Month: February 2021

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Timeless Wisdom: Why Small Matters With Two Current Examples

“Credit unions are small, yes very small. But it is vital that America not say they are too small to be worth the effort of keeping them around. Because if nothing else, credit unions keep alive a principle—that principle is freedom of choice.”

Ed Callahan, Callahan Report, June 1997

Two Washington Post news articles present why the choice that Ed championed, even of smaller institutions, is vital for society today.

  1. Efficiency is Not Resilience

The efficiency curse  describes the effectiveness of small farmers adapting more readily to market disruptions of food distribution during the pandemic.   Excerpts follow.

“Efficiency is a wonderful thing. It can result in benefits such as lower prices and better uses of resources. But a hyper specialized system is more vulnerable to disruption; it is not resilient.

“Smaller farmers are doing relatively well. According to Civil Eats, farms with existing CSAs (Community Supported Agriculture) have seen “a massive increase” in memberships since the start of the pandemic, with some reporting a 50 percent bump in sales. One California farmer said, “It took a pandemic for people to support local sustainable agriculture again, and home cooking, and ‘know your farmer.’ ”

“Why don’t we pay as much attention to the benefits of resilience as to the benefits of efficiency? We tend to get good at what we can measure, and it’s easy to produce numbers that support efficiency, such as crop yields per acre. Resilience cannot be easily measured, though. Its benefits are most evident during the catastrophes that can’t be predicted and the trends that haven’t been foreseen.

“One striking thing I’ve learned is that many (industrial scale)farmers and companies lose track of who’s eating their products.

“That sense of interconnectedness is, for me, one of the most powerful and hopeful lessons of the pandemic. People who had never given much thought to where their food comes from suddenly learned something about farms and farmers. Which is to say, they learned about our interconnectedness. The pandemic has shown us that the world is much more connected than we thought.”  END

The “Know Your Farmer,” bumper stickers of the sustainable-food movement might be translated to  “Know Your Member” as the signature phrase for credit unions.

  1. Nimbleness and Local Knowledge Beat Big Chains

A second example, “Small Pharmacies beat big chains at delivering vaccines,”showed  how local independent pharmacies were more effective delivering Covid 19 vaccine shots than large retail chains. The reason: “local owners know their community best.”  More relevant for credit unions is the author’s assertion that government policy makers promote bigness allowing “market power abuses.”   The parallel to today’s merger-sales of long-standing sound credit union charters, could not be clearer. Excerpts follow.

“More than a month into the coronavirus vaccine rollout, only about 60 percent of the doses distributed across the country have actually made it into people’s arms, according to federal data — a discouraging display of inefficiency. But a handful of states are far ahead of the pack. At the top of the list are West Virginia, which had given out 84 percent of its doses as of Friday, and North Dakota, at 81 percent.

“Many factors are slowing distribution.  But one key element appears to be the type of pharmacy states choose to work with. While the federal government partnered with CVS and Walgreens to handle vaccinations at long-term care facilities in the first phase of the rollout, North Dakota and West Virginia have instead turned to independent, locally owned pharmacies. Small drugstores are prevalent in West Virginia, and in North Dakota they’re just about the only game around: A 1963 law mandates that only pharmacies owned by pharmacists may operate in the state (save for a few grandfathered CVS locations).

“These small providers have proved remarkably nimble. Meanwhile, CVS and Walgreens have stumbled.

“The vaccination results in West Virginia and North Dakota have prompted a wave of national news stories, noting how startling it is that two rural states relying on local drugstores — the epitome of the old-timey “mom and pop” stereotype — have rocketed far ahead of states like Massachusetts and Virginia, with their networks of supposedly sophisticated chain pharmacies that have largely replaced the independents.

Public Policy Treats Small as Expendable

“For decades, Americans have been steeped in the idea that big businesses naturally outperform small ones. Indeed, much public policy is predicated on this belief. Our antitrust rules bless most corporate mergers on the grounds that larger companies are more efficient. Our financial regulations grease the flow of capital to the biggest firms. And in unstable times, the federal government almost invariably steps in to ensure their survival, while treating small businesses, local banks and family farms as expendable.

 “So ingrained is this ideology of bigness that we routinely overlook evidence to the contrary. The fact is independent pharmacies have been outperforming their larger rivals all along. According to research by Consumer Reports, for instance, local pharmacies generally offer lower prices than the chains. And while the major chains only recently began offering one- or two-day home delivery, most independents have been providing same-day delivery for more than a decade (and most do it free).

Better Results by Being Small

“Independent pharmacies achieve superior results not despite being small, but because they are small. It’s their local ownership that makes the difference. Their decisions are guided not by the prerogatives of Wall Street but by the healthcare needs of their neighbors. Lacking top-heavy bureaucracy and rich with local knowledge and relationships, independent pharmacies possess what you might call economies of small scale. That helps explain why, in the places where they’ve been tapped to provide vaccinations at nursing homes, they’ve been able to quickly map out a plan and efficiently execute it.

“Like pharmacies, small banks derive advantages by virtue of being locally run that big banks simply cannot match: The owners know their communities and their borrowers, giving them access to a rich trove of “soft” information that enables the institutions to extend loans to new and growing businesses on the basis of factors that aren’t easily quantified and don’t fit the rigid parameters of big-bank lending. This is true not only during crises like the pandemic: Community banks account for less than one-fifth of the industry’s assets, but they supply nearly half of all lending to small businesses.

Regulatory Bias for Bigness

“So, if local pharmacies, banks and other businesses are outcompeting their biggest rivals, why are they losing ground? The number of independent pharmacies, for instance, has dropped by nearly 1,400 over the last decade, to 21,700 — and their market share has fallen from 28 percent to less than 20 percent.

“The answer is that policymakers, convinced of the inherent superiority of bigness, have allowed a few corporations to amass outsize power and wield it with impunity. Rather than compete head-to-head with their smaller rivals on price or service, these huge companies can simply crush them.  (ed. or buy them out via mergers)

“These kinds of market-power abuses are rampant across the economy, but we’ve been conditioned not to see them. Confronted with yet another shuttered storefront, we take it as simply more evidence that small businesses can’t compete.

“It’s not just some hazy nostalgic feeling that we’re losing when independent businesses close. The stakes are much more consequential. We’re trading away some of the most productive and effective parts of our economy. The strong performance by local pharmacies in distributing lifesaving vaccines makes that clear.” END

The Takeaway for Credit Unions

Every time a sound, locally focused and managed credit union merges, the surrounding economy, the cooperative system and the American marketplace is less diverse, nimble and responsive.

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NCUA Leadership Is in a Rut – Part 2

Part I showed how the changeover of NCUA board chairs has perpetuated a leadership vacuum at the agency frustrating effective policy development and positive relations with the industry. Following is a recent example of this challenge.

A classic case of ineffective pubic policy  is NCUA’s management of the corporate credit union crisis. It also demonstrates the embedded cultural mindset from the agency’s actions in this event.

This regulatory hangover continues whenever any corporate topic arises. Since 2009, NCUA’s attitude in supervising the corporate system could be described as, “If you don’t have a seat at the table, then you must be on the menu.”

The absence of market expertise at the NCUA board and staff level has created policy decisions by rote. Lacking different perspectives and professional insights, the existing culture plods on. When governmental backgrounds are the dominant experience senior officials bring to their roles, the disconnect with credit unions competing in the open market can become great.

Policy On Autopilot

One example of this bureaucratic legacy is from the NCUA board’s January 2021 meeting. It approved by a 3-0 vote a final rule 704 permitting corporate credit unions to invest in the subordinated debt of natural person credit unions. However, this “loan” must be deducted 100% when computing a corporate’s net worth ratio.

The following is the logic for this rule from the board memorandum:

NCUA claims open-ended authority: The FCU’s “broad mandate,” “plenary grant of regulatory authority,” and “an express grant of authority” can be exercised as “the Board deems appropriate.” The words are presented as unrestricted power to do whatever the board wishes. An unchecked authority.

“Under the FCU Act, the NCUA is the chartering and supervisory authority for Federal credit unions (FCUs) and the federal supervisory authority for federally insured credit unions (FICUs). The FCU Act grants the NCUA a broad mandate to issue regulations governing both FCUs and FICUs. Section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe regulations for the administration of the FCU Act. Section 209 of the FCU Act is a plenary grant of regulatory authority to the NCUA to issue regulations necessary or appropriate to carry out its role as share insurer for all FICUs. The FCU Act also includes an express grant of authority for the Board to subject federally chartered central, or corporate, credit unions to such rules, regulations, and orders as the Board deems appropriate.”

It’s a loan: “Treating the purchase of such subordinated debt instruments as lending ensures consistent treatment between natural person credit unions and corporate credit unions.”

It must be fully deductible from the capital ratio: “The Board believes that fully deducting such instruments from Tier 1 capital ensures any potential losses do not affect the capital position of the investing corporate credit union. This measured approach strikes the right balance between providing corporate credit unions the flexibility to purchase natural person credit union subordinated debt instruments and avoiding undue systemic risk to the credit union system.”

The Result: A Nonsensical Rule

This “updated” rule restores an activity, previously allowed but then revoked, to make a loan. But only if it is 100% deducted in calculating the required net worth ratio.

Loans are a credit union’s primary purpose. Few “loans” would ever be made on the condition that the institution must “write it off“ when calculating capital compliance.

In effect, NCUA confesses a lack of confidence in its own supervisory decisions. For NCUA must first approve all the subordinated debt issuance by natural person credit unions. The rule’s logic is that this approval and oversight are so suspect that the only prudent behavior is to write it off if a corporate purchases this loan debt. This is not mere risk rating; it is 100% reduction from capital when calculating net worth.

The write off is not proper accounting under GAAP. It is an imposition of regulatory accounting practice or RAP. There is no limit to RAP interpretations; see authority claimed above.

No facts were offered to support this claimed risk. Has any issuance of subordinated debt ever been written down or subject to a loss? What is the evidence to document this risk? Moreover, how important is this debt option for credit unions? If it is an important, why discourage its use this way?

If NCUA is so concerned about investments or loans used as capital by the recipient, then why aren’t credit unions required to write down their home loan bank equity requirements?

Or closer to home, why aren’t the corporates required to write off their CLF capital investments. Are they not at risk?

The ultimate rationale is that this is the way we have done it before. The result is that past errors of policy, guidance, interpretations compound far into the future. The mind set continues.

“In addition, the February 2020 proposed rule included a requirement for a corporate credit union to fully deduct the amount of the subordinated debt instrument from its Tier 1 capital to ensure consistent treatment between investments in the capital of other corporate credit unions and natural person credit unions. Under the current regulation, corporate credit unions are currently required to deduct from Tier 1 capital any investments in perpetual contributed capital and nonperpetual capital accounts that are maintained at other corporate credit unions.”

This rule is not based on any assessment of actual risks, Moreover it perpetuates “confirmation bias” errors that have been extraordinarily costly to the corporate and credit union system.

Which Leadership Model Will New Chair Harper Follow?

He inherits a decade-long policy of top-down mandates. Former board member McWatters described the situation this way in a 2015 speech to Pennsylvania League’s Annual Meeting:

“NCUA should not treat members of the credit union community as Victorian era children—speak when you’re spoken to and otherwise mind your manners and go off with your nanny—but should, instead, renounce its imperious ‘my-way-or–the-highway’ approach and actively solicit input from the community on NCUA’s budget and the budgetary process.

“With the strong visceral response within the agency against budget hearings, it seems that some expect masses of credit union community members to charge the NCUA ramparts with pitchforks and flaming torches to free themselves from regulatory serfdom. I, conversely, welcome all comments and criticism from the community.

“I champion the right of the regulated to speak to the regulator on the record regarding the expenditure of their limited resources. . . It’s simply a matter of respect and professionalism evidenced through the lens of transparency and full accountability.”

‘Step Down from the Ivory Tower’

McWatters also cautioned against the view that board nomination validates knowledge:

“Regulatory wisdom is not metaphysically bestowed upon an NCUA board member once the gavel falls on his or her Senate confirmation. NCUA should not, accordingly, pretend that it’s a modern-day Oracle of Delphi where all insight of the credit union community begins once you enter the doors at 1775 Duke Street in Alexandria, Virginia.”

https://www.cutoday.info/Fresh-Today/McWatters-Says-NCUA-Treats-CUs-as-Victorian-Era-Children-Comments-Draw-Rebuke-From-Chairman

Duty vs Loyalty

The Chair’s approach to board leadership also affects how agency staff perceive their jobs. Is staff supposed to provide their professional judgment, or are they just expected to fall in line with the Chair’s approach?

This staff dilemma was described by former Chairman Rick Metsger: “As I told Mark Treichel, the then executive director of the agency when I became chairman when he offered his loyalty, I said I didn’t want his loyalty, but I did expect his loyalty to the mission of the agency and that he would offer unvarnished opinions and options to help me make the best decisions possible.”

https://www.cutoday.info/THE-tude/Political-Storm-Karma-Makes-Landfall-at-NCUA

Harper’s Challenge: Reset or More of the Same?

Todd Harper was chief policy advisor to Chairman Matz. Her top-down leadership approach to policy is what prompted the above comments by board members and staff who worked with her.

Will Harper follow her leadership and policy example? Or will he embrace the widespread belief that there needs to be a reset in Agency and credit union relations?

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NCUA Leadership Is in a Rut Part 1

Since 2017 there have been four NCUA Chairmen designated by the President. Two republicans and two democrats.

The Board’s primary responsibility is the “management” of the agency as stated in the Federal Credit Union Act. The chair sets the agenda and is the primary spokesperson for the Agency.

Any organization that undergoes four changes of the titular leader in the same number of years would face unusual difficulties in both policy and operational effectiveness.

In the past decade, no one has accused NCUA of being well governed. Less than optimal outcomes can be endured in normal times. When crisis occurs, ineffective decisions can be destructive. A prime example is the ruinous handling of the corporate legacy asset resolution plans in 2008-2010.

These prior mistakes compound; the legacy perpetuates in subsequent decisions. The errors become hard-to-shed precedents especially when there is an organizational aversion to back-testing past events.

An Example of Effective Leadership

In October 1981 when Ed Callahan became NCUA chair, the economy had double digit unemployment and inflation. Credit unions had only one concern: survival. Only in 1977 had NCUA become an independent agency governed by a three-person board. The CLF was still in formation. The NCUSIF was out of cash and using 208 guarantees to assist troubled credit unions to work through problems.

Chairman Callahan’s approach was twofold: implement deregulation so that credit unions, not the government, could make the essential business decisions to serve members and effectively compete in the changing market; and secondly, build a regulatory infrastructure and supervision capable of overseeing the deregulated industry.

But his approach was not top-down but bottom-up policy implementation. To succeed, he initiated a multi-faceted open dialogue with credit unions. The first effort was a 24-minute video produced by the Illinois Credit Union League entitled: “Deregulation–What Does It Really Mean?” The video featured a panel discussion of three credit union CEOs, CUNA’s Vice President for Governmental Affairs, and Bucky and Ed from NCUA.

A comment in the video by Chairman Callahan illustrates his approach to policy leadership:

“Do you want government off your backs?

“Even though I think credit unions want deregulation, I am more committed to the fact that we have to respond to their needs. If they don’t want deregulation, we will see that it doesn’t happen.

“Write us a letter so that we can respond to your needs. I will read each one personally.”

Three months later, April 1982, the NCUA board approved the complete deregulation of all savings accounts with full credit union support. It took the other depository institutions until June 1987 to shed their regulatory deposit limits.

The key to success was having participants with experience in the room, even some who had made mistakes, but who were willing to learn from their involvement. Secondly, persons who would come at issues from a variety of viewpoints and backgrounds–not a single framework–but with multiple perspectives.

A Mutual Process

This engagement with the industry resulting in share deregulation was just the beginning. The insights of credit union leaders were crucial in all areas of policy development.

Before developing a new NCUSIF financial structure, the agency received input from all segments of the industry to prepare a Report to Congress, required by the Garn-St. Germain Depository Institutions Act of 1982. In April 1983 this seven-chapter, 100-page credit union share insurance analysis was submitted. It ended with a list of over 60 names of industry contributors, many of whom were quoted in the study.

The recommendations in that joint study became the basis for the 1% deposit NCUSIF restructure, A Better Way, passed by Congress in 1984. The dramatic change occurred because of the support of the entire system.

In a similar manner, the Central Liquidity Facility was completely opened to all credit unions in an innovative partnership with US Central, the corporate network and the CLF. This liquidity safety net is an example of a public-private partnership based on the unique principles of cooperative design. NCUA ended this valuable partnership when it liquidated US Central.

From 1982 forward, credit unions recorded annual, sound double-digit growth. This mutual approach built a regulatory infrastructure responsive to the moment. The credit union system prospered for the next 25 years.

Bureaucracy is built on the adherence to traditional practice when making decisions. This “mind set” or “culture,” may suffice in normal times. But when changes to meet credit union needs is necessary, then the approach “we’ve always done it this way” will not suffice.

When the 2008/09 financial crisis happened, the agency took a different approach. The legacy of which continues.

Part II will show how this hangover of poor regulatory decisions can infect subsequent rules for decades.

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“Two Families”–The Strength of Cooperative Relationships

It is common to describe credit unions as family. Sometimes the description is indeed accurate as father or mother passes the profession down to sons and daughters.

But rarely would one expect a regulator, and especially the Chairman of NCUA, to embrace the concept.

On April 9, 1984, the American Banker published a story on credit unions based on an interview with the Chairman: “Callahan mans the credit union helm through the seas of deregulation.”

The article closed with this description:

Mr. Callahan, who once held three jobs at the same time and who says he is “used to hustling,” has a varied background. It includes positions as Illinois Deputy Secretary of State, a math teacher and part-time football coach, and a school principal.

He now boasts of having two families, one with over 40 million credit union members and one that includes eight children.

“Just keeping up with a family of eight has kept me running,” he jests.

Two families. That is a regulator who knew where his responsibilities were truly owed.

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The Paradoxical Commandments

These ten insights were included in a book, The Silent Revolution, published in 1968 by a Harvard sophomore.

The latter years of the 1960’s were marked by demonstrations and unrest across the country.  Civil rights activity combined with anti-war protests culminated  in occupations and extensive campus disruptions. Kent’s book presented  the alternative of working within the system for change.

To succeed, he presented ten  obstacles to be expected and the necessary counter response to sustain an effort.

I think his sixth commandment is especially relevant for the majority of credit unions, many of whose futures are devalued in public commentary.

The biggest men and women with the biggest ideas can be shot down by the smallest men and women with the smallest minds.

Think big anyway.

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Timeless Wisdom: The Relationship between NCUA and Credit Unions

“The relationship between credit unions and the regulatory agency is one founded on mutual self-respect, and on the realization that both sides share equally in the responsibility for the survival and future development of credit unions.

It seemed as though we would never escape the attitude that the regulator knows best (but) a dramatic change has taken place in the last few years. We now have a federal regulatory agency which openly concedes that credit union people know more about running credit unions than the agency does.

The nature of the federal bureaucracy, being what it is, there will be a great amount of inertia to cause it to revert to a less creative and less cooperative approach to regulation credit unions. I would not like to see that happen.”

– Frank Wielga, CEO Pennsylvania State Employees Credit Union, NCUA 1984 Annual Report, pg. 14.

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The Member’s Voice: The Sounds of Silence

One of the most famous trademarks of the 20th century is of a dog, perhaps a terrier mix, looking at a gramophone horn, head tilted quizzically. It’s from an 1898 painting called “His Master’s Voice.” Whenever I recall it, I think of the Coop belief in owner democracy, the vital role of the Member’s Voice.

This branding image was based on an original painting by Francis Barraud of Nipper, a dog he inherited from his brother Mark.

https://www.startribune.com/the-hidden-history-behind-nipper-one-of-the-most-famous-dogs-in-the-world/506221042/

The painting was sold to HMV, an early English recording company. Later the portrayal became a logo for the RCA Company in the United States. The picture was marketed in such a way to suggest that RCA recordings were so lifelike that the dog could not distinguish between the sound of his master’s voice on records versus real life. Years later, the Memorex cassette tape company used this idea with their, “Is it real or is it Memorex?” campaign.

But there is another connotation in the phrase “His Master’s Voice” suggesting a deeply ingrained master-servant loyalty relationship.

Unfortunately that interpretation seems more appropriate when reviewing how the “Member’s Voice” is seen today by many CEOs and boards in credit union mergers. That voice is unwanted and unheard. The relationship is not member-owner, but master-servant. Loyalty expected, but not requited.

A Member’s Voice In High Fidelity

Following is one member’s continuing frustration with his post-merger experience in an email shared with his peers:

“Then there is our favorite subject of the credit union merger. The bill pay system they use — to put it bluntly — really sucks. This system requires you to set the date the payment will be issued, leaving you to guess when the payment might be delivered. There is no unique tracking number to trace individual transactions via bill pay as there had been in my former credit union. I cannot think of *any* system I have ever used involving financial transactions that did not afford some way to distinguish one payment from another to the same payee.

“Considering that this merger was not necessary or advantageous to members, I see this as one major reason it would be best to leave smaller credit unions the hell alone and let them do what they were chartered to do and what members expect them to do. Again, if individuals think their institutional management skills are such they wish to enjoy the perquisites their commercial peers receive, then they should go find a for-profit outfit to destroy and live the life of Riley (or maybe Jamie Dimon).”

I wonder if anyone hears these howls? Maybe it’s  time for a cooperative Roaring Kitty!

 

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A Cooperative Opportunity Trifecta

There are three on-going challenges facing the credit union system:

  1. Attracting the next generation of passionate co-op entrepreneurs
  2. Planting new charters to spark innovation and relevance
  3. Enhancing opportunities for those left behind by current financial choices

Credit unions are can now tackle all three with an initiative started by a CEO in California. If successful, the result could usher in a new era in this three-fold challenge.

The Rise of the College-University Innovation Incubators

During the past decade, institutions of higher learning have embraced student interest in starting new businesses by offering courses and funding innovation competitions.

A web newsletter the Times of Entrepreneurship recently published a list of the top 20 US university new venture competitions. Out of a total of 65 collegiate contests, MIT was ranked #1 based on total cash granted, in-kind support and number of participants.

The third ranked institution was George Washington University in DC which listed 423 participants in its most recent premier event.

The irony of this ranking is that four years earlier one of the top ten winners was a group of students seeking to charter a credit union for the GW community. More than three dozen undergrads, several faculty and numerous credit union advisors have worked voluntarily on the project to fulfill this student led ambition. Almost $100,000 capital has been donated.

Yet four years later, after numerous submissions, and receiving a “shout out” from NCUA Chairman Hood at his 2020 CUNA GAC speech, this student startup still waits for NCUA approval.

The Drought of New Cooperative Charters

Students, innovators, and persons passionate about a business idea will not wait four years or longer to receive a governmental OK to launch an idea.

NCUA’s chartering process is one of attrition stifling efforts for new credit unions. In 2020 NCUA issued one new charter. The agency’s performance plan for 2021 has a goal of 2.

With this option largely shut down, the energy, curiosity and passions of the next generation of leaders and innovators will go elsewhere. In a generation in which many seek to address vexing social problems with business solutions, the credit union door is closed.

As a result,  students interested in finance opportunities are looking elsewhere-traditional wall street options, hedge funds, venture capital firms and even banks.

Colleges and universities across the country are teaching and encouraging student and faculty interest to undertake innovative business solutions. To compete in the future, cooperatives must be an option for this creative energy.

The Inclusion Challenge

Today’s $1.8 trillion credit union movement was founded on the belief that ordinary citizens could own and control their own financial institution.

This was especially important for those left out of existing financial options. In North Carolina, for example, at one time over 55 credit unions were serving the black communities cut off by Jim Crow laws and practices from banks serving only whites.

As described in UNC’s Southern Oral History Program: https://sohp.org/research/african-american-credit-unions/

“The first credit union in North Carolina was founded in 1916 in a rural community in Durham County, most likely for white farmers, while the first credit union established by black North Carolinians was founded two years later in Rowan County. Black citizens had set up another eight credit unions by 1920. During the 1940s, the number of black credit unions rose to fifty-five, giving North Carolina nearly as many as all other states combined.”

One example of this from an oral recording:

“St. Luke Credit Union in Bertie County was established in 1944 by a group of about twelve African American men with $500. James T. Mountain remembers his father, James T. Mountain Sr., as part of that founding group, explaining why they felt it was necessary because the white-owned local bank would not deal with African Americans.”

Today only one of these black sponsored credit unions remains.

The Trifecta Opportunity

However, a California credit union CEO is trying to do something about engaging this generation of collegiate entrepreneurs, bring new charters to life and enable groups left behind in pursuit of the American dream.

Gary Perez, the CEO of USC FCU launched a project in the post George Floyd awakening to bring credit union services to the historically black colleges and universities (HBCU’s) in America.

There are 107 HBCU’s in 19 states plus DC and the Virgin Islands (http://www.thehundred-seven.org/hbculist.html). Vice President Harris graduated from Howard University in DC which has a credit union, but according to its web site, does not serve students.

Gary brought together a group of nine young leaders (from Filene, CUNA, CUES, the CCUL and several natural person CUs), many of whom are HBCU graduates, to do the critical concept research. His five-page paper describes the need, the opportunity and questions to be answered. (contact information: gperez@usccreditunion.org and direct line is 213-821-7122)

Several of Gary’s young leaders expressed interest in migrating to a new venture startup, just as the GW students have undertaken.

This effort may be furthered by another group of leaders trying to promote credit union solutions for new generations of member owners. De novo charters is one of NACUSO’s “challenge” goals—to mobilize support for new coop startups within the CUSO community.

The Stars Align for a Credit Union Renaissance

College campuses are a vital source for the next generation of credit union leaders should the movement embrace these new venture competitions. Think of the appeal of Start Your Own Credit Union! The self-help model is the ideal path for inclusion for those seeking to realize America’s promise of opportunity.

Credit union leaders, CUSO’s and trade groups recognize these three enduring movement challenges. NCUA’s 1983 Annual Report (pg. 8) “Student Credit Unions Welcomed” demonstrated the regulator’s willingness to support student charters. It described new credit unions at Georgetown, Skidmore, and the University of Chicago promoted by designating them as low income, thereby enabling nonmember alumni deposits to fund low-cost student loans.

That regulatory support today seems to be the only missing piece to launch a new, more diverse and noteworthy era of credit union relevance. This effort could be a winning bet for all three races the movement is in–if NCUA would only step up to the window!

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A Critical Role for America’s Credit Union Museum

America’s Credit Union Museum in Manchester, New Hampshire, is on the site of the first credit union founded in the United States— St. Mary’s Cooperative Credit Association, renamed in 1925 to La Caisse Populaire Ste.-Marie, or “Bank of the People.”

Over the past several years the museum’s role has expanded beyond collecting credit union memorabilia.  When the Richard Ensweiler research library was christened in2018,  the goal of supporting studies of the movement became central to its purpose.

I believe this expanded function couldn’t be more timely.  If credit unions lose their connection to past events and personalities, it will lead to a declining IQ for the industry.

This does not mean that the IQ of current leaders is less their predecessors.  It may even be higher.

But the collective appreciation  of the unique power of cooperative design, the advantage of collective action, and  the embrace of disruptive innovation have atrophied in favor of imitating banks and an addiction to mergers versus organic growth efforts.

The importance of knowing about the movement’s past was captured in this CEO’s observation:

I wish I had kept the phone numbers and emails of CEO’s that are now gone from view.  Ex-CEO’s that could tell what they wished they had done when they faced downward curves to the end.  I worry that lessons lost and archived outside our industry are what is needed now.

 Some might say that we missed nothing; we witnessed progress and the natural march towards an industry’s maturation.  But that sounds like short-term winners talking to me.

Randy Karnes, CEO CU*Answers, February 2018