee 90 days prior to the annual election which is scheduled in May. This gives the applicant just weeks to prepare for a nomination. The nominating committee then determines the names to put “in nomination”. For years only one name per open seat has been recommended avoiding any elections. From 2004 through 2018 there were only three open seats.

By creating a path riddled with obstacles with no term limits, the Board of Directors has created a culture of exclusion that ensures these same seven individuals will be able to continue sitting as directors for their lifetime while controlling the process for those who may serve alongside them.

A Member’s Cites Athenian Democracy

Last night right after reading your critiques (of credit union board elections), something dawned on me. Would you be familiar with ancient Athenian democracy? I want to test an idea with you.

I was “browsing” – in an old store, in an old town, when I came across a volume entitled The Constitution of the Athenians, written by Aristotle. I remember, vaguely, learning about the ancient world in history class in high school.

I stood there flipping through pages when I came to the chapter on Aristotle’s constitution. I was immediately stunned by the most unexpected aspect of the Athenian democracy. Get this: They did not elect their leaders; they were selected by lot!

Yes, literally drawn by lot. I’m talking about shards of old pottery that were used as tokens to be drawn at random to select the 9 archons. Naturally, my first response was one of utter disbelief that just anybody could be the material of solid leadership for a nation, much less the one system of governance touted as the prototype for modern democracy.

I finally caught onto the idea that it might be safe to regard most people as competent enough to lead. Especially if a lot of other eyes are watching them in a transparent process.

Curiosity drove me to devour the rest of that constitution. Checks and balances were built into that system to prevent the sort of mayhem and corruption one might conclude would be the possible outcome of a system of leadership drawn by lot.

Archons only served certain weeks of certain months of the year, at randomized times. At the end of their one-year term of service to Athens, they were subjected to an audit. Every dime had to be accounted for, and every decision made had to be justified.

Here’s the bottom line: In some 2 centuries that Aristotle discusses he notes that there were only 2 very brief periods of corruption, largely due to these systems of controls which he lays out in exquisite detail.

So, I have to wonder… if such a system could work for centuries, where democracy was first tried out on live subjects, then could it work for a credit union.

How would a credit union apply these procedures?

An outside auditor would draw however many names to fill the board, all performed in front of a live membership audience (even by Zoom if necessary).

We would select persons for the board to serve for certain periods, but no one would know exactly who, when, or in what order. This would prevent anyone from taking deleterious actions, since other board member (also randomly picked) would be relieving them next, whose duty would be to check that everything was in order upon their taking their turn at the helm.

Each board member would be accountable, individually, by way of a public audit of their activities during their staggered and unpredictable periods of duty.

Any dealings with other organizations — such as potential mergers, e.g. — would be open to question and discussion at that time.

The key is that members of the CU could only serve ONCE, and only for a limited period of service.

Term limits would prevent endless manipulation and personal betterment on the backs of members of the coop. The end of endless terms. The end of non-diversity, since board members will be chosen at random from applicants desiring to serve. The end of unilateral and secretive decision-making without membership input. Those self-serving possibilities stand little chance this way.

I believe this model has a chance of working. At the very least, any alternative system to the current approach would be a welcome improvement.

PS As an interesting aside, recent research into Koine Greek seems to indicate that the word democracy does not mean “the people rule” as is often purported. It more accurately appears to mean “the power of the common people” — and note that the word common is essential here. The word democracy intends all-inclusiveness, and I strongly feel that this point is perfectly relevant to cooperative systems of governance.

The First Member Responds

The “bottom line” is simple…the credit union is not bound by anything, so the directors operate their credit union like the Politburo. The NCUA provides broad guidelines for elections that would provide each of the over 1 million members an opportunity to serve in a board position. Instead, the credit union has chosen an election path that makes it impossible for anyone, other than the incumbents to serve. Consequently, you have a board made up of individuals who have served for over 20 years and will never give up their seats. The most recent vacancies were a result of death and illness.

The Proponent of Cooperative “Athenian” Democratic Reform

You are right; perhaps the board is not required to perform its duties in any particular fashion. But what sort of model would one use to ensure that members will never again be abused the way they have been historically? My ideas are an attempt at implementing democracy, albeit in a manner unlike what passes for democracy in the world today.

Judging from the lukewarm response, I’ll take that as a cue to push this no further.

The First Member

My lukewarm responses are based on the fact that fighting this is an uphill battle. Personally, I will continue to push. The best way to ensure that members will never again be abused by a group of leaders who value their power over diversity and democracy. That’s my objective.

My Takeaway: Term Limits

By law NCUA board members are limited to one term, a maximum of six years. Or until a successor is appointed. All three board terms are staggered.

Is NCUA’s Board structure an application of Athenian democratic governance described above? Should term limits apply to credit union boards? What is the role of “common people” in a cooperative organization?

FOM: a Regulatory Vestigial Organ

NCUA and a few state regulators still profess fidelity to the field of membership concept. Credit union competitors love the idea as a political attack weapon.

The first credit unions were begun with open, community service areas. Only later were specific FOM requirements introduced by law.

Now the last bastion of this formerly sacred concept, is getting a new charter. NCUA’s process is one of attrition.  Few applicants survive the regulatory obstacle course; most give up.

Bureaucratic instincts die hard. The impulse to stretch the process interminably is because it is somebody’s lunch pail .

I was reminded of this anachronistic obsession by a CEO’s reaction to FOM commentaries on NCUA’s recent “updates.”

“Depending on your point of view, these are trade groups guarding the gates like an old dog tied to a tree; or the NCUA winning a shadow boxing match with banker’s lobbies swinging at ancient windmills. It’s a time of political theater where trades and regulators prop up their dues.”

Everyone Is Welcome

A second reminder was this website:

The Largest Credit Unions Anyone Can Join https://www.depositaccounts.com/credit-unions/anyone-can-join/

This website, Deposit Accounts–“a different kind of bank account comparison site”–is apparently supported by Lending Tree. Under each credit union name is the link “how you qualify” describing how anyone can join.

The list ranges in size from Cadets FCU in Buffalo, NY at $14.8 million to PenFed in VA at $26 billion. Some are federal and some state charters. All have a member option open to anyone.

The purpose of the listing is described as follows:

Overview of the All-Access Credit Union List

The list is now updated daily. By default, the list is ordered based on asset size. Click the column title “Credit Unions” to order alphabetically or “Branches” to order based on the number of branches.

Click on the name of the credit union to visit our hub page for that credit union. The hub page lists all of my blog posts for that credit union. It also includes the credit union rate tables, financial health, branch locations and readers’ remarks.

A Reminder

Before deregulation credit unions would frequently use the phrase, “my members,” to assert, and no one else’s. Today members have choices even among credit unions. These listings remind us that credit unions succeed not simply by whom they serve, but how they serve their member-owners.

From the Field: The Source for AI?

A CEO shared some new data runs his team had prepared. The analysis was trying to identify potential auto loan prospects. His response:

“Love to have some thinkers give me 20 more routines for the programmers to crunch on. Where are the people who are thinking like AI?”

Hamilton: The Credit Union Connection

The family of Lin Manuel Miranda, the creator of the historical musical Hamilton, is from Puerto Rico.

His extended family still lives there. As a child he would visit Vega Alta, his family home in the summer.

One of the local economic institutions is VegaCoop, a credit union. (https://vegapccoop.com/auth/login?lang=en_US)

The credit union was founded by Ignacio Miranda, the great grandfather of Lin Miranda.

It is one aspect of credit unions’ presence in Puerto Rico. Over 100 of these locally chartered cooperatives are regulated and overseen by COSSEC.

There are 7 NCUA chartered credit unions* with headquarters in Puerto Rico providing banking services from 33 branch office locations as of January 2021. These federal credit unions have a total of 90,209 members with over $935 million assets. Finally, there are branches of US based credit unions such as Baxter (BCU) with full operations.

The Miranda Influence

The story of Vega Alta, Miranda’s family, and the economic problems in Puerto Rica are summarized in this NBC news story from 2016. It includes a clip of a school children performing one of the songs from the musical.

Hurricane Maria devastated the U.S. territory on Sept. 20, 2017, ultimately killing at least 2,975 people; it was the deadliest U.S.-based natural disaster in 100 years.

Over 200,000 Puerto Ricans left for the mainland, many temporarily and some permanently. Island residents had no full power for almost a year. The health system was overwhelmed, and an understaffed forensics sciences department couldn’t keep up with the bodies piling up. Not much progress has been made since.

Puerto Rico’s Economic Plight

Lin-Manuel began advocating for Island relief in the form of a restructuring of Puerto Rico’s $70 billion debt in 2016.

“I write plays. I am an artist. I figure out what words rhyme. I never asked for this role,” said Lin-Manuel, “I don’t know what else to do when your people are suffering and you have a giant light on you. All you want to do is just take the light and reflect it on them,” as he described his strong ties to the Island.

The Credit Union Opportunity

The Island’s circumstances have only worsened since these financial and natural disasters. The question: is there a way for credit unions or leagues to partner with the Puerto Rico credit union system and strengthen the cooperative self-help economic model? And invite Lin Manuel Miranda’s participation?


*Seven Puerto Rico FCU’s at September 30, 2020

Rank State Name assets
1 PR Caribe $483,643,621
2 PR VAPR $233,042,199
3 PR Puerto Rico $166,796,050
4 PR Universal Coop $27,950,406
5 PR Borinquen Community $16,249,885
6 PR Glamour $4,245,800
7 PR Puerto Rico Employee Groups $3,343,064
Totals for 7 institutions $935,271,025

5 Years Old and Selling Cookies Online

The annual Girl Scout cookie fund drive is underway virtually, as most office and on-site sales are under quarantine restrictions.

The email announcing this event from is from my 5 year old great grandniece.   Olivia already “attends” virtual kindergarten. She does virtual exercises and I presume is a virtual Girl Scout.

My first reaction was virtual cookies? We already have those!

Beginning school, social and business skills via the Internet means this generation will be one of the most virtually enabled ever. What else will this early mastery of digital reality change for this generation and society? And what are the implications for every organization hoping to attract their engagement?


The Ship’s Captain Surrenders

Flying to Japan in April 1970, I had two days to find off-base housing for my family before beginning sea duty on the Windham County LST 1170. The ship left Yokosuka Naval Base to join a small task group in Operation Golden Dragon.

Golden Dragon was a joint military exercise with the South Korean navy off the coast of Korea. Our LST’s tank deck was filled with Korean marines, landing craft, trucks and tanks for amphibious landing drills.

As we crossed the Sea of Japan, the ship’s captain, CDR J. P. Mann, reminded us of the January 1968 seizure of the USS Pueblo (AGER-2), an intelligence gathering ship. Captain Bucher and his crew of 82 were held for eleven months before release.

Our captain told the officers in a wardroom meeting that should there be any threat of North Korean intervention, we should know he would never let his ship be captured, whatever the circumstances.

That was my introduction to how this commanding officer understood duty and our collective obligation. Growing up I had watched the WW II television series “Victory at Sea” with its portrayals of the Pacific island-hopping campaigns. Now it was real life.

Credit Union Duty

There are three pillars of cooperative duty:

  1. The trust, loyalty and support of the members
  2. Leaders who take the fiduciary responsibility managing their inherited legacy to heart
  3. An effective networked collaborative support system including sponsors, joint ventures, supervision and collective resources.

If members lose confidence, leaders shun accountability, or supporting organizations forget who founded them, the cooperative model will slowly decline in relevance.

All Three Pillars Weakened

Two back-to-back emails from members about a current merger vote suggested that all three elements of duty are lacking in this proposal.

One read in part:

“I’ve learned a lot about credit union mergers from you. Curious if you have an opinion about the merger of Kinecta FCU (formerly Hughes Aircraft Employees FCU) and my credit union Xceed Financial/XFCU (formerly Xerox FCU).

Based on online reviews of Kinecta FCU, I voted against the merger. As a former Xerox employee myself, my father worked for Xerox in Rochester’s Xerox Square for 30 years I hate to lose the affiliation of what’s left of my Rochester focused credit union.”

The second was a comment on my blog, “Should a CEO’s Last Act be a Merger,” published August of 2020.

“Is there any organized attempt among members to oppose this merger?

I have been a member of Xceed for over 25 years and have been very satisfied with the institution.

I was also a member of Kinecta from 2002 until I closed the account in 2017 due to them nickel and diming me with fees that were often worse than the big banks, and horrible customer service.

In 2014, Xceed gave me a substantial personal loan, right after Kinecta rejected my loan application.

I have no desire to go back to Kinecta’s fees and horrible customer service and will likely close my account if the merger goes through.”

Until these emails, I had not seen Xceed’s Member Notice of December 30 requesting member approval for the merger. Reviewing this Notice confirmed the issues in my first blog. For this event is nothing less than giving up the ship. This sale of long-standing member relationships, loyalty and common resources by those in authority undercuts all three cooperative pillars.

Xceed’s Leaders Surrender

Voluntary mergers require that members vote to approve closing their charter. No minimum participation is needed. A simple majority determines the outcome. Each member has one vote regardless of account size or length of membership.

To properly make this voting decision, members should have sufficient information to exercise an informed choice. This Member Notice is woefully deficient in describing why the abandonment of this 1964 charter is necessary.

Some of the questions that should be addressed so Xceed’s 48,500 members can make a knowledgeable decision about management’s proposed “surrender” include:

  • Since members are turning their long-standing relationships to an unknown management team and board, why is no information on these individuals provided?
  • If Kinecta is the chosen successor, why is no data about their past and present financial performance, current business model and future plans given?
  • If “enhanced convenience” is one of the reasons for merger, how does adding 23 Kinecta branches, all in Southern California, help Xceed’s members in their eight locations in New York, New Jersey and northern California?
  • If Xceed’s employees and branch network are integral to member value, why were employees given no post-employment commitments and all branch locations now “subject to business necessity?”
  • Xceed’s net worth ratio is 20% higher (10% versus 7.9%). Why are the members’ $94 million reserves given to the “continuing credit union’s” control and they receive nothing? Not even a token homage for their $2,000 individual pro rata value?
  • If merger costs (contract cancellations, core conversions, etc.) are so great that transferring Xceed’s $94 million equity “will not result in a material increase” in Kinecta’s 7.9% net worth ratio, shouldn’t these new costs be fully disclosed?
  • If “better pricing, additional products, lower operating costs” will result in “lasting benefits” why is no single fact or comparison of existing fees, savings or loan rates provided to support this promise? What is the evidence of Kinecta’s superior member value?
  • What is the basis for five senior employees receiving a “possible maximum amount” of additional compensation of $3.5 million while giving up their leadership roles and responsibility for future performance? What is the rationale for the CEO gaining $1.5 million in added compensation above that earned by staying on the job? Is this a conflict when senior managers negotiate their own benefits and do not provide any for members?

The Record of Xceed’s Board and CEO

When asked to approve a merger, members should have factual information not merely rhetorical promises of a better “low-cost” future. Lack of facts suggests the merger tactics have not been thought through.

Performance data is especially important in evaluating the marketing clichés and future hopes offered in the merger Notice.

The track record of Xceed’s leadership is one of continuing decline. The past five years show a compounded annual (CAGR) asset growth of negative (-0.67%) per year. The CAGR for the CEO’s 14-year tenure is 1.39%, less than a quarter of the industry’s 5.77% annual growth. This 1.39% long term growth includes five mergers that added $200 million in external assets and over 30% additional members in this time frame.

The September 2020 financial report shows a year-to-date loss of $1.7 million versus a $2.5 million gain for the same nine months in 2019. The members are already “voting” with their feet: over 4,000 (almost 8%) have left the credit union in the 12 months ending September 2020.

The board and management responsible for these trends state their future roles as President of Kinecta and two directors will “help ensure members have a voice.” What support could this “voice” be in light of their own abdication?

Xceed’s CEO provides members with the criteria they should apply in voting on this proposal. In a 2010 Credit Union Times the CEO wrote:

“At the end of the day, credit union mergers must be based on what’s best for the member (of both credit unions). At Xceed FCU, although we operate across the country, we wouldn’t merge a credit union just for the sake of expanded asset size.”

She continues: “Mergers call for serious consideration and although I appreciate the unprecedented difficult operating environment, we find ourselves in today-let’s continue asking the question “What’s in it for the member?”

Kinecta’s Track Record of Size and Performance

Since Xceed’s summer 2020 announcement, this combination has been justified by saying larger size will bring better value. As presented in the Notice:

“The combined credit union, and consequently the members will benefit from the economies of scale (including a combined entity totaling approximately $6 billion in assets and approximately 300,000 members) translating into lower operating costs by allowing such costs to be spread over a wider membership base. . .this merger (will) create a larger credit union that will be in a strong competitive position to offer members greater value than they have today.”

Kinecta’s record of its “competitive position” suggests that there is little relation between performance and size in this organization. The following shows long term and more recent trends in Kinecta’s asset ranking. It continues to fall even though it has been in the top 100 listing throughout this listing.

1978: Hughes FCU, #3 of all 12,759 FCU’s; no state cu listing available
1995: Hughes FCU, #9 of all 12,107 credit unions
2005: Hughes FCU, #16 of all 9,062 “ “
2015: Kinecta FCU, #34 of all 6,284 “ “
2017: Kinecta FCU, #40 of all 5,815 “ “
2018: Kinecta FCU, #43 of all 5,482 “ “
2019: Kinecta FCU. #47 of all 5,349 “ “
9/20: Kinecta FCU, #49 of all 5,244 “  “

This fall from #3 to #49 means Kinecta’s performance is not keeping pace with its peers. In 2010, Kinecta attempted a merger with NuVision using a two year trial run with a shared CEO. After reporting a $30 million loss in 2011, the effort was ended.

As of September 2020, Kinecta’s 2.74% operating expense to average assets is lower than Xceed’s 3.59%. But size does not automatically create better member value. Together the credit unions report losing 16,000 members in the past twelve months. Kinecta’s 12,000 drop is equal to almost 5% of its total from the previous year.

These declines are not a sign of member confidence. Member value depends on the business model, not the institution’s size.

Members Told to “Abandon Ship”

The two emails above suggest that members are disheartened as they are asked to leave the self-help craft in which they placed their trust, loyalty and belief for six decades. And how must they view the ship’s captain rewarding herself and the senior officers after bailing out of future responsibility.

With so many unanswered questions, Xceed’s members should vote No.

Management’s proposal to sell their cooperative’s future to an unnamed board, an unknown leadership group and then rewarding themselves with additional millions in compensation is a failure of leadership. A violation of duty.

If a No vote prevails, this $3.5 million dollar payoff plus the savings from added merger expenses, should be enough to find the right crew to set a better direction going forward.

One Credit Union’s Alpha and Omega

Alpha: The Government Giveth

Esau Jenkins – pre of Citizens’ Committee of Charleston County announces Credit union approved!

From The Pittsburg Courier, October 8, 1966, page 16.

Omega-The Government Taketh Away

C O Federal Credit Union Conserved

ALEXANDRIA, Va. (Jan. 5, 2021) – The National Credit Union Administration today placed C O Federal Credit Union in Charleston, South Carolina, into conservatorship.

C O Federal Credit Union serves members of The Citizen Committee of Charleston County, South Carolina, who live in Charleston County and members of the International Longshoreman’s Association — Local #1422 in Charleston.

C O Federal Credit Union is a federally insured, federally chartered credit union with 785 members and assets of $4,488,256 and over 10% net worth according to the credit union’s most recent Call Report

Member services will continue uninterrupted at the credit union’s main office at 117 Spring St., Suite C, Charleston, South Carolina.

Long Live the Government!

The Greek letters alpha and omega