Who is NCUA’s Customer?

Several leading business schools, Harvard, Yale and Wharton, have offered courses to explore the role of capitalism.  Does business have a responsibility beyond expanding shareholder wealth?  How do concepts like ESG or DEI impact strategy?

Five years ago one professor noted these issues would not be part of the core curriculum.  Why are these courses outside the norm being offered?  Who is the school’s customer?  Are business schools becoming socially progressive?

A cautionary note about these boot camps for capitalism becoming more socially conscious was given by Jim O’Toole a long time USC business school professor.  “In the Dean’s view, the business community is their primary stakeholder. . . ranking of business schools reflects who hires the students. . .  most business are not trying to hire woke students.”

The Question for NCUA

Every organization, no matter the legal design or setting, has a customer.  Even governmental agencies.

December is a pivotal month on the NCUA calendar.   Multiple budgets, staffing changes, project priorities are being reviewed at the board level.  The NCUSIF’s NOL is reset.  The 2023 expense parameters are laid down including the OTR and the FCU operating fee.

Who is NCUA’s customer?   How does this focus affect these multiple spending and organizational priorities?  Is there evidence NCUA is becoming more sensitive to its customers?

Who is NCUA’s customer?

Is it the 100 million plus credit union member-owners?    There is no evidence of this.   In fact I can think of no example in which NCUA has responded to individual members’ concerns, let alone supporting their ownership rights.  In fact NCUA has ignored numerous situations where members are routinely disadvantaged by their own institution.

Could it be the 4,500 cooperative institutions?  Much of NCUA activity is directed toward the industry, its examinations, supervisory and admin roles and rules.  But NCUA does not treat these as customers in any traditional sense of the term.  It is very unusual for anyone at NCUA call out a credit union’s contributions on behalf of its members or communities.

Perhaps Congress is the “customer.”   NCUA claims independence from any traditional Congressional oversight via appropriations.   It keeps its own funds and maintains backup liquidity from Treasury.   It is an agency completely self-sufficient,  outside of any Congressional approval.

If not Congress, then the executive branch which nominates the three-person board.   Certainly board members assert party loyalty and will sometimes make overt efforts to follow administration priorities.  But in the overall governmental structure, NCUA is not a very visible part of any administration.

There is one other possibility which is alluded to in the frequently used justification for NCUA’s actions to “protect the insurance fund.”   From whom or what is never spelled out.  But the implication is NCUA is guarding the US Treasury from credit union’s somehow calling on the government for support.  There is no legal basis for such a belief, but this phrase is often used to justify some new rule or abrupt action without further explanation.

If all the obvious constituencies for who is NCUA’s customers do not align with current practice, then who do NCUA board members and senior staff see as their primary customer?

The  answer:  themselves.   The primary purpose of NCUA is self-preservation.

Just like the business school curriculum, the ultimate customer determines the outcome.   It is not the credit union member, credit union institutions or even a cooperative system that drives NCUA’s agenda and budgets.   It is institutional growth as measured by budgets, staffing and multi-year capital projects.

You might ask where does purpose fit into this organizational picture?  It doesn’t.

If in doubt about the agency’s priorities, just follow the money in the upcoming board agenda setting.  While there are multiple constituencies that claim an interest in NCUA’s activities, only one stakeholder matters when it comes to counting the money.




Two Suggestions for Giving Tuesday

I am sending donations to  the following 501C3’s organizations this Giving Tuesday.

While the demands for charitable giving may seem endless, identifying special circumstances or organizations in need today, is an expression of gratitude.  Gratitude makes us human.

Music Mission Kiev

Founded in the early 1990’s by a Presbyterian choir director, the intent was to introduce forbidden choral classics of the Western repertoire to the classically trained musicians upon Ukrainian independence from the former Soviet Union.

The group performed the first Messiah concert ever in Ukraine.

Their mission expanded to offer care for widows and orphans and bible studies.

Their efforts today are literally on the front lines.  One orphanage was occupied by Russian troops until liberation.

Their funding request today is: On Tuesday we will raise $21,600 for Ukrainian soldiers suffering from PTSD and brain injuries.

$21,600 will provide a year’s supply of medicine for at least 40 soldiers as follows:

$1,800 — Supplies 40 soldiers with treatment for 1 month.
$540 — Support 1 soldier’s treatment for 1 year.
$270 — Support 1 soldier’s treatment for 6 months.

Contact infor:  Music Mission Kiev PO Box 161849, Altamonte Springs, FL 32716.  Phone:   407-699-7172.     

Their most recent concert recorded in late October in Kiev during the missile attacks, can be viewed here. (https://www.youtube.com/watch?v=U8ALGRrXRJQ)

Next City

My second donation is to Next City a journalistic effort to recognize  initiatives to make urban environments more livable.

Their writers focus on case studies which address some of the most important challenges of urban life.  Their Partners for the Common Good series highlights CDFI funding initiatives such as this black owned wine and jazz club in Grand Rapids, MI.

Another example is the 15 minute neighborhood app that helps anyone see if the essential services are available within  a short walk.  The app’s concept  is simple:

The ability to find what you need to live daily within a 15-minute walk is one of the “secret sauces” that make cities great places to live. That’s why I found the news that a digital mapping and location software developer created an app that could tell users whether their neighborhood cleared the bar and what they had access to in minutes so fascinating.

Next City’s mailing address is:

Next City
P.O. Box 22449
Philadelphia, PA 19110

Their focus on reporting successful examples that improve the communities  mirrors the original credit union goal of enhancing common values and individual economic opportunity through cooperatives.

On Credit Unions and Mergers as a “Strategy”

Anything that can’t go on forever will eventually come to an end.

“The idea that we could strip-mine useful and productive businesses forever has an obvious flaw: eventually you will run out of productive businesses.

But there’s another, slightly less obvious flaw: long before the entire productive economy grinds to a halt, everyone who relies on it will get very, very angry.”   (Cory Doctorow on November 20, 2022)


A “Magnificat” Performance

One of the most unusual recordings of Bach’s Christmas oratorio, Magnificat, is this by the Harvard University Memorial Church choir in 2001.

Recorded virtually, it is possible to watch simultaneously every soloist, the conductor and every member of the orchestra as individuals-and to hear their collective performance.

A joyous wonderful experience, visually and musically.


Thanksgiving Thoughts

A Prayer of Thanksgiving

Written and offered by Dr. Colleen Hanycz on 1/25/21 at the “Introduction to the Xavier Community” event upon her selection as the 35th president of Xavier University

“Before I begin, I would like to offer a brief prayer of thanksgiving that I have relied upon heavily, especially throughout the past year as we have suffered as a community, and as a nation, and as a world, in so many ways:”

Let us remember that we are in the holy presence of God.

Loving Creator,
We asked for strength, and you gave us difficulties to make us strong.
We asked for wisdom, and you gave us problems to solve.
We asked for prosperity, and you gave us purpose and brains to use.
We asked for courage, and you gave us fears to overcome.
We asked for patience, and you gave us situations where we were forced to wait.
We asked for love, and you gave us troubled people to help.
We asked for justice, and you called us to be just and to lead with integrity.
Lord, we have received nothing that we asked for or wanted.
And yet, we received everything that we needed.
For this, we give thanks.

A Family Gathers Once Again


Thanksgiving Poem

Gettin’ together to smile an’ rejoice,
An’ eatin’ an’ laughin’ with folks of your choice;
An’ kissin’ the girls an’ declarin’ that they
Are growin’ more beautiful day after day;
Chattin’ an’ braggin’ a bit with the men,
Buildin’ the old family circle again;
Livin’ the wholesome an’ old-fashioned cheer,
Just for awhile at the end of the year.

Greetings fly fast as we crowd through the door
And under the old roof we gather once more
Just as we did when the youngsters were small;
Mother’s a little bit grayer, that’s all.
Father’s a little bit older, but still
Ready to romp an’ to laugh with a will.
Here we are back at the table again
Tellin’ our stories as women an’ men.

Bowed are our heads for a moment in prayer;
Oh, but we’re grateful an’ glad to be there.
Home from the east land an’ home from the west,
Home with the folks that are dearest an’ best.
Out of the sham of the cities afar
We’ve come for a time to be just what we are.
Here we can talk of ourselves an’ be frank,
Forgettin’ position an’ station an’ rank.

Give me the end of the year an’ its fun
When most of the plannin’ an’ toilin’ is done;
Bring all the wanderers home to the nest,
Let me sit down with the ones I love best,
Hear the old voices still ringin’ with song,
See the old faces unblemished by wrong,
See the old table with all of its chairs
An’ I’ll put soul in my Thanksgivin’ prayers.

Lincoln’s Thanksgiving Proclamation

The national Thanksgiving holiday is a time of community and family gatherings.  Local 5K and 10K turkey trot fun-runs, watching Macy’s parade in NYC-or on TV, rivalry football games, black Friday retail sales, children traveling from school or work to go home, new editorial or historical opinions on the Pilgrims and native Americans, and of course the feasting.  Familiar recipes prepared once a year.  Everyone sitting around a common table  grateful for this pause in life’s hectic doings–just to be together.

Religious services are still offered which in the secular context of today’s Thanksgiving events recall the holiday’s roots.

It was Lincoln who issued an 1863 proclamation calling on Americans to “set apart and observe the last Thursday of November next as a day of thanksgiving,” partly to celebrate victories in the then-raging Civil War.

Lincoln’s action came  three months after Union Army victories at Gettysburg and Vicksburg, and at a time in which ultimate triumph appeared in sight.

Reading the words illustrates the power of belief in a time of civil conflict; and shared gratitude for the blessings of life.  A reminder of the “gracious gifts” that give the holiday its special meaning still today.

Washington, D.C.
October 3, 1863

By the President of the United States of America.

A Proclamation.

The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God.

In the midst of a civil war of unequalled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union.

Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore.

Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.

I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens.

And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union.

In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.

Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.

By the President: Abraham Lincoln

An Eye-Opening NCUA Board Meeting

Last week’s  NCUA board meeting had only one topic: the financial state of NCUSIF.

The interest rate context for this briefing was described by a CNBC commentator as follows:

“What we’ve seen in the last few years was a cost of money that was 0. Throughout history, that’s very rare. Now we have a cost of money that is high and going to keep going higher.”

The implications of this context were  absent in the initial presentation.

A Puzzling Omission

The CFO’s presentation of the September 30 NCUSIF financial position was the routine reciting of numbers on slides, until the questions started.

Vice Chair Hauptman referenced the fund’s cooperative nature and the importance of transparency.  He pivoted to making a pitch for CLF legislation to enhance liquidity for 3,600 small credit unions and “for the NCUSIF.”  His first question was , what is an appropriate liquidity level for the NCUSIF?  The September overnight number was $362 million.

That’s when the bombshell was dropped.  CFO Shied said that the NCUSIF now held $1.7 billion in overnights. This is almost four times the amount initially presented. This increase was partly the result of $650-$700 million in additional 1% deposits.  Partly because the fund was “pausing on long term investments.”

This $1.7 billion yields almost 4% or three times the year to date yield of 1.31%.  For over a year the fund’s declining NEV showed that the robotic laddering over 7+ years was locking in significant NCUSIF underperformance for  years in the future.

Why this  dramatic balance sheet change was not part of the initial update is puzzling.   It marks a change in the year-long investment explanation that changing the ladder approach in the face of the rise in rates would just be “timing the market.”

No one asked the obvious question.  Is this a change of investment tactics to a managed WAM approach?  Or just a temporary pause?

It was  Board member Hood who brought out the impact of the underperformance of the fund.   His three questions follow.

Q. Given how interest rates have increased, every security we have currently is underwater, correct?  

Answer: That is correct Board Member Hood.  The continued and sizable increases in interest rates mean that the entire portfolio other than the overnights is underwater at this time.

Currently the NCUSIF’s portfolio has lost over $2.0 billion in market value(NEV).  The agency continued NCUSIF’s  auto investment policies even when rates were at “historical lows.”

Now every security in the $22 billion portfolio is underwater.   Even long term securities purchased this year in the rising rate environment.

The result will lock in  below market portfolio yields for a long term (up to the WAM of 3.7 years).  This underperformance means credit unions are on the hook should the fund’s operating expenses (liabilities) exceed its annual income.

Q. At a previous board meetings on the status of the Share Insurance Fund, we discussed the outside accounting firm we hired to look at the true-up issue and how this impacts the equity ratio. For the record, at one of the last share insurance board updates, we discussed that the true-up memo by the outside accounting firm states that the timeliness and accuracy of the data is required in the Federal Credit Union Act so this provision in the law, and I quote, “May provide some latitude from a strict interpretation, that the equity ratio must be calculated based on the financial statements amounts, particularly given the knowledge of the timing effect on the calculation of the equity ratio. Accordingly, it may be permissible to use the pro forma calculation of the contributed capital amount when calculating the actual equity ratio.”  In a previous board meeting, I noted that the letter pointed out the current practice understates the equity ratio by several basis points and that there were several options for correcting this understatement.  Can you please provide an update on next steps?

CFO Schied said a committee was studying this issue.  The memo in question was presented a year earlier.  One would hope that this considerable delay would result in a more accurate NOL calculation. For as Hood noted the present calculation  understates the actual yearend ratio by 2-3 bases points.

Q. I see several sizable institutions changed in their CAMELS score.  Is there any takeaway from these data?  Do we think any of this has to do with the new “S” component–or any individual scoring component? 

Answer: This does include elevated interest rate risk, but examiners also noted increased liquidity and compliance risk in these institutions. The downgrade in CAMELS ratings also reflects a lack of governance or poor risk management practices.

Not a Liquidity Issue but Risk Management

Other board members spoke to the importance   of liquidity.  This has become more pressing as any sale of a security from the portfolio would result in a realized loss to the fund.

With an NCUSIF portfolio nearing $22 billion and regular predictable cash flow, the last concern should be liquidity.

Credit union owners should receive more than a perfunctory reading of data on slides when an NCUSIF update is presented.   The critical issues of investment performance, NEV risk management and detailed explanations of allowance expenses should be the routine.

Anyone can read numbers on a slide.  What they mean should be the substance of every update.  It should not require board questions to discover that the data presented was not timely, relevant or representative of current conditions.

Hood’s questions show the need for better risk management in the NCUSIF.  They also demonstrate the need for a more professional and current briefing by staff.




The Changing Seasons

Temperature fell to 34 degrees last night.

A Gerber Daisy, the last flower of summer.

Camelia, the first flowers of fall.

Finished putting 5 allium, 15 tulips, 25 crocus and numerous hyacinth bulbs until the rain came.  Still over a 100 tulips and daffodils to plant before the first freeze.


How People in Power Make Mistakes

From Scott Galloway:

“The undoing of many powerful people is that they enter a hermetically sealed bubble of fake friends. Enablers, not people concerned with their well-being. When the Elon-Twitter debacle started this spring, I wrote a post about power.

“My thesis: Power, unchecked, is a psychological intoxicant. OK, this isn’t so much a thesis, as it’s scientifically proven. Research shows power causes us to downplay potential risk, magnify potential rewards, and act more precipitously on our instincts. In other words, you lose your ability to self-regulate; you need others to do it for you. . .”

The solution: Every day, every one of us needs to ask ourselves an important question: Who keeps it real for me? Who will push back, who will tell me I’m wrong … who will save me from myself and the psychosis that’s led to so many successful people’s fall from grace. ”

Example: Ed Callahan had Bucky Sebastian as his “wingman” in work and life.