War is when the government tells you who the bad guy is.
Revolution is when you decide that for yourself.
Ben Franklin
Ben Franklin: Declaration Signer, Creator of Civic Enterprises and Proponent of Community Values
Benjamin Franklin (born January 17, 1706, Boston, Massachusetts, died April 17, 1790, Philadelphia, Pennsylvania) was a person of extraordinary talent. He made lasting contributions to multiple areas of human endeavor including practicing the cooperative principle of Paying It Forward.
As a signer of the Declaration of Independence, he played a major role in getting the document approved and adopted by the Continental Congress. Perhaps more critical, he served as Ambassador to France from 1777 to 1785. securing France’s financial and military assistance in the Revolutionary War.
His Areas of Intellectual and Social Enterprise
One of 17 children, he went to work at age twelve in a print shop run by his older brothers. He published his insights in Poor Richard’s Almanac, many of which are still recited today: “A penny saved is a penny earned.”
As a tradesman and inventor his ambition, intellectual energy and sociable nature, made him a natural leader of public projects. His lifelong commitment to self-improvement also manifested in his civic initiatives to upgrade living conditions in mid 18th Century Philadelphia.
Beginning in 1727, Franklin and his associates enhanced community life establishing a lending library, hospital, school, fire brigade, insurance company, learned society, and militia. To advance public safety: he supervised the lighting, cleaning, and paving of Philadelphia streets and designed a fireplace that conserved fuel while avoiding house fires.
These civic endeavors were in addition to his work as an inventor (bifocals and Franklin stove), scientist (theorist about electricity), musician and author of timeless insights on human nature and society.
The Cooperative Foundation: Pay It Forward
Much of Franklin’s multifaceted contributions from his discipline and hard work, arise from a value centered life focused on the question, how can I help?
“Pay it forward” is the concept that when someone does something for you, instead of paying that person back directly, you pass the kindness on to another person.
In a letter to Benjamin Webb (April 25, 1784) who’d requested to borrow money, Franklin asked his friend to repay the debt by lending to someone else in need down the road. Instead of receiving repayment, he sought to do a world of good with what little he had to give.
I do not pretend to give such a deed; I only lend it to you. When you meet with another honest Man in similar Distress, you must pay me by lending this Sum to him; enjoining him to discharge the Debt by a like operation, when he shall be able, and shall meet with another opportunity. I hope it may thus go thro’ many hands, before it meets with a Knave that will stop its Progress. This is a trick of mine for doing a deal of good with a little money.
One outgrowth of his “doing a deal of good with a little money” is today’s cooperative credit union movement. Another enduring legacy from the nation’s founders.
As we celebrate this 244th anniversary of the 4th of July Declaration, Franklin’s reflection on our nation’s governance remains timeless:
The U.S. Constitution doesn’t guarantee happiness, only the pursuit of it. You have to catch up with it yourself.
Issues Bigger Than Regulator’s Rules
In 1978, Sangamo Electric Company announced the closing of its Springfield, IL manufacturing plant and head office to move to Georgia.
The company had its own credit union. I had been Illinois Credit Union Division Supervisor for one year. My dad had worked at the company in the 1950s, so I felt an interest in the situation. The issue: what should happen now to Sangamo Employees Credit Union?
For me, the answer was simple. The sponsor and all its direct support, plus the members’ jobs, no longer existed. The employer-based “common bond” was gone. Therefore, it no longer complied with the state’s chartering requirements . It should be closed.
That was not the view of my boss, Ed Callahan, the Director of the Department of Financial Institutions. His logic was that with the company’s closing, the members needed their credit union more than ever. Their jobs were gone. The credit union would be more vital to their future than before.
He suggested we find a way to modify the charter so that the members, not the company or the regulator, could determine their credit union’s future. And that is what we did .
Regulators and the Current Pandemic
This incident came to mind when a CEO sent me NCUA’s interagency joint announcement: “Examiner Guidance for Assessing Safety and Soundness Considering the Effect of COVID-19 Pandemic on Institutions.”
The purpose of its eleven pages: “to promote consistency and transparency across the agencies, examiners will continue to assign supervisory ratings in accordance with the applicable rating system. . . CAMELS.”
“. . .it is essential that examiners maintain a clear understanding of the financial condition of each institution.” And “. . .examiners will distinguish between problems caused by the institution’s management and those caused by external factors beyond management’s control.”
Why is NCUA Sending this “Guidance”?
The paper appears self-serving, citing circumstances familiar to everyone. It reads more like a warning notice, than “guidance.”
Its bottom line is “we are telling you, be careful.” Is this a prelude to circumventing normal supervisory due process, using the pandemic’s uncertainty as an excuse?
There are three concerns with NCUA’s forwarding this directive to “promote consistency and transparency across agencies.”
- Why did NCUA believe this bank-drafted warning message was even appropriate for credit unions?
Credit unions are different from banks in fundamental ways. Their cooperative design, tax exemption, “common wealth” and reserve/capital options are intentionally unlike privately owned firms created to profit shareholders.
Credit unions fulfill a different purpose, one of which is to be an antidote to the shortcomings of for-profit financial options. The CLF and NCUSIF’s designs incorporate these cooperative differences.
- At this time every other arm of government including Congress, Treasury, the IRS, SBA and even the FED are crossing all their traditional “red lines.” Why is NCUA joining bank regulators to announce “business as usual” contrary to the activities of every other government entity?
- This “examiner guidance” makes no mention of the special credit union role in times of economic distress. Every day credit unions are waiving fees, lowering rates, providing forbearance and other special accommodations for members. These actions reduce a credit union’s “normal camel ratio ” outcomes. That is what coops are supposed to do with their members’ collective savings.
A current example is how 15 Vermont credit unions have provided $385 million in member relief, so far. Isn’t this the special “guidance” NCUA should be highlighting?
Rising Above Rules
While hitching NCUA’s wagon to other regulators may seem to enhance NCUA’s image, it diminishes credit unions’.
Credit unions were well positioned financially entering this crisis. The cooperative regulator is most effective when knowing how to see beyond the letter of the law and support the spirit of the movement. That is the Sangamo lesson Ed Callahan helped me to see.
This instinct to put members first lives in most credit unions. In this time, shouldn’t NCUA’s “examiner guidance” be to promote this essential mission? And even co-develop special programs with the industry to help members recover financially?