The Best Sermon in Life Is the One You Live

(from Jim Blaine)

          Fred Byrd 

Fred Byrd has passed away at the age of 87.  Fred Byrd started out life as one of eight children, son of a hardscrabble sharecropper in rural Hoke County, North Carolina.  The funeral was held Saturday at Rock Springs Missionary Baptist Church – standing room only.

Might say that 70 or 80 years ago in the rural South, that the “odds for success” were not exactly stacked in Fred Byrd’s favor; but Fred Byrd was a remarkable man.  Loved by many, admired and respected by all.

Fred Byrd was faithful in his mission in life to his five children, his church, his extended family reunion association, his friends and to his work. Those things Fred touched with his life were always improved; he wasn’t always necessarily the leader, but he was always in-charge. The Minister said one of Fred’s favorite pastimes was talking.  Fred was plain-spoken and freely shared his thoughts and opinions with others – whether you were ready or not! With Fred Byrd, you didn’t have to wonder what he thought or felt. Fred didn’t shirk his responsibility “to counsel” you when you needed it. The Minister said Fred even counseled him on his sermons: “Keep it simple and, most importantly, don’t take all day!”

Fred Byrd counseled me often over the years; it was always advice well worth getting. I distinctly remember our “first session”…. 

You probably need to know that Fred Byrd’s career was as the supervisor of housekeeping at a very large, state-operated mental hospital in Raleigh. A challenging task with numerous employees, 3-shifts, 7x24x365 operations in an environment which required not only great skill, but also great flexibility, discretion and compassion. Fred Byrd was definitely the right man for the job; he cared about everything. Fred took his work, his life very, very personally.

But Fred Byrd, true to his roots, also worked a second job at the CU keeping our house in order. One evening Fred dropped by the office and said: “Mr. Blaine (I immediately knew I was in trouble!), could I speak with you a moment about the trash?” You want to “talk trash” to me Fred? “That’s not what I said!  I don’t want to talk trash to you; I want to talk about your trash!”(This was really not looking good…)

Fred told me that he knew that I brought in fast food for lunch everyday and ate in the office. Fred was into GPS tracking long before the technology was invented! He noted that the bag and remaining cup of ice from the soft drink ended up in the trashcan nearby. Fred pointed out that by the end of the day that the ice had melted and created quite a problem and a mess for his folks. Fred said softly that he was sure that this was just an oversight and something that had never occurred to me (and it hadn’t); and would I mind emptying out the ice in a sink before discarding it? Fred was looking me dead in the eyes as he “counseled” me. And then he made the lesson stick:

“Mr Blaine, there is no reason, there can be no justification for any of us to make life purposefully more difficult for someone else.”
In life, I have received no finer “counsel”.

In closing the funeral, as the casket was rolled down the aisle to the strains of “I’ll Fly Away”, the Minister had one final thought about the man Fred Byrd:

“Your best sermon in life is the one you live…”
Amen, Brother Fred…. and thank you, …
Thank you for your “sermon”.

Being a Leader: Where is Kristian Christian When Members Need Her?

Bank Transfer Day.   It was a national headline PR story and marketing tsunami in 2011. The activity was started by a young woman who took action when Bank of America began charging fees because her combined balances were less than $20,000.

The person behind this movement was Kristian Christian.  She stepped up because she believed  bank executives were “out of touch” with their customers.  Her example raises a question: do credit unions need her activism even more today?

The Bank Transfer Day Story

The time was the fall of 2011.   The worst of the 2008/09 Great Recession was over.  Banks were being held to account by regulators.  Customers were paying the price.

Two brief videos that capture this movement’s moment.  The first is a 6:26 minute video from the news program Democracy Now on November 9, 2011.   The report estimates that as many as 700,000 people may have transferred money by the November 5th transfer date in response to Christian’s call to action.

In this news interview Christian also tells how she started  by  just sending a Facebook post to her 500 followers and asking them to join.

The second video from Christian, one year later in November 2012, gives an update on the  results and describes some of the online attacks she experienced.  Her message is for activism to succeed, it requires initiative and courage.

Where Grass Roots Efforts Are Needed Today

In the first video, Christian says banking executives were disconnected from the people they were meant to serve.  She urged her “followers” to seek out a not-for-profit credit union or community bank and transfer their funds to these locally-focused institutions.

Today might Christian see this same situation where  some credit union CEO’s and boards seem totally removed from their own member-owners?

In recent  years  a number of credit union members have experienced the merger of their sound, long serving coop justified with only rhetorical statements about the future.  But also creating immediate benefits and payouts for the initiators.   In several cases the CEO’s promised to stay in leadership roles to oversee their former members’ interests only to bail out within the year.

Here is one member’s comment on a merger vote completed this month:

Have asked several times for the actual voting numbers and have been told that no one has then and if they did they would not share them.
 Have you ever voted and not known the voting results? Employees from SEFCU were asked what they’re shirt sizes were for the new logo well before voting even ended. Also that it would become legal as of August 1 . Again before the end of voting. Whole thing smells !!!!

In another case, the Chair and CEO transferred $10 million dollars of members’ capital to a newly formed private “foundation” under their control as part of the merger.   According to  IRS form 990, the FCCU2 is a private foundation holding assets$11,973,971 at 2021 yearend.  The $2.0 million increase in assets occurred in less than 6 months. There is no mission statement, operational activity or officers listed in the Guidestar (Candid) report from the IRS (EIN: 87-1724276).

The Fix Is In

Credit union boards have ignored or stifled efforts for members to participate in the annual election of directors.  Virginia Credit Union is a well-publicized example because some members  challenged the status quo and submitted nominations.  The credit union turned a blind eye to their efforts and the disenfranchised members went public.

Few credit unions today actively encourage or seek board candidates.   Annual elections have become moot as internal nominations just equal the number of open seats.

The democratic governance model has been converted to a self-perpetuating board oligarchy.

Solution: Credit Union Transfer Day

Christian’s effort shows there is nothing more powerful than an engaged person who wants to change the world.

How might her example empower credit union members who feel overlooked by their coop’s leaders?

Should they identify another credit union willing to open their doors to persons seeking a responsive coop?  Transfer their money?   Refinance their loans or shift their direct deposits?

Christian’s method was simple: vote with your funds. Do something, not just complain.  Let your personal network know what you have done and ask then to support your position.

In 2013, Christian again stepped up by joining over 6,000 credit union supports to sign a petition to the White House to “Choose NCUA leaders who Understand Cooperatives” when making appointments to the Board.

Maybe concerned members should contact Christian to see what she is doing today?




Leadership: Woven from a Different Fabric

(from Jim Blaine)

It’s a bit difficult to explain to folks who never met him, what “a force of nature” Ed Callahan was as a person. 

 He had an unusual instinct for listening to difficult issues, considering alternatives and options, and then “cutting to the chase”- clearly, decisively, on-point.

When leaving his position as NCUA Chair in 1984, he wrote a “Farewell Address” to President Regan about his view of the credit union movement. 

For those looking for a defense against unnecessary taxation, a rebuke against inept and intrusive regulation, or a simple, concise statement of the hope and promise of “the credit union alternative”, Ed Callahan’s message still rings true:

“The only threat to credit unions is the bureaucratic tendency to treat them, for convenience sake, the same as banks and savings and loans.  This is a mistake, for they are made of a different fabric.  It is a fabric woven tightly by thousands of volunteers, sponsoring companies, credit union organizations and NCUA – all working together.”

“Credit union boards of directors have made, and will continue to make, individual and collective decisions from their vantage point on the front lines of the marketplace.”

When left alone, they return to what they do best; providing basic financial services to their members on the most convenient and cost-effective terms possible.”

Credit Unions: Woven From A Different Fabric.

(Originally published July 2013)

Abraham Lincoln and the Challenge Facing the Credit Union Cooperative Movement

In the Gettysburg Address Lincoln summarized the ever-present challenge of keeping alive the spirit of a  revolution’s  original intent.

Dr. Eva Braun’s essay describes Lincoln’s grasp of the declining motivation of later followers in his Gettysburg speech:

From Dr. Braun’s  analysis: Lincoln begins, “Four score and seven years ago.” “Four score,” With its long oh’s, sounds a more mournful, solemn note than could the words “eighty-seven years,” but the choice of the phrase is not only a matter of sound; it also carries a special meaning. It is the language of the Bible, as in Psalm 90:10:

The days of our years are threescore years and ten; and if by reason of strength they be fourscore years, yet is their strength labour and sorrow; for it is soon cut off, and we fly away.

With the psalm in mind the phrase implies: just beyond the memory of anyone now alive, too long ago for living memory.

Now, we know that from youth on Lincoln was concerned with a peculiarly American danger: the death of sound political passion. In his speech on “The Perpetuation of our Political Institutions,” of 1838, Lincoln drew a clear parallel with the early community of Christians, whose danger lay in the fact that the generation of disciples and eye-witnesses had been followed by a second generation which had only heard by word of mouth, by a third which had only read of Christ, and by a fourth which had begun to forget.

So in the American community; the scenes of the revolution, he said, “cannot be so universally known, nor so vividly felt, as they were by the generation just gone to rest.”  The men who had seen the Revolution, who were its “living history” are now gone.

“Beginning to Forget”  A Peculiarly American Habit

Remembering the contributions of earlier credit union founders is vital. Last week Jim Blaine described the legacy of Ralph Swoboda. As CUNA General Counsel and then President, he helped transform the movement through two system-wide challenges: business modernization and deregulation.

While leading NCUA in the early 1980’s, Ed Callahan and Bucky Sebastian in their presentations promoting deregulation would cite the original practice of common bond going back to the early years of state chartering.   They pointed out that some of the first fields of membership were often city-wide.  The intent was to be inclusive, not limiting,  for those who sought a cooperative financial choice.

But this reference to the spirit of the cooperative founders, where purpose surmounted existential challenges, can  dissipate as the “living history” passes on.

We cannot resurrect those who have left the playing field. But we can certainly rekindle passion for member advocacy in all its cooperative possibilities.   And in the process keep the “movement” alive.

The Current Challenge

When a motivated popular movement aligns itself with another cause to promote its  agenda, the hybrid effort can pervert its primary purpose.

An example is the tying of Christian nationalism with white nationalism.  Christianity becomes less about faith and more about political power.

A parallel confluence of activity is occurring in credit unions.  Since the imposition of PCA in 1998 through the Credit Union Membership Access Act, NCUA has increasingly equated credit union oversight  with banking practice.

The latest effort is the imposition of RBC/CCULR completely incorporating the full bank regulation in its rule. This embrace of banking models, a frequent standard cited by Chairman Harper, also includes the promotion of external capital.  It neglects the unique capabilities of cooperative design.

Collaborative institutions include the CLF and NCUSIF, both under NCUA management. CLF’s role is moribund.  As for the NCUSIF, NCUA has converted the insurer into an open-ended funding draw for the agency’s daily operations.

Another example of cooperative diminution is NCUA’s lockdown of the corporate network, especially its services for smaller credit unions.

Credit unions have read the regulatory signals.  “Treat us like banks, and we will follow that industry’s lead.”  Mergers, not collaboration, become a priority growth strategy.  Bank purchases, paying premiums to bank owners with credit union member capital, is promoted as an immediate expansion opportunity. In other words, “If we can’t beat ‘em, let’s just buy ‘em.”

The regulators are silent. As long as credit unions’ financials mirror bank’s, everything is OK.  Mergers, bank purchases and novel (SPAC) growth tactics are just the free market at work. Even when a CEO and Chair transfer $10 million of members’ funds to their control following a merger.

Let me be clear that these are not the actions of the majority of credit unions, but they  dominate the headlines.

Losing Faith

The credit union system’s unique capacities are simplified to  safety and soundness, defined by ROA and net worth with a dollop of growth thrown in.  Purpose becomes dressed as creative public relations campaigns and promotional branding efforts.

An example of this waywardness is VyStar Credit Union.  A member forwarded their most recent assessment of its recent flawed digital channel conversion:

In regards to VyStar, we have decided to move our account to another credit union.

Facebook posts ( have certainly slowed down.  I do not know if it is due to apathy or is X number of people who have just gone to other financial  institutions.

Login online has greatly improved.  There is little to no wait time.

They updated the mobile app on June 26th.  Many people had difficulty getting on the app, especially the android version.  

Getting a hold of someone in customer service is very difficult at best.  Very long wait times on the phone (in excess of two hours).  You can log into chat, I had almost an hour wait the other day.  While they have now added internal transfers, you still cannot do member to member (linked account) transfers (like to other family members).  You can only transfer funds internally within your savings, checking, MMA, etc.  

You still cannot see any account history prior to 05/13/2020 which was the day they shut down the system they used prior to the current one.  

You no longer get copies of your checks written online as before.  

I see no “Improvements” or new features in the new system whatsoever.  The new bill pay is cumbersome and not user friendly.  I filled in the bill payees into our new credit union with ease, it is almost exactly what  we used to have at VyStar before this poor unsatisfactory installation.  

Lastly, and most disappointingly, is the fact that the CEO has still not addressed the members directly.  I know of no statement to the press since about May 23rd.

I have no idea how many members have left and I am not sure we will ever know.  I hate leaving but, I have lost faith in them.

A Two-Way Street

The fundamental flaw in VyStar’s strategy is not a bungled conversion.  Many conversions have temporary problems.   Rather it is VyStar’s strategy that credit union membership is a one-way street.   Members just transact and are viewed as customers, not owners.  There is no respect for members’ “faith” which is the primary foundation for any credit union’s long-term success.

A two-way street means the owner’s role is understood, honored and continually enhanced.  The primary means  is seeking to expand the multiple ways value is created for members, especially those who have the least or know the least.

A Member Advocate

The credit union model is foremost an advocate for members’ well-being.   That was the original intent.

The vibe at VyStar is all about the institution and its size. This is a sentence from an April 2022 merger announcement before the digital debacle:  VyStar, which has more than 800,000 members and over $12 billion in assets, will remain the 14th-largest credit union in the country by asset size.

When the member relationship is always front and center, the owners return much more than transactions.  They give their loyalty, patience when necessary, and word of mouth endorsements with friends and family.

That was how the credit union movement achieved their current $2.3 trillion position while serving the fourth or fifth generation of members.   Members’ contributions are paid forward to benefit future members.

For the founding members’ spirit of purpose to prevail, it must  be constantly renewed in the words and actions of those leading cooperative charters now.






Finding Leaders: Clean Up Hitters

(from Jim Blaine)

This one’s about leadership, but it’ll take you a little while to find that out.  Leadership’s that way quite often.  With leaders, last impressions are usually more accurate than first impressions;  and appearances, unfortunately, can frequently be deceiving.

But if you survive this next little ride you’ll come away with a surefire, can’t miss, “spot the leader” identification methodology. A “new paradigm” for you MBA types.

How this all got started was a mid-week road trip to Kings Dominion with a small herd of high-decibel youngsters, mostly mine. For the in-cognoscenti , Kings Dominion is an amusement park one exit north of Richmond, Virginia.  They would have built in Richmond, but the State Legislature already runs a three-ring circus at that exit.

 The roller coasters were why we were headed to Kings Dominion. They’re the main attraction. Not to say there aren’t many others. One big draw, for example, is the “volunteers from the crowd” karaoke show, which the emcee promises “requires no talent to participate.” The absolute truth of that statement usually becomes pretty obvious rather quickly. Critics in the crowd overheard to remark, “Heck, I can sing that well” probably haven’t really thought through that observation carefully enough .

Chainsaw Carvings

Another major entertainment is good old-fashioned “people watching.” There is always an extremely wide variety of exotic folks at an amusement park. And, usually there is an exotic variety of extremely wide folks, too. But much like risk-based lending, the rabble can be divided into two distinct groups – the have and the have-nots. In this case, that’s not a distinction based on wealth. The division is between those who have enough clothes on and those who have not. Well, the have-nots do, at least, seem to have the more complete tans. Don’t forget your sunglasses!

Carnival Ride

But my favorite thrill – other than the coasters – is the Scrambler. For those of you who haven’t been around much, so to speak, the Scrambler is 12 whirling cars on three separate pods that sling you toward, and spare you from, oblivion at ever increasing speeds. The Scrambler is the ultimate smile machine. The toughest hombre, the dourest Puritan, even the most jaded CPA can’t resist a broad grin when this mechanical marvel spins into action.

As the velocity rises, each rider’s “public mask” gradually weakens, then falls completely away. And for a few brief moments, you can gaze directly into the hidden child heart of another person’s soul. Souls are private places which, when uncovered, search frantically for shelter from the light. But with the Scrambler, only raw happiness – that which is best in each of us – is spun to the surface. And, it’s quite alright, and very reassuring, to enthusiastically stare. If you do take a look, don’t miss the revelation that we’re all very human and, at heart, very much akin – that’s something really worth learning before it’s too late and the ride is over.

Leadership and Roller Coasters

But, I came to tell you about leadership and that’s where the roller coasters come in. Kings Dominion has a bunch of them with names like The Rebel Yell, The Anaconda, The Hurler, The Grizzly, Shockwave and The Avalanche. You can ride these thrills forwards, backwards, over, under, inside, outside, up, down, sitting, standing, or my recommendation, kneeling and praying!

Riding a roller coaster evokes many of the same emotions as running a credit union, rolling out a new marketing campaign, or leading a DP conversion. “Shucks, it can’t be that bad…”  “This is going to be fun…”  “Whose idea was this?”  “Well, at least it can’t get any worse…”  “If I ever get out of this, I promise…” Guess you get the idea.

This time around, on one particular roller coaster ride there was an unfortunate accident. The to-and-fro and up-and-down was just too much for one young’un, who unswallowed his lunch while being closely held in the lap of his mother. When the ride ended, it wasn’t difficult to tell from Mom’s face (and clothes!) that this unexpected extra little thrill was just about “too much.” As opposed to the Scrambler, this is one of those soul-searching moments when it’s only polite to look away!

Carnival Food

The roller coaster quickly emptied, of course, and the waiting throng watched and waited for the “now what” with much anticipation. The rides are operated by teams of young people. I’m sure they are summer help, awaiting the advent of the fall semester at local universities and colleges. It’s apparent that they’ve been chosen with great care, because all are neat, attractive people in their blue knit and pressed tan khaki.

The Leader’s Test

Surprisingly, on this occasion, all the “service team” seemed to have missed “the mess” and to be thoroughly occupied with other duties; though it was difficult to determine exactly what those “other duties” involved. The team members were all desperately looking anywhere other than toward the “scene of the crime.” As time passed and the tension mounted, the feigned ignorance developed into a serious game of chicken. Who would blink first?

Carnival Food

There are certain problems and situations in life that only a leader will handle. Such problems and situations are of a type which should not be avoided and cannot be ignored; and, of a type which only the uncivilized or unjust would try to delegate to others. These are the type of problems that we all can see “somebody needs to do something about that.” Most of us aren’t willing to be that “somebody.”

Next time you have “a little mess” at your credit union, watch for who steps forward to clean it up. Always promote the first person “to grab the mop.” They really are somebody.

And, if your hand is not the first one on the mop, perhaps you should give that a little thought, too….

(March 14, 2011)

Lincoln’s Insights for Today: # 5

From the Second Inaugural Address March 4, 1865 to a divided nation.

At 701 words this is the second shortest address given by a President. He invokes God fourteen times, and mentions the Bible four times.  He uses inclusive language to avoid polarizing further the nation’s feelings at the war’s termination.  He talks about forgiveness and reconciliation.  In the style of a preacher from the Great Awakening, he first provides a scriptural injunction and closes with an imperative, therefor we must. . .

Both read the same Bible, and pray to the same God; and each invokes His aid against the other.  It may seem strange that any men should dare to ask a just God’s assistance in wringing their bread from the sweat of other men’s faces (Gen 3:19); but let us judge not, that we be not judged (Matt 7:1).  The prayers of both could not be answered; that of neither has been answered fully.

With malice toward none, with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan—to do all which may achieve and cherish a just, and lasting peace, among ourselves and with all nations.

Editor’s comment:

This excerpt is  from a lecture by Dr. Ronald C. White (BA, UCLA; PhD Princeton University) an independent scholar and authority on Abraham Lincoln. He is the author of Lincoln in Private: What His Most Personal Reflections Tell Us about Our Greatest President.

Lincoln’s words are timeless, especially as we face  our political divisions today.  They were transformative when first prepared.  They feel even more profound today.

Ronald White’s complete lecture can be heard here.


The $846 Million Missing Item From Thursday’s NCUA Board Agenda

While NCUA’s $350 million annual budget is the primary Board item, that is not the most important financial issue.   For there is unfinished business stretching back over a decade.  The agency owes credit unions an amount that is 250% greater than the budget it will be discussing.

Here’s the details.

In March 2009 NCUA Board member Rodney Hood along with Chair Michael Fryzel and member Gigi Hyland voted to conserve US Central Credit Union and WesCorp, the two largest corporate credit unions.

My hunch is that board member Hood never expected to be overseeing the continued distribution of US Central’s almost $2.0 billion surplus thirteen years later during a second term on the Board.

Credit Unions Due $846 Million

As of the March 2022 AME financial reports for the five liquidated corporates, NCUA projects over $846 million is remaining to be paid. The majority, $556 million, is from US Central’s estate.

When completed total AME payments to credit union member shareholders will exceed $3.2 billion.   As a comparison, the total capital of the eleven active corporates at December 2021 was only $2.5 billion.

Put bluntly, the collective funds returned by the four liquidated corporates is 132% great than all the equity in corporates active today.  Closing these solvent corporates was a catastrophic error in  judgment!

The March 2022 AME financials presents the total forecasted payments to the four corporate’s members and the remaining amounts due.

US Central:     $1.832 billion with $ 556 million due

Mbrs United:  $  622  million with $130 million due

Southwest:      $  613 million with $127 million due

Constitution:   $     48 million with $  32 million due

There are no payments for the $1.1 billion of credit union member capital at WesCorp.  NCUA projects a WesCorp deficit after all recoveries at $2.1 billion.  This is the only loss to the NCUSIF from the five corporate liquidations.  (from line B4-Due to Government March 2022 AME financials)

Total Corporate Surplus Now Tops $5.8 Billion

The above amounts do not include the $2.563 billion added to the NCUSIF when the TCCUSF surplus was merged on October 1, 2017.   Adding this amount brings total recoveries to almost $5.8 billion.

This surplus continues to point the need for an objective review of the entire corporate resolution effort.

When US Central was seized in March of 2009 NCUA Chair  Fryzel was quoted in a Wall Street Journal March 21 article:  “With us in control, we’d get honest numbers.”

If subsequent events have shown anything, it is that  “honest” numbers in an environment of uncertainty depends on who does the accounting.   Especially when the underlying process relies on valuation  models that claim to project the economic climate and related cash flows  years or even a decade into the future.

The Core Regulatory Failure

The problem is not the models or their incorrect assumptions, both of which were wrong.  The error is that predictions should not be the primary basis for resolution strategy.  All models are wrong; some are useful.

The required response is managing the daily dynamics as markets change.  Trying to predict the future  as the basis for today’s tactics led to disastrous decisions in NCUA’s  assessment of the corporate assets.

With NCUA’s ALM/NEV supervisory tests becoming more prominent in today’s rising rate environment, the limitations of financial modeling  is a much needed lesson to bear in mind.

The Need for a Look Back

But a look back is important for another reason.   Still today NCUA Chair Harper and senior staff use the apocalyptic estimates and conjectures thrown out in 2009 as NCUA  projected future events.  The hyperbolic forecasts were incorrect then; it is double injury to repeat them today when the actual facts are known.

In the same WSJ article above, Chairman Fryzel was quoted:  “regulators aren’t concerned about the health of any other wholesale credit unions besides the two brought into conservatorship.”  Yet just a year later when no longer chair, member Fryzel supported the liquidation of three more corporates, a decision that was devastating for the system and individual corporates.  Both Southwest and Members United are paying liquidating dividends on top of returning all their members’ capital shares.

By forecasting disaster, NCUA took unilateral action without any industry involvement except paying the bills.  There was no check and balance, no transparency and no alternative solutions developed.

Unfortunately, that unilateral regulatory mindset continues today.  It undercuts the unique cooperative advantage of collaboration represented in the common credit union funded resources  in the NCUSIF and CLF for individual turnarounds.

The most important takeaway from the corporate debacle is not estimation failures or the value of patience when resolving problems.  Rather it is NCUA’s failure to understand the unique cooperative capabilities when developing regulatory work out plans.

That lesson should include respect for the institutions in difficulty and a willingness to work together for solutions versus liquidating problems to make them go away.

The one board member who is best positioned to state the importance of this learning opportunity is Rodney Hood.  He was there at the Alpha and now hopefully, the Omega.

His counsel should be heard.  And credit unions should get their funds back ASAP. Enough delays!

PS:  I hope a board member will ask what the additional $10 million in liquidation expenses paid (outside the NCUA budget) in the first quarter from the AME recoveries was used for.


When Less Is More: NCUA Board’s Mid-Year Operating Budget Review

This coming Thursday the NCUA board will review the agency’s midyear budget.  To do so thoughtfully, it is useful to put the operating budget’s long term and recent trends in perspective.

Below is a summary of the growth rate of NCUA’s operating fund budget from 1999-2001.  The first column shows the compound annual growth (CAGR) for the entire period; the second column for the most recent five years.   Note the annual growth rate is per year.

  Annual Growth of NCUA’s Operating Fund Expenses (1999-2021)


Account CAGR’99-’21 CAGR ’16-’21
Beginning Cash Balance $MN 11.47% 22.43%
Operating Fee Receipts $MN 4.27% 8.97%
Operating Expenses $MN 3.66% 9.48%
Net Fund Bal at Yearend $MN 16.92% 26.01%
Ending Cash Balance $MN 12.32% 21.33%

What the Recent Numbers Mean: Expenses Out of Control

During these 22 years, NCUA has transferred ever higher amounts of its operating expenses to the insurance fund.    This is via the Overhead Transfer Rate (OTR) process. That rate of expense allocation has been as low as 52% in 2008 and as high as 73.1% in 2016.   Currently it is 62.7% an increase from 2021.

This overhead transfer has exceeded 50% even though state charters have always had fewer than 50% of total insured shares this entire time.  NCUA is subsidizing its regulation of federal charters by shifting costs  onto state credit unions.

Following this arbitrary, open-ended expense transfer however, operating expenses still increased 3.66% annually or faster than inflation for the entire period.  Most recently in the five years 2016-2021 this annual growth accelerated to 9.84 % or three times faster than the overall 22 year average.

NCUA invented inflation five years before the rest of the economy could catch up.

After this OTR allocation, the Operating Fee charged to FCU’s exceeded actual operating expenses by an average of 104.5% for this entire period– some years more than 100% and others less. Since 2015 however, the NCUA’s the operating fee collected has exceeded actual expenses every year.

Building NCUA Cash  from Credit Union Funds

The result of these excess fees is that yearend cash on hand has grown from $13 million to $129.6 million (or ten times-1000% ) in this 22 year period.   During these same years, while  annual expenses grew by just 3.6%, NCUA grew cash balances at 12.3%, or four times as fast.

The 2021 year end cash balance of $129 million was 110%  more than that year’s total expenses, and  double the 46% average for the entire period.

NCUA held cash balances for the first 16 years of this analysis  between 30-40% of the actual expenditures.  Since 2016 NCUA has retained  more and more credit union funds.  Yet there has been no change in either the agency’s ability to assess its fee or in its operations to require this ever growing cash and fund balance.

The Latest Numbers: May 2022

As of end of May, cash balances are $191.8 million slightly higher than 12 months earlier.   Operating expenses for the first five months are $48.3 million exactly the same as the prior year.

The net fund balance (equity) is at an all-time high of $141.3 million for this time of year.  In 1999 the net fund balance was just $6 million.   The numbers and trends suggest that  $75 million or more of this excess cash could be returned to credit unions and NCUA still have more than enough to cover all operating expense.

The Board’s Budget Review

American author Edward Abbey observed:  “Growth for the sake of growth is the ideology of the cancer cell.”

This Thursday if expenses lag budget, the NCUA’s habit is to repurpose unspent funds  and/or approve new positions not in the original budget.

Normal business practice would be to reduce the budget, not find new ways to spend a surplus.

How will the board view this ever-growing cash hoard? The traditional government mindset is to spend all the money on hand, whether that is necessary or effective.  Staff is always fearful that if money is left over, it will justify reducing the budget request for the following year.

Chairman Harper has been very public in of his ambition to grow staff, the NCUSIF and the budget at every opportunity.

Will the rest of the board go along with this six-year pattern of uncontrolled operating expenses and buildup of excess cash? Or will they stop the spread of NCUA’s operating fund cancer?

After all this is the members’ money.





Lincoln’s Insights for Today: # 4

Lincoln’s meditation on Divine Will September 2, 1861.

The Civil War was not going well.  There had been a second Union defeat at the battle of Bull Run.  He became depressed.   These are thoughts written to himself found in John Hay’s papers.

The will of God prevails.  In great contests each party claims to act in accordance with the will of God.  Both may be, and one must be wrong.  God cannot be for, and against the same thing at the same time. 

In the present civil war it is quite possible that God’s purpose is something different from the purpose of either party—and yet the human instrumentalities, working just as they do, are of the best adaptation to effect his purpose  I am almost ready to say this is probably true—that God wills this contest, and wills that it shall not end yet.  By his mere quiet power, on the minds of the now contestants.

He could have either saved or destroyed he Union without a human contest.  And having begun, He could give final victory either side any day.  Yet the contest proceeds. 

Editor’s comment:

This excerpt is  from a lecture by Dr. Ronald C. White (BA, UCLA; PhD Princeton University) an independent scholar and authority on Abraham Lincoln. He is the author of Lincoln in Private: What His Most Personal Reflections Tell Us about Our Greatest President.

His book is based on 111 private notes Lincoln wrote to himself which provide insights  into his personal, religious and  intellectual journey as a politician and statesmen. 

Lincoln’s words are timeless, especially as we face  our political divisions today.  They were transformative when first prepared.  They feel even more relevant today.

Ronald White’s complete lecture can be heard here.


Lincoln’s Insights for Today: # 3

Lincoln’s note to himself on Slavery, July 1, 1854

Lincoln served one term in Congress from 1847-1849.   He was defeated for reelection in part due to his questioning of president Polk ‘s war on Mexico– which Lincoln’s constituents did support.  This brief note shows how he develops his political positions by first presenting his opponent’s point of view.  And then rebutting it.

If A. can prove, however conclusively, that he may, of right, enslave B.—why may not B. snatch the same argument, and prove equally, that he may enslave A.?  You say A. is white, and B. is black.  It is color, then; the lighter, having the the right to enslave the darker? Take care.  By this rule, you are to be a slave to the first man you  meet, with a fairer skin than your own.

You do not mean color exactly?–You mean whites are intellectually the superiors to blacks, and therefore have the right to enslave them?  Take care again.  By this rule, you are to be slave to the first man you meet, with an intellect superior to your own.

But say you, it is a question of interest; and if you can make it your interest, you the right to enslave another.  Very well. And if he can make it his interest, he has the right to enslave you. 

Editor’s comment:

This note is  from a lecture by Dr. Ronald C. White (BA, UCLA; PhD Princeton University) an independent scholar and authority on Abraham Lincoln. He is the author of Lincoln in Private: What His Most Personal Reflections Tell Us about Our Greatest President.

His book is based on 111 private notes Lincoln wrote to himself which provide insights  into his personal, religious and  intellectual journey as a politician and statesmen. 

Lincoln’s words are timeless.  They were transformative when first prepared.  The logic is  still profound today.

Ronald White’s complete lecture can be heard here.