Month: January 2021

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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?

Thoughts?

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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.

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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

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What Scientists Do With Their Extra Time in Quarantine

Finishing high school in 1962, dating for the first time, meant learning how to dance.

I even took lessons for the senior prom—at the YMCA. I never really got confident; it seems you either have rhythm or not.

A song that captured the growing popularity of rock and roll versus “slow dance” was Do You Love Me (Now Than I Can Dance). It is from the only album cut by The Contours during their recording career at Motown Records. Issued 58 years ago, October 1962, the album includes the hit title track which starts with the words:

You broke my heart
‘Cause I couldn’t dance

Now the song is back with a new era of rockers. This is a mesmerizing algorithmic performance. There are three rhythmical dancers, including a dog, and a production assistant. Creative and agile moves. They are much better than my stiff, robotic efforts!

(https://www.youtube.com/watch?v=fn3KWM1kuAw)

Now that Cirque de Soleil is in bankruptcy, the Arthur Murray dance studios closed and most ballet companies in isolation, is this a future for performances and professional instruction?

The video has generated a wide range of reactions. For some this demonstration gives hope for humanity. Entertaining, almost mesmerizing. It is fun to watch.

For others the video is more dystopian: “Smart people are doomed if these creatures can be programmed for sex.” “Nice knowing you fellow humans. We had a good run. This is the end.” Some immediately presume more militant applications of this AI prowess.

The Lesson for Credit Unions

If this is what scientists with a little extra time on their hands did during a pandemic, what do you think NCUA staff is working on?

When we learn, will the outcome be dystopian or hopeful? Mash Potatoes or the Twist? Are the song’s words a harbinger of a post pandemic agency?

You didn’t even want me around
And now I’m back
To let you know
I can really shake ’em down

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Credit Unions Are Precious

A Member Questions a Merger After the Fact–Can This Process Be Fixed?

On December 5, 2019, I published a blog questioning the rationale for the merger between SchoolsFirst FCU in Orange County, CA and Schools Financial CU in Sacramento. One issue I raised was whether members had been given fair treatment when the top 5 managers can gain $9.8 million additional compensation, but the 158,000 owners receive only a “special dividend” of $4.0 million.

This past month a Schools Financial member, Hal Goldfarb, discovered the blog as he sought information on this year-old event.

In the emails below he raises multiple issues about the merger including:

  • Why the merger was necessary;
  • Loss of local focus, service and connections;
  • No clear benefits provided;
  • Drop in trust following the event;
  • Future control outside the community;
  • Were members ripped off?

Excerpts from his emails are reprinted with permission. Emphasis added.

Hal’s initial comment on finding the article:

I had heard that the merger of these 2 credit unions did not go smoothly. I hardly noticed the change, other than to have to re-enter information for bill pay, some of which was automated.

Today, my landlord notified me that my November rent check was not received. Schools Financial mailed the payments; I assume that SchoolsFirst does as well. The office received my December rent, but cannot seem to track down the previous month’s, which I believe may have been just before or after the merger of the computer systems was completed.

I am suspicious that the merger is the culprit. I see no other reason why my rent checks, which have arrived without issue for 2 years that I have been living here, should suddenly miss a payment. I have contacted SchoolsFirst to report this problem. Luckily, my landlord is tolerant and understanding.

Why All the Mergers?

I also wondered why so many credit unions are merging. I don’t see how that helps members for they are the soul and foundation of credit unions, unlike commercial bank customers. I have been through several of these credit union mergers over the years, the first being a merger of several employee credit unions at AT&T in the 1980s. I also saw AT&T Telco in Alabama get merged into another credit union. And now, this one.

Credit unions, as I understand and appreciate them, are intended to serve the members of said organizations, as well as provide local benefit to the communities where those funds are deposited. Close control over the funds is key to this end. I did not see how my depositing my money with a larger credit union, many of whose customers do not live here in Sacramento where Schools was largely based, would continue to benefit me or anyone else living in this area.

Stay or Leave?

On top of this, many members are leaving the merged credit union thanks to the foolhardy way they went about the merger. As you pointed out in your article, the benefits are not as good, and the portfolio is riskier; by comparison, Schools Financial had much better management.

Troubles are primarily at the technical level for me. I rely on on-line banking — I rarely, if ever, physically step into a financial institution for any reason. . .

I was already feeling uncomfortable with all of this when I stumbled over your article. It is shocking that a tiny cabal of officers is taking a nice chunk of money in exchange for the beads and trinkets they are giving the merged members. Manhattan Island was a better deal by comparison.

I am considering leaving for a different credit union, perhaps one I already belong to (I have several).”

My response: 12/18

Thank you for your comment. How did you find the article? Have you seen any benefits from the merger, new branches, products, better fees or services?

Did you vote for it when you received the ballot? Were you aware that it was happening and your thoughts at the time?

I appreciate your taking time to write . . .

Hal Goldfarb’s 12/18 response:

Chip:

Amazingly, SchoolsFirst found the canceled check and emailed me a copy, which I have forwarded to the landlord. They admitted to a hiccup during the merging of the systems, but apparently the check did make it out to the landlord and was paid. Now, any further to-do over this is in the hands of the other 2 parties. I love it!

As far as the article comment, I am surprised no one else has responded to it. I have a friend who is/was with Schools Financial and was talking about leaving it. And now I am also. Anyway, I found your article while searching the web for something indicating when the merger was technically resolved or merged. I wanted to make sure I had my timeline straight for my own issue with the missing landlord check. Anyway, I stumbled over your website and decided to put in my 2c over this.

The mergers of these credit unions are completely contradictory and counterproductive to their purpose. If the commercial banks want to all merge into one, monolithic terrorist organization, there is not much we can do about it. But credit unions should be regarded as precious, one of our first steps on the road to full “coopertivezation” of the economy.

My reply on 12/18/20:

I added your comment to the blog, but the blog was so long ago, I doubt few will see it. I would like to combine your comments into a single new post. OK?

Hal Goldfarb responds on 12/19/20:

Chip, I feel that, as a society trying to maintain control over our own work and our own resources, we need to have a legal business form called a “cooperative” (as opposed to the mere conceptual label we use currently to designate these entities). This would be analogous to the legal fiction of the corporation.

This new legal entity would protect the shareholders of cooperatives. . . in the same way the corporate business form protects investors. As an example of the power of this new legal instrument, members could not be gypped in these mergers, or better yet, maybe mergers would be obviated altogether. . .

On 12/19/20 I asked:

Do you remember voting a year ago October? What do you remember about the board’s recommendation at the time?

Hal Goldfarb responds on 12/19:

. . .I did not look into it deeply at the time. I needed to, esp since this impacts my own finances. 

I am trying to recall now how I voted. I remember getting the ballot, but I cannot recall what I did after that. 

I think I am a bit intimidated by officious mailings like these. I am not a youngster either. I know how much these issues can impact individuals. One aspect of it is that I really don’t know who these people even are. I could have researched it… it’s not like these facts are secrets these days. Another thing I could have done was to research SchoolsFirst and find out more about that credit union, as well as find out why Schools Financial agreed to this.

I am 60 years old, on disability, and I really ought to know better. . .

As to what I was thinking… I think I was feeling curious about why this merger was even considered, much less acted upon. . .I see these CU mergers as contradictory to the whole basis of local control of economy, something I feel deeply about.

I just wasn’t really sure what to do about it. It did not occur to me to look for organizations and individuals — such as yourself — who might be advocates and defenders. . .

Hal

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Hauptman’s First NCUA Board Meeting-A Ray of Hope

Whether the event is a first date, a rookie’s initial at bat, or a novice composer’s first ballad, the promise of an initial appearance is often projected into future success.

Kyle Hauptman’s first NCUA board meeting, one week after being sworn in, was a two-day marathon. How could he possibly process the hundreds of pages of budgets and board action memorandum and make a meaningful contribution?

I believe his premiere was positive for several reasons.

Not Following a Script

Public NCUA board meetings are supposed to enlighten because they are the only authorized occasion that individual members may debate issues with each other. Internal preparation for the board meetings is handled among policy advisors and staff shuffling among the three directors to seek a consensus or positions on agenda items.

Unfortunately, board meetings are rarely enlightened discussions of the core issues. Rather, the board members read prepared statements, staff presenters are provided questions in advance, and answers readily supplied . The meetings are stage-managed public relations exercises. No views are changed or positions further illuminated. The recent virtual meetings, audio only format, has made this approach even more pronounced.

Hauptman’s remarks however sounded as if he was not reading a script. And in so doing, he made some interesting observations.

The first was to call NCUA’s insurance role a “monopoly,” an accurate term, but one I do not recall being uttered by another board member. A monopoly is not a positive characterization in a free market economy. With that description, he cautioned that such authority must be used carefully.

He also noted that all NCUA funding comes from credit union members. The government, he asserted, should not be holding money that the members can use to meet their needs. The fact that all agency expenses are paid by the industry is known, but rarely acknowledged by agency leaders.

Newcomers to NCUA’s board often begin with fresh insights and comments. They have yet to be caught up by the bureaucratic vortex of expertise and self-interest which can overwhelm outsiders’ initial perceptions. But that centrifugal pull may be tempered by his first major decision, the choice of his Senior Advisor.

A Credit Union Veteran Goes to DC

Sarah Canepa Bang, Hauptman’s first personnel decision, may not be in the same role as Jimmy Stewart of Mr. Smith Goes to Washington fame. But she brings a lifetime of credit union experience with several cooperative and credit union organizations in multiple states. She knows where bodies have been buried. And where saints have trod. She has achieved hard earned success and experienced economic setback.

For decades a CEO or senior manager, as well as serving in numerous volunteer roles, Sarah brings a thorough appreciation of how NCUA’s actions affect members, not just institutions. She is approachable and listens, aware she does not have all the answers.

Most importantly in an industry in which relationships are vital for collaborative advantage, she can bring to Hauptman views and connections that will give him information to set informed priorities and make member-focused decisions.

Discernment and earned life experiences are combined in these two capable NCUA newcomers. That is a promising union for a country and industry navigating unprecedented events.

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How Society Prospers from Immigration

The boy in the yellow shirt immigrated with this family to Germany in 1970. He is now the co-founder and CEO of BioNtech.

In 2020 he led the firm’s COVID-19 vaccine development, now being distributed throughout the US and the world.

An Immigrant Creates First US Credit Union

Pierre Hevey, the second pastor of Ste Marie Parish, was born in Saint-Hyacinthe Quebec in 1831. At the age of 19 he entered Sainte-Hyacinthe seminary and ordained to the priesthood on July 13, 1857.

After serving in both Canada and Lewiston, Maine, Fr. Hevey was appointed as the second pastor of Ste. Marie Parish, March 8th, 1882 in Manchester, New Hampshire.

In 1908, Monsignor Pierre Hevey, as pastor of the parish, organized what would become known as the first credit union in America. The goal was to help the primarily Franco-American mill workers save and borrow money. On November 24, 1908 the new cooperative opened in Manchester as “La Caisse Populaire, Ste-Marie” (The People’s Bank), the nation’s first financial cooperative.

The newly formed “bank” made it possible for Manchester’s immigrants to achieve the better quality of life they had envisioned. For just $5, the price of one share of capital stock, anyone in the community could become a member. Savings were accepted from workers, families, and children. The accumulated savings were, in turn, lent to members to purchase and build homes, establish neighborhood businesses, and meet the personal financial needs of the community.

St. Mary’s Bank prospered. The credit union moved into its own offices in 1913 and hired its first paid, full-time manager in 1916. In 1917, the state legislature approved a bill changing the name from “St. Mary’s Cooperative Credit Association” to “La Caisse Populaire, Ste-Marie”. And, by 1923, the credit union’s assets exceeded $1 million. In 1925, an amended charter allowed the institution to be called either “La Caisse Populaire, Ste-Marie,” or “St. Mary’s Bank.” https://www.stmarysbank.com/nav/about-us/history/our-story

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The $3.0 Billion Question in 2021 for Credit Unions and NCUA

As credit unions enter a New Year, a $3.0 billion dollar question hangs over the cooperative system. Will the AME surpluses be returned in full, or will NCUA devise a way to hold back funds as it did when closing the TCCUSF in 2017?

The September 30, 2020, update on the five corporate AME’s shows a total of $3.035 billion in surplus. This would return the membership capital, a portion of paid in capital, and even a liquidating dividend for the credit union members of four of the five corporates. Only WesCorp members will receive nothing as that estate still reports a loss.

There are two kinds of payouts. The thousands of credit unions with membership capital in the former Members United, Southwest, and Constitution corporates should receive $572 million, $712 million and $36 million, respectively, according to the September data.

The balance remaining in the US Central estate after allocating $620 million to the four other AMEs is $1.065 billion. This should go to the eleven active corporates that will share according to their pro rata ownership of membership and paid in capital at US Central. These percentages are listed below in the column headed % USC MSC.

(Source: NCUA)

NCUA documented these obligations with receiver’s certificates sent to all credit unions upon liquidation. The agency reported an initial payment of $171.4 million to over 900 Southwest Corporate shareholders in July.

Will Credit Unions Receive Their Money?

The distribution process seems simple enough. All NGN’s holders are paid off and the trusts wound up. The legacy assets are released, sold and the cash distributed. Except that is not NCUA’s traditional instinct.

When NCUA recommended closing the TCCUSF earlier than the 2021 final NGN maturity, credit unions were in favor, expecting a portion of their $5.0 billion in premiums to be returned years early. Instead NCUA “merged” the $3.1 billion into the NCUSIF, not returning the cash to credit unions.

Congress in establishing the TCCUSF in 2009 explicitly rejected this use of the funds: “These provisions are intended to ensure that the activities of the Fund are restricted to resolving problems in the corporate credit union system, and not used for other purposes, such as for dealing with natural person credit union problems.”

To merge and retain the funds, NCUA repudiated all previous analysis by raising the NOL above 1.3%, a distortion still practiced today. And it immediately expensed $650 million in the year’s final quarter to add to NCUSIF’s loss reserves—without explanation.

When NCUA closed the TCCUSF, it promised future “dividends” which were actually refunds of premiums paid. Credit unions received a $735 million “dividend” in 2018, and a second $160.1 in 2019. However, NCUA still held onto at least $1.3 billion more in surplus by keeping the NOL at 1.38 versus the 1.3 cap in place for 35 years.

In closing the TCCUSF early, NCUA has returned only 29% ($895 million) of the TCCUSF surplus to credit unions. The Agency retained or spent the other 71%.

Government Craves Funds

The innate bureaucratic reluctance to return credit union money is supported by some NCUA board members who openly advocate for more NCUSIF funding. Board member Harper covets the FDIC’s flexibility, the freedom to assess and risk rate premiums, and its ability to set the NOL at whatever level the FDIC determines is necessary.

Harper’s statements show a misunderstanding of the NCUSIF’s unique financial model. Credit unions’ cooperative undertaking is to always maintain 1% of insured shares as a perpetual underwriting commitment. In return for this open-ended funding, credit unions, fearful that government would just spend these ever-flowing deposits, asked for and received statutory and operational guardrails on the fund’s management. These are the constraints that Harper now wants to undo.

The FDIC’s premium model Harper frequently references has required government bailouts on at least three occasions. NCUSIF, never. That’s why the NCUA 1984 restructuring was called “A Better Way.”

As former NCUA Chairman Ed Callahan prophesized in NCUA’s 1984 Annual Report, “Don’t set it up and forget about it. It’s unique. It’s a better way. But just as important, it’s yours to monitor—because if you don’t it’ll go just like everything else government touches. When government gets more money, it wants to spend more. Our goal is to spend less. You have to hold us to that promise.” (How to Keep Your Insurance Fund Strong and Cost Effective, pg 18, NCUA 1984 Annual Report)

Action Required

Start by asking the NCUA board to publish a plan for winding up the AMEs and distributing the cash. The audits will soon be done. There are no reasons to withhold any details of the remaining assets and their value.

Every credit union will benefit from this clarity and knowing there is a commitment to return the funds. The Corporate system will also gain additional capital to expand their services.

Already there are discrepancies between the latest AME numbers and the membership capital totals NCUA published. It is vital to NCUA’s credibility to produce its plan with full details. Another regulator described the importance of such action as follows:

“The essence of an effective deposit insurance system is the trust of the banking public in the operations of the deposit insurer. The only way to build trust is to make those operations transparent so that your stakeholders have the information and the means to hold you accountable. It is all about being accessible, understandable, and responsive to both regulated entities and those we seek to protect vis-à-vis deposit insurance.

“If you do not trust the system in which you live, you do not feel a part of it. It is not your government.” –Jelena McWilliams, Chair FDIC

When NCUA closed the TCCUSF in 2017 (ahead of the 2021 NGN final maturities) credit union’s expectation was an early return of their special premiums. But the Agency disavowed that hope by keeping all the money. Let’s ensure the money goes to where it belongs this time, all $3.0 billion plus.