Month: November 2019

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Thanksgiving for Life’s OMG Moments

I did not understand the OMG reactions in text messages when I first saw them. Did not know what it meant. And when I learned, thought it a cliché.

I have come to recognize that these three letters are the sender’s stamp for a special experience. A kind of shorthand for a secular prayer of joy, insight or even sorrow.

Some Personal OMG Moments

An Unexpected Win

This summer I was watching an iPhone video of the SRAA National Championships rowing finals in Dillon Lake, Ohio. The boys 8-person varsity entry from Wilson High School in the District was not supposed to be there. My sophomore grandson was in the two-seat. They had not made the finals in their qualifying regatta. But the coach petitioned and received an exception entry. They were seeded at the bottom of the teams.

As the finish of the finals was being recorded live on an iPhone video, the sound of the phone’s owner became louder and louder as they ran along the shore capturing the last two hundred yards. I heard again and again: “Oh my God! Oh my God! They are going to win!” And they did. Becoming national high school champions.

National HS champions

Coming in Second: Twice

As both a freshman and a senior, my granddaughter’s high school volleyball team worked its way to the state championship rounds. As a freshman they lost in the final championship match-second place. As a senior they finished second again in the Northern California playoff. After her final senior match she sent an Instagram post to her followers as a thank you for their support. The words that stuck in my mind: “There is not a single thing about my four years with M-A volleyball I would change.” I thought OMG, gratitude, even when coming up one match short of winning it all, more than once.

Recognizing a Busker

The concert of Richard Einhorn’s Voices of Light, a choral work accompanying Theodor Dreyer’s silent film The Passion of Joan of Arc, had ended. We walked to the parking garage with the crowd of other concert goers to take an elevator to our car. A tenor singer, still in concert dress, said to hold the elevator as everyone crowded in. He walked over to the busker, between 50 and 80 in appearance, who was seated, playing an accordion at the end of the long entry hall. The singer reached into his wallet and dropped a bill into the little box at the musician’s feet. One musician out of a chorus of over 100, completing a performance in a very modern concert hall with full orchestra and silent film, pausing to recognize a person performing for change, not applause, in a parking garage entry. OMG

Life’s OMG Moments

Every day we experience OMG events. Sometimes it is as simple as seeing again the stunning beauty of a tree changing seasons:

Or, it can be as grand as the communal expressions of disbelief and joy as the Washington Nationals won the world series.

Washington National’s logo (curly W) and team colors light up the National Cathedral during the World Series.

Thanksgiving is a moment, a pause, to share OMGs. Whether it is seeing family members who have been absent for a time, sharing food from recipes handed down through generations, or just being together around a traditional table, it is a celebration of gratitude. For life’s special moments and for each other.

But try to avoid the one OMG moment we all fear: OMG, I ate too much!

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Thoughts on Mergers: The Tallest Candlestick Ain’t Much Good Without a Wick

I am increasingly concerned about mergers of well run, healthy credit unions. And the bandwagon that many credit union CEOs seem eager to join. Here are my reasons why.

One of the most important innovations of the cooperative financial model was to give ordinary citizens the right to “own and manage the means of financial production.”

Without this option, members would just be consumers of financial services at the mercy of whatever options the market, private enterprise or non-regulated firms offered.

Making Capitalism More Democratic

The co-op response emerged out of the progressive era at the turn of the 20th century. Large monopolies controlled railroads, banking and other vital industries such as steel and oil. Farmers were one of the first groups to organize against large corporate monopoly power via co-ops.

The credit union belief that regular citizens, not the wealthy, could own, control and invest their collective savings was both a political and an economic innovation.

The elected boards were the mechanism by which the governance and democratic purposes were carried out.

The Importance of Economic Democracy

As consequential as the movement’s financial growth to over $1.6 trillion has been, the value of cooperative design goes beyond a purely economic role. Or offering just another market option. Benefits individual credit unions provide for their communities and member groups include:

  • Collaborative economic capacity inspired by purpose, passion and values
  • Direct CEO accountability to user-owners
  • Elected oversight of directors, from the membership
  • Focus on community needs and priorities
  • Reinvestment of savings responsive to local conditions
  • Firsthand knowledge of members and community circumstances-both routine and in uncertain environments
  • Leadership in the community to support other local solutions

Credit unions are an essential part of members’ lives especially when communities, no matter the size, are hollowed out by changing economic, political or even demographic events. Credit unions’ roots provide local, CEO level, leadership capacity and staying power in ways other economic firms cannot or will not do.

Mergers of Healthy Credit Unions Compromise Cooperative Design

NCUA released the latest batch of merger totals. Year to date, there have been over 110 approved. In the last five years the total exceeds 1,200.

The most frequent reason provided in the NCUA summary spreadsheets is “expanded services.” A very small number report difficulty finding officials, and a one or two, poor financial condition in the third quarter 2019 summary.

None of these situations is irreversible or necessarily fatal. Yet the industry has accepted this consolidation as inevitable. Regulators routinely encourage mergers for situations that would be temporary but lack oversight perseverance. Consultants tout their help in arranging new combinations–for a fee.

The Agency Challenge and Board’s Fiduciary Role

Most mergers, especially among healthy credit unions, are initiated by the CEO. Almost all credit unions merging today were begun at least two generations (50 years) ago or longer. All have survived severe economic cycles, regulatory disruptions, constant technology innovations and leadership changes in their decades of service.

But today the boards, led by CEOs, have thrown in the towel. Forgetting the responsibility for the legacy they inherited and their accountability to future members, the board’s present “happy talk” narratives saying the credit union can no longer meet its responsibilities to the member-owners.

Instead of carrying on their fiduciary duties to members, they transfer this financial and relationships legacy to another credit union. Often the senior leadership has carved out a better immediate future for themselves. This is often accompanied by a token “incentive” special dividend, if members will give up their accumulated commonwealth reserves and political control over their co-op’s future.

Although boards and their CEO are supposed to be agents of the members, they can also be motivated by self-interest. The best support for this interpretation is that most merger discussions are portrayed as extending over a year or two. Boards state they have routinely evaluated all strategic possibilities. Even though these discussions occur during the annual election-meeting cycle, I have yet to find a board seeking election while stating their intent to merge the credit union.

Rather, a sudden decision is announced with no prior public information. Members are asked to give up their independent charter on short notice. Their accounts are transferred to another credit union seemingly offering a better deal than what their own board and senior management are able to provide.

In this message-controlled process by the CEOs and boards, there has never been a member vote against a merger. Developed in secret, the charter surrender is then marketed as a logical decision to members, completely unaware such a pivotal event was even needed. No other option is allowed to emerge. The incumbent always wins.

The Irrelevance of Size

The benefits of cooperative design do not depend on size. Very large credit unions can be just as focused on member well-being as small ones. Often a credit union’s size ambitions reflect its market reach. As FOMs expand, so does the logic for larger and larger size, resulting in a self-justifying need to seek mergers.

The difference is not the size of the credit union, but its approach to business strategy. Some credit unions want to be primarily commercial firms with institutional ambitions that mimic the for-profit banking sector. Other leaders focus on innovation in member service. Both approaches can fit within the cooperative model.

The difference is what success criteria are used. One is driven by institutional performance, the other by member well-being. Regardless of size, I believe that strategies that focus on commercial success are like candles without a wick. No matter how tall, they will never shed any light.

Shredding the Legacy

Why should credit union leaders care whether mergers are driven by “commercial” motives or member well-being? Because democratic co-ops are hard to sustain if the member focus is subordinated to agent self-interest. Cooperative democratic governance depends on values where leaders follow the highest standards of fiduciary conduct overseeing collective wealth. It is based on the foundation that members’ interests will always be paramount. Abdication by boards and CEOs of decades of cooperative investment justified by marketing bromides about future benefits, compromises the reasons credit unions were created in the first place.

The unchallengeable progress of the credit union system demonstrates both the need and power of cooperative design for the American economy. If its distinctive purpose is increasingly hijacked by questionable combinations driven by self-interest, then the entire system’s foundations are at risk. For if credit union CEOs do not believe in their own institution’s autonomy, but instead are open to the best offer, will members themselves respect the cooperative choice?

Mergers are complex and hard to engage in non-interested discussion. However everything we say or do affirms or critiques the status quo. To say nothing is to say something; in this case, that the status quo in merger trends is okay. I believe these trends are not okay.

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The Necessity for Coop Designs: Food Deserts Turn to Co-ops for Local Grocery Stores

On November 6, a New York times story In Land of Plenty, Few Places to Find Fresh Foods described the challenges of small, rural communities maintaining local shopping options.

The article led with an example of a small town in the Midwest that is a center for the farming community. As in many other small communities across the country local grocery stores have closed in the face of large regional competitors. “It’s the story of every small town; it’s a domino effect and it starts with the grocery store,” states a resident of Winchester, Illinois, a town of 1,500.

The irony of over five million people who make their living feeding the rest of the nation but having to drive at least 10 miles to buy groceries, has prompted local residents in a number of these circumstances to seek new options.

One solution is to set up cooperatives financed by residents to start their own stores. “This isn’t charity. This was self-responsibility. If you want a grocery store in town, you have to step up to it,” says one of the founders of Winchester’s for-profit coop which opened in August 2018.

The article describes multiple volunteers contributing community help and resources. Radishes and spinach are delivered from a local farm; milk from a local dairy; beef from a nearby ranch and eggs are delivered once per week by a local farmer.

Co-op design allowed local residents to mobilize resources for solutions that larger firms do not see as practical or profitable.

Parallel histories for farmers and consumer finance

Farming coops are one of the creators of this country’s collaborative business model at the turn of the 19th century. So popular were cooperative solutions in rural America, that the original bureau for federal credit unions was assigned to the Department of Agriculture in 1934 when the Federal Credit Union Act was enacted.

Credit unions in the past and even today actively serve “credit deserts”. These are communities where no locally-owned financial institutions are located. Credit policy and lending priorities are set at headquarters located outside the areas served.

Relevance for credit unions

Should these “fresh” initiatives be borne in mind as several hundred local credit unions per year cancel their charters to merge with larger, often out-of-area, credit unions? Is giving up local control, leadership and resource allocation compromising the unique capacity of credit unions to fill voids left by larger financial competitors?

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The Versatility of Co-op Designs

On Tuesday November 12th, the largest milk company in the Unites States, Dean Foods, filed for bankruptcy.

Among the contributing factors were too much corporate debt and changing consumer attitudes toward both branded products as well as the traditional dietary recommendation to drink three glasses of milk per day. In 2017 Americans drank 37% less milk than in 1970 according to the Agriculture Department.

The solution to continue providing distribution of dairy products according to newspaper accounts is “to sell itself to Dairy Farmers of America, a marketing cooperative that sells milk from thousands of farmers.”

This situation illustrates the ability of persons and firms affected by the market conditions can potentially ally via a cooperative to address changing circumstances for mutual benefit.

A Lesson for Credit Unions

What can credit unions learn from this example? When the taxi medallion crisis arose, credit unions were best positioned to help borrowers transition to the new, lower valuations. But these options were stopped as NCUA liquidated the credit unions experienced in these kinds of transition problems. Without a firm that can renegotiate and continue to serve these borrowers, the only option is to force collections even if this causes member bankruptcies.

Meanwhile Uber reported a $1.2 billion loss in the third quarter. 

It is forecasting a profit sometime in 2021 as it runs through investor capital. The taxi industry will adapt, just without credit union participation.

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Wisdom from the Field

“The primary purpose of MANAGING is to keep current systems functioning, while the fundamental purpose of LEADERSHIP is to produce useful change!”

Steve E. Kelly, President, Metrum Community Credit Union

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Impeachment Hearings and a Congressman’s Lament

Glen Taylor was a singing cowboy who worked as a country musician, construction worker, on sheet metal and as a carpenter.

He ran for Congress and lost in 1938, 1940, 1942, 1954 and 1956.

But he won a seat in the Senate in 1944 as a progressive democrat from Idaho. He was also the Progressive Party’s nominee for vice president in 1948.

He lost in his party’s 1950 primary after being called a communist.

In his farewell address for his one Senate term he described his political approach: “At one time, I stated on the floor of the Senate that I was going to vote my convictions, as though I never expected to come back. All I can say now is that I did vote my convictions and I did not come back.”

An observation true for today!

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A Great Place to Work: Minimum Wage at $41,000 per Year

Bank of America announced this week that they are accelerating the implementation of a new higher minimum wage to $20 per hour at the end of the first quarter 2020.

This equates to a full time salary of $41,000. In explaining this one year speed up of the increase, CEO Brian Moynihan also explained that the bank had reduced the cost of health insurance by half all with a goal of making Bank of America a great place to work.

The action also speaks to the increasingly competitive labor market at full unemployment described in my blog How Tight is Today’s Labor Market.

What Makes a Great Place to Work?

Starting salaries certainly matter, especially for a first job. But is salary sufficient to retain the people an organization relies upon to build a sustainable future?

Successful credit unions also create cultures in which people feel good about their work carrying out the organization’s purpose, what they do for and with members, and expanding career challenges.

Financial rewards are only one aspect of a dynamic and leading organization. Necessary, but not sufficient.

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Two Stories for Veterans Day

Veterans Day is a reminder of both the sacrifices and service of those who serve on active duty and the home front. These two vignettes capture courage in battle and the parallel commitment given by those praying for safe return to family.

Courage in Battle

Last week the New York Times reported the deep sea location of a destroyer escort sunk during the battle of Leyte Gulf in October, 1944.

While the article was about the technology used in discovery, the context of the battle was also summarized.

It prompted me to look up a fuller account, found here.

Two facts stand out from this description:

  1. The American task force, Taffy 3, was completely outgunned by the Japanese. “Just after sunrise on 25 October, Rear Admiral Clifton A. F. Sprague’s TG 77.4.3—call sign “Taffy 3”—the northwesterly-most task unit, made up of six small escort carriers, three destroyers, and four destroyer escorts, was stunned to confront four Japanese battleships (among them Yamato with her 18-inch main guns), six heavy cruisers, two light cruisers, and 11 destroyers.”
  2. So what did the Americans do in this naval mismatch? They attacked, again and again, launching three separate sea and air assaults during the morning long battle. “At this point, with the exception of John C. Butler, the escorts had expended all of their torpedoes. Given the dispositions of the two forces, it was also questionable if an advantageous firing position was even still possible. The destroyers and destroyer escorts had to resort to darting attacks at the Japanese cruisers while firing their guns, zig-zagging back and forth between the carriers and the enemy. Smoke screens partially shielded Sprague’s carriers, but the escorts were hit hard, yet remained underway and able to fight. “

And the outcome of this battle even with the loss of five ships and hundreds of lives was:

“The initiative, aggressiveness, and outright heroism demonstrated by Taffy 3, combined with determined U.S. naval air attacks, limited Japanese situational awareness, and pure dumb luck, the Americans had stymied Vice Admiral Kurita’s intent to destroy General Douglas MacArthur’s U.S. landing forces in the Leyte Gulf.”

Sam Cox, a retired Navy rear admiral and director of the Naval History and Heritage Command states in the Times article that as the U.S.S. Johnston DD 557 was sinking, the crew of a Japanese destroyer saluted the vessel.

“They didn’t think Americans had that kind of bravery,” he said, “so that surprised them.”

Serving at Home with Devotion and Courage

The most important event while on board a ship at sea was mail call. During the Vietnam War, deployments away from home ports, would extend for months. While away, there was no contact possible with home except letters. Military families serve along with their active duty kin. My wife wrote this letter while living “on the economy” in Hayama, Japan with our 15 month old daughter, Lara. Windham County, LST 1170, was supporting a Navy Seal and Vietnamese ranger outpost called Solid Anchor on the Cau Mau peninsula at the very tip of Vietnam. As Supply Officer, I paid the Seal Unit and their US support with military pay certificates (MPC), transported oven roasted turkey dinners to the base on Christmas and ran a ship’s store outlet selling boom boxes, current cassette tapes and geedunk (snacks). Mail deliveries aboard ship were by helicopter from Saigon on an irregular schedule.

February 2, 1971

Dearest:

It’s a “burr-freezing” morning as Lara and I say. Imagine her clinching her little fists and scrunching up her cute face and trying to shiver. That’s what it’s like. The thermometer has been in the mid-twenties at night, in the forties during the day. So it isn’t really cold but it sure feels it without any heat. . .

Even if June 1 is the beginning of a year unaccompanied tour, I’ll have a 90 day grace period so I can stay here and have our new baby and go back to the states 6 weeks later. In that way you may be able to see and hug the baby. If the ship isn’t in you may be able to take a little leave. The CO sounds like a compassionate guy. . .

Both Cindy and Margie (wives of shipmates) got mention in their letters that you were caught at Solid Anchor during the last mortar attack and that one American had been wounded but they didn’t know if it was you. I told than I had already heard from you and that you were only suffering from a mosquito attack. Please be careful. . .

Lara has just started another one of her biweekly colds so we have to stay in for a couple of days. I can’t figure out what I’m doing wrong—except maybe chilling her but it’s all her fault. She is the one that wants to stay out and won’t leave her mittens on. . .I’ll be glad when winter is over!

Mom sent me three more Montessori books so I’ve been reading–that’s why I haven’t written in a few days. . . Will write again tomorrow.

Love and Kisses, MA