The end was quick. Like all hidden executions. The 60-year-old Indianapolis Newspaper FCU was conserved on January 14 and liquidated on March 31. The $6.3 million credit union served 1,143 members. In December 2019 it reported 10% net worth and a breakeven operation with 1% delinquency. One year later the credit union reported a $990K loss primarily due to a $741K loan loss provision expense.
NCUA gave no explanation except the “unsafe and unsound practices” mantra in the January 2021 press release. Why is this minor event worthy of any further attention? A local credit union, Elements Financial, took over “most” of the members’ savings. NCUA retained “a portion of members’ shares” and all the credit union’s loans. The loans are being collected by a small private company, Statebridge in Colorado. An unusual arrangement: why did Elements not also collect the loans? And only a portion of savings?
What’s to be gained spending more effort to understand this credit union’s demise?
Why Transparency Matters
The most powerful action NCUA can take is to close a credit union. The agency has refused to say how or why it acts in all such cases. By not providing any detail the press then speculates about circumstances using the last call report. Or more common, the true story comes out years later as a result of legal actions against bad actors. The agency vacuum creates an impression of covering up its own supervisory shortcomings.
How can a small, easily examined credit union that has been in business for over 60 years suddenly fail and lose every cent of its capital? The lack of specific facts and any NCUA person willing to take public responsibility suggests there is something to hide. No “body cameras”– Vice Chairman Hauptman’s suggestion at the April NCUA board meeting–for these closings.
NCUA’s silence reminds me of a college student’s essay addressing the difficulty people and organizations face when something goes wrong. The brief paper was titled Mistake-aholics Anonymous and reads in part:
“Ah, mistakes. Such an ugly word that carries quite the negative connotation. However, if you ask people if they regret their mistakes or would go back in time to change them, more often than not the answer is no. So why do we not like mistakes?
And why is retrospect so important to be able to see the true beauty in these unfortunate circumstances?
As a human I am inevitably a member of mistake-aholics anonymous; mistakes simply aren’t a choice; however, what you do about them is.
One learns that mistakes are essential to one’s evolution. But – like in AA- the first step is to recognize the problem and admit we are powerless to prevent them, so start there.
A second challenge is failure to ask others for help. However, a person must be ready to listen. Part of the journey with mistakes, is coming to these realizations personally and then seeking assistance. Step 2 in AA: come to believe and accept that we need strengths beyond our awareness and resources.
Another obstacle, I can’t seem to stop taking things personally. Whenever someone criticizes or critiques something I have done, I feel as though they are criticizing or critiquing me.
Fast forward to last week when I received non-ideal feedback from my manager. I noticed feeling demotivated and internalizing that I was not good at my job. However, the keyword here: I noticed. I relate this recognition in AA step 5: admitting to ourselves the nature of our wrongs.
Mistakes are important. They force us to re-think previously held beliefs and assumptions as well as encourage us to explore alternatives and pivot.
How easy would it be to just live life and never mess up? Never be wrong? I think we can all agree life would be boring. We learn by experience that mistakes are natural.
They are what it means to be human, yet we often shun those who own their mistakes. When that occurs, everyone loses. Mistakes owned, offer insight for making all things better.”
No one expects perfection from NCUA supervision. But as described by this student, it is reasonable, even necessary, for a responsible person or firm to learn from its failures.
Today NCUA just buries its mistakes. Indianapolis Newspaper is just another incident hidden in a pattern of silence. How can a credit suddenly suffer huge losses on a portfolio years in the making? There are no postmortems. Institutional failures become accepted, a way of life, a cost of doing business.
Is anyone at NCUA willing to enroll in Mistake-aholics Anonymous? The entire credit union system could benefit if NCUA followed AA’s step one: recognizing it has a problem.
Police body cameras were necessary when transparency was avoided and after-the-fact explanations proved self serving. Is this the accountability process NCUA wants imposed on its most critical supervisory activities?