On December 28th, the 85-year, $35 million Post Office Credit Union (POCU) in Madison, Wisconsin will cease to be an independent charter. After voting, the 3,196 members and their savings, loans and abundant reserves (22% net worth) will be transferred to the $26 billion PenFed Credit Union in Virginia.
Why care? After all UPS, Federal Express, DHL and even Amazon can fill the needs if the Post Office itself were to close. Same with financial options–aren’t there plenty?
Members Uninformed What Their Vote Enables
The members are not informed about what is happening by their required vote. The intent of the organizers of this action is to announce the deed as late as possible, limit the voting period to minimum required interval, and make the process appear as just another routine event in the life of the credit union—as the members are asked to drink the cooperative Kool Aid.
What POCU’s members are approving in surrendering their charter via merger is:
- A new board of directors, whom they do not know and have never been told about.
- A new senior management team who has not been identified or even presented.
- A new business model (virtual), very different from their current one—PenFed is 742 times larger and serves over 2.1 million members.
- Accepting a service profile with no specific information of any changes in prices, services and fees. The five examples given are all INCREASES in fees.
- Loss of all control for any local service, employment, or business initiatives. All references to such are open-ended and subject to PenFed future review, including the $50,000 per year local contribution.
Joining a Harem
In summary, this is an arranged marriage, agreed in secret in April. The bride was informed in October. And still knows nothing about the groom and what will happen after the wedding. POCU will become just another junior member of PenFed’s credit union harem of 19 other charters.
Oh, and the broker of the deal, who had the authority to sign for the bride to protect her best interests, will then get to choose between a five-year $650,000 sinecure, or an immediate $437,500 payoff for his actions. PenFed is paid a dowry of $7 million to marry this unwitting bride. The family of bride will go away empty and the community will no longer recognize them as members.
Whose Responsibility?
The reaction to this situation in Wisconsin reminds me of a story that Dick Cavett once told. During a performance of Hamlet in Central Park, NY City, when they got to the part where he stabs Polonius, eight people got up and left because they didn’t want to get involved.
If those with the power, position or privilege fail to speak about this event, will these members ever trust credit unions again? Or as another American leader once said, “In the end, we will remember not the words of our enemies, but the silence of our friends.”
No matter our intentions or inattention, we are all stained. We watch an anti-democratic process fueled by self-interest not member well-being. Statutory terms such as “good faith,” “specific plans,” “best interests of the members” and the legally required “consent” of regulators is devoid of meaning. As the precedents of these calculated takeovers expand, credit union leaders shrug their shoulders accepting this as just the way of the world.
By our inaction we endorse the preying upon our industry by our own.
This acquisitive behavior is an assault on everything cooperatives stand for. It brings the capitalist model’s full range of animal spirits with none of the market’s checks and balances.
The Wisconsin statute requires a petition by 25 residents to require a public hearing on this event, should the DFI not do so on its authority. That hearing would give all those interested in the future of cooperatives to give the Board of POCU and PenFed to make their case publicly not behind closed doors.
Are there 25 credit union believers who are willing to ask that this activity be done in the full light of public debate and request the DFI hold a hearing?
So true Chip, so true. We, the 124 million owners of American credit unions, are allowing this demise of our cooperatives to happen. This is the lazy disinterest of today’s consumer and the failure to spend any time learning about what their credit union really is and how they’re responsible for its healthy continued existence. Of course this would not be the case of if the leaders of each individual credit union made the effort and investment to make sure this was not so. Why aren’t we hearing or seeing a more active owner/member participation in the debate about this merger transaction from from owner/members of both sides? From members of Postal , for the many reasons you state AND from PenFed owners about the wisdom of their long term current merger strategy. Do they know, do they care?
Piranha in the fish tank eat all others. The piranha has met its match in PenFed. Both are eating their young. Regarding PenFed it’s called Capitalist Economic Cannibalism. It’s actually a crime. How do you say extortion? Stealing the net worth from POCU in exchange for shakedown by management of some $650,000 is not kosher. But it is NCUA approved by a rubber stamp endorsement. Members are kept in the dark. Blind, deaf and dumb to the Merger Madness at PenFed. To hell with organic growth. Merger acquisition is easy money and the legal embezzlement of the net worth booty is sweet. Paying the $650,000 juice to management is a small rebate kickback from the 22% net worth. Everyone gets greased like pigs at the trough. Everyone except the members that created the net worth. About the NCUA: Never shocked. Just disappointed.
from Paul Horgen PHorgen@gmail.com
The alpha and omega of the problem is lack of management know-how and competent board members. So, now, what is at the center of gravity of credit unions? It’s not difficult to answer but sad to say.
As grandma (all) said, “We get too soon old and too late smart.”
From Randy Karnes:
1. Owners will rise on the day the question is asked “to merge or not to merge”.
2. Member-Owners need years and years of a CU culture that is OVER THE TOP in teaching to be constantly diligent as owners. To take pride in ownership, accountability, and their community. This work is not a hail Mary pass during bad times; it is the culture and the constant teachings of a dedicated cooperative community and personal. CEOS are not doing their jobs, because the entire industry does not demand it. We can demand compliance with banking rules, we can demand best practices with financial service expectations, and we can demand performance that yields careers and benefits. BUT we seem unable to DEMAND the work to ensure our success with owners. That work is the focus, and the engaged owner is the hope.
3. The issue is we have not been able to engage for the future, we simple bitch about today and how they did not show up.
Reading Chip’s alert to the merger situation that The Post Office Credit Union (WI ) is currently experiencing ; and the few responses to his commentary , evoked a few images in my mind. One, was that of an Orca (PenFed) surprising a very fat seal (Post Office Credit Union ) attacking and consuming the seal as the it is sunning itself on the beach. The second image is that of the requested trial /hearing where PenFed is the defendant and the members of Post Office Credit Union are the plaintiffs.
Frankly I do not see it the same way as positioned. I see PenFed as nothing more than opportunistic.
I know a Little knowledge is very dangerous. But the indisputable facts
Are that the Post Office CU had almost 22% capital. Plus the credit union would have had minimal income in 2019 and no income in 2020 if not for “credits” to the provision for loan loss.
As I read the proposal to the membership PenFed is “positioned “ as bringing much to the table regarding improved services and products. I’m sure they do as compared to the current situation. However, My immediate thought was well , how much more in improved services and products could Post Office have brought to their membership if they had spent the excess capital they had accumulated -> say $1.5 million for the benefit of their membership?? I’m sure quite a nice array.
I also do not see PenFed as the “defendant”. In my mind it should be the Board of Directors of Post Office Credit Union who should be the defendant. The members of Post Office CU elect their Board to be fiduciaries and to deploy funds as need be to make the CU relevant and viable. Not to hoard those funds nor to give a potential suitor those funds.
The document provided to the membership indicated that other avenues for mergers were considered but PenFed was the best choice. It’s sad that some sort of consortium or partnership could not be arranged with other Postal Credit Unions so that this Post Office CU could maintain their identity but benefit from economies in other ways. Just spending a few minutes examining NCUAs website brings to light the graveyard of former postal credit unions that no longer exist. Very sad and unnecessary in my mind if Postal CUs collaborated.
This merger situation rises to the top because of the capital involved. But, I believe , a boatload of mergers of smaller CUs will be the inevitable result of the large retirement wave expected in the next few years and the lack of succession planning currently in place.
I sure hope this situation is not even partially a result of lack of succession planning given the wonderful opportunities that CUNA, CUES and Filene provide for leadership development ; and they are all in the Post Office CUs backyard.
I know that Board of Directors are Sacred Cows in the movement but giving them a pass and blaming PenFed in this instance should not be the end result.