The Greatest Credit Union Market Opportunity

I subscribe to a resource called Visual Capitalist +. The firm transforms data into  pictures and graphs that present the meaning from the numbers.

Below is an example of income distribution in the US using information from 2010.  I suspect the outcome would not be much different today.

I believe this visual illustrates where credit unions have their largest market opportunity.   If the cooperative’s goal is to serve the greatest number of members, versus the members with the greatest wealth, then 80% of Americans owning less than 7% of the country’s financial wealth should be the primary target.

This distribution  is one reason Congress created cooperative credit unions founded on self-help.

Why I’m Writing a Book

No, not me, but a kindred spirit.

Oscar Perry Abello  is the Senior Economic Justice Correspondent for Next City.  I have reprinted excerpts of his stories about startup credit unions and other community financial firms, especially CDFI’s. To find these just fill this blog’s search function with “Oscar Abello.”

In the following post he writes about withdrawing from his reporting job to write a book.

As you read his reasons, think about credit unions whenever he mentions “community banks” and their declining role in communities.  Ask whether cooperatives, in a similar manner,  are moving away from their core strengths?

His goal is to document the need for community focused financial institutions which he describes as “local fountains of money.”  Here is his “mission’ statement.


“The rumors are true.

“I’m going on book leave for the next few months. I’ll be working on a book, under contract with nonprofit publishing house Island Press, that makes a case to take back the banking system for communities. It will build on a lot of the reporting I’ve done right here for Next City’s newsletter The Bottom Line, especially over the past three years or so — quite an eventful period for the banking system, especially this year. . .

The Vital Issues or Just a Broken Record?

“Over the next few months, I’m looking forward to diving more deeply into questions like: What exactly is so different or special about a more locally-owned and locally-controlled banking system? What examples reveal how a renewed local banking system can avoid mistakes of the past and present? And what policy reforms or other changes help tilt the playing field back in favor of community banks or credit unions?

“As readers of this newsletter, you may recall one of the increasingly frequent occasions I’ve taken to mention in my reporting that there were 15,000 community banks holding 37% of banking industry assets in 1985, the year I was born.  Today there are just 4,200 community banks holding 11% of banking industry assets. If we’ve had the great fortune of sharing a conversation in person or during a webinar over these past few years, I’ve probably brought it up somehow. Sometimes I worry I’m starting to sound like a broken record about it. 

“I just haven’t been able to stop thinking about this set of facts — that there were so many community banks across this country within my own lifetime, and that we allowed so many of them to get swallowed up by bigger banks. A few years back, I came across this stunning graphic from the FDIC, showing how the four largest banks as of 2011 gobbled up a bunch of smaller banks over the decades leading up to that point.

“Maybe it’s a journalist thing. Follow the money, as they say. 

“Most of us, including most bankers, think of banking as taking deposits and lending them back out to borrowers. In some ways there is some truth to that idea, but it turns out if you follow the money all the way to its original source, 92% of money comes into existence as the result of a bank making a loan. So says a recent working paper co-authored by an economist at the Federal Reserve Bank of Philadelphia. Here’s the International Monetary Fund saying the same thing in 2016the Bank of England in 2014members of U.S. Congress in 1964, and economist Joseph Schumpeter (posthumously) in 1954.

Local “Fountains of Money”

“So think about it this way: In 1985, there were 15,000 money-creating local institutions. They were — and still are — often deeply flawed. Nearly all of them were guilty of redlining at some point in their history if not still at the time. Remember, women couldn’t open a bank account or get a loan without a husband or male relative’s signature until 1974. But even with those flaws, each community bank functioned as a local fountain of money. 

“Is today’s consolidated banking system an effective substitute for the 11,000 community banks that no longer exist? The Paycheck Protection Program debacle powerfully demonstrated the shortcomings of today’s banking system, as big banks initially struggled to reach the smaller businesses that were most urgently in need at the start of the pandemic. 

The Ongoing Need

“I don’t intend to wax too nostalgic about the community banks we’ve lost. Taking back the banking system must not look exactly as it did before. Lately there’s been another set of facts that grows larger and larger in my mind every day: Even after decades of consolidation, there are still 4,200 community banks out there. But how many community banks are also minority depository institutions, or MDIs, meaning they are owned or led by people of one or more racial minorities and primarily serve those communities? Just 122.

“Simply put, across the entire country there are 4,078 community banks serving primarily white communities, while just 122 community banks serve primarily communities of color. Of course, it’s much more likely today than it was in decades past for white-owned community banks to do business with people of color, but recent research has revealed the continued starkness of the divide.

“Banks still tend to locate their branches in neighborhoods whose residents look like their leadership or ownership, according to a joint analysisby researchers at Johns Hopkins University and the National Bankers Association, a national trade association for MDIs.

“Any effort to take back the banking system for communities has to take it back for the country we are becoming, not the country we were.

“So how many community banks do we need? I’m not sure that me or some policymaker or expert should be the one answering that question. Maybe it should be up to each community that feels ignored or frustrated with larger, distant financial institutions to take some of that money creation power for themselves and see how they do with it.

“I’ve been reporting on recent examples of communities taking that power for themselves. My hope is for this book to help the people in those and future examples to feel connected and properly informed about what’s at stake and why efforts like these are so important to the future of our cities, this country, and the planet. Look out for it in your local bookstore (tentatively) in Fall 2024.”

Oscar Perry Abello


An Opportunity for the Combined Trade Group: America’s Credit Unions.

The merger of CUNA and NAFCU proceeds apace.   The 60-day voting period by members began yesterday. Already scheduled NAFCU educational and network meetings continue. CUNA President Nussle will attend NAFCU’s Congressional Caucus in September to show a united Washington effort.

Joint transition committees have been appointed.  One initial product was a proposed dues structure. As I read the announcement, members of both organizations are expected to continue  paying the same dues  to the new organization until 2027 (three more years) following the same fee structure in place at December 2023.  It seems illogical  to pay dues for a nonexistant organization three years past its demise.

If credit unions are members of both trade groups, “Dual members are encouraged to pay membership dues for both organizations” even though NAFCU nor longer exists.  Apparently, economic efficiency is not a current goal of the merger.

An Immediate Opportunity for a Unified Effort

The merger process has been focused on the political steps necessary for member approval and  less the potential offered from a “unified voice” in DC.  Even though the political agenda may emerge down the road, there is one immediate opportunity that could demonstrate the possibilities of a combined lobbying capability.

An NCUA board position is now open as Rodney Hood’s term expired this month.  This new member’s six-year tenure should outlast the two current members.  It could extend over two presidential election-administration cycles.

For many recent appointments the expectations, even needs, of the credit union community have not been seen as a factor in the Administration’s choices.   The result is that new board members are strangers to both the Agency and the credit union system.  Think Metsger, McWatters and Hauptman.  Having prior NCUA experience as a staff or board member (Harper and Hood) may be useful, but it still does not bring an industry or coop perspective.

One longtime, now retired, CUSO CEO Randy Karnes (CU*Answers) commented during an earlier appointment cycle: “Cooperative principles make us different. When the NCUA believes that and Washington believes that, we have a stronger system.  But when nobody believes that, then it’s simply about banking regulations. I think our system’s position is weaker, and NCUA is not even thinking about their own brand.”

“Congress didn’t create the credit union charter because the nation needed “nice banks.”

In that same appointment cycle, there was a public White House petition, CO-OPS 4 Change, asking that the administration,  “choose NCUA leaders who understand cooperatives.”  And, “who recognize the shared economic value for people and communities created by the Cooperative model from the seven cooperative principles.”

Jobs for the “Boys” or for Cooperative Leadership

All NCUA appointments result from political ambitions and relationships.   That need not be inconsistent with cooperative leadership.  Earlier NCUA appointments included candidates with credit union experience such as retired and active CEO’s, state coop regulators, CUSO executives and even some with trade association connections.

Knowledge of the evolution of the credit union system and its current status can make regulatory decisions more informed and relevant. The unique structure of the NCUSIF, the potential for a fully engaged CLF, the self-interested trends in mergers, the paucity of new charters, and the continuing use of members’ savings to pay off bank shareholders are critical industry topics.

Even with experienced senior advisors, appointees without credit union knowledge easily default to Agency staff perspectives.

As the combined America’s Credit Union marches forward under a single banner, this appointment is an immediate test of its potential role.  Will the promise of enhanced influence bring forth potential nominees who have cooperative experience? Or will the person be another unknown to credit unions? Can the industry hope members’ needs will  be paramount in a proposed board member’s regulatory views?

The appointment, whenever announced, could provide vital insight about potential benefits of a united credit union voice in DC.

The March on Washington and MLK’s Speech: The Financial Metaphor

On August 28, 1963, an estimated 250,000 people gathered in the nation’s capital for the March on Washington for Jobs and Freedom — the largest civil rights gathering of its time. Today, that landmark protest is remembered for Martin Luther King, Jr.’s famous “I Have a Dream” speech.

Many can recall almost verbatim parts of the content of his “dream.”  Politicians of all beliefs, for example, use his phrase, “that one day all people will be judged not by the color of their skin, but the content of their character” to support vastly different views on affirmative action.

To Cash a Check

The dream’s words are still aspirational and inspirational.   For credit unions however, his metaphor about justice and freedom is a reminder of why coops exist.   Here are his opening words with emphasis added:

Five score years ago, a great American, in whose symbolic shadow we stand today, signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of their captivity.

But 100 years later, the Negro still is not free. One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later the Negro is still languished in the corners of American society and finds himself in exile in his own land. And so we’ve come here today to dramatize a shameful condition. In a sense we’ve come to our nation’s capital to cash a check.

When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise that all men — yes, Black men as well as white men — would be guaranteed the unalienable rights of life, liberty and the pursuit of happiness.

It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned. Instead of honoring this sacred obligation, America has given the Negro people a bad check, a check which has come back marked insufficient funds.

But we refuse to believe that the bank of justice is bankrupt.

We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation. And so we’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.

Why a Financial Metaphor?

America is the world’s leading capitalist society and its wealthiest.   For many the American dream is about becoming financially well off, even wealthy.   Everyone is financially accountable for important areas of their life.

He uses this metaphor because financial services are at the heart of the American enterprise.  People know what cashing a check means.  Checks  only work if people trust that there will be sufficient funds in their account.   In using this analogy, King says all Americans were given this promissory note of freedom and justice.

Credit unions, the cooperatives founded on democratic governance, self-help and common purpose, embody a critical means for this dream of individual equality to be realized.

Financial services as King presents the metaphor are built on trust, confidence and solvency.   I believe that whenever any credit union for whatever reasons compromises these fundamental principles, the integrity of the entire system is eroded.

Whenever any person’s freedom is limited,  the entire system of justice is compromised. Freedom is not an overnight event.  Its meaning, like financial opportunity, is constantly evolving.

Since 1909, credit unions were intended to be one of the important financial options for bringing  equity for all. Especially for those “who have the least or know the least, but today pay the most for financial services in America.”

On this 60th anniversary of the March on Washington, may it remind those of us who make a living from cooperative financial services, to once again acknowledge and embrace our role in bringing Martin Luther King’s dream to reality.


A Friday Morning Homily

From author and speaker Greg Satell’s article: Values Always Cost You Something

“The truth is that, to mean something, values always cost you something. Otherwise they’re just platitudes. . .

“Values are essential to how an enterprise honors its mission. They represent choices of what an organization will and will not do, what it rewards and what it punishes and how it defines success and failure. Perhaps most importantly, values will determine an enterprise’s relationships with other stakeholders, how it collaborates and what it can achieve.

“The problem is that values are often confused with beliefs. When you’re sitting around a conference table, it’s easy to build a consensus about broad virtues such as excellence, integrity and customer service. True values, on the other hand, are idiosyncratic. They represent choices that are directly related to a particular mission.

“Make no mistake. Real values always cost you something. They are what guides you when you need to make hard calls instead of taking the easy path. They are what makes the difference between looking back with pride or regret. Perhaps most importantly, they are what allows others to trust you.

“Without genuine commitment values, there can be no trust. Without trust, there can be no shared purpose.”


Mid Year Numbers for NCUA

NCUA requires all credit unions to post monthly financial statements for members.

Similarly NCUA posts monthly financial statements for the three funds it manages. This is an important  transparency commitment as all the agency’s revenue is from money provided by credit unions.

Timely publication permits credit unions and the public to follow how the funds are used and overall spending trends.

These monthly updates are a promise the agency made when the 1% NCUSIF underwriting was agreed to by credit unions in 1984.  The dominant concern of credit unions with the 1% requirement was, if we keep sending money, how do we know the government won’t just keep spending it?  (see pgs 18-19 in NCUA’s 1984 Annual Report)

Timely publication is critical for credit unions which provide the funding, to be able to monitor what was being done with their member’s money.

 NCUA’s June 2023 Operating Expense Trends

The following is an overview of one aspect of each fund’s financial report, the trend in operating expenses.

         Operating Expenses   ($ millions)

Fund    YTD June ’22   YTD June ’23     % change

CLF          $       521          $     1,051                  98 %

Op Fund $ 61,145          $ 69,770                14.1%

NCUSIF   $101,164        $115,010               13.7%

TOTAL     $162,840       $185,131                14.1%

These numbers actually understate several expense or cash outlays.   For example the NCUSIF operating expense does not include a YTD $20 million increase in the provision for insurance losses (a non cash outlay).

In the Operating Fund, NCUA has spent $3.4 million in cash outlays for fixed and intangible assets, but only records depreciation expense of $1.8 million.

Depending on which measure of inflation one uses, the 14.1% increase is three to four times (300%-400%) the most recent reported annual price increase.

The Board Action with a Budget Surplus

The staff’s mid year budget update in the July board meeting, projected a $5.1 million surplus by year end.

Here is the recommendation from staff of how to use these funds:

Based on projections for the remainder of the year, staff estimates that spending will be approximately $5.1 million lower than the Board-approved 2023 Operating Budget. Reprogramming a portion of this projected surplus would provide funding for new requirements related to cybersecurity in the Office of the Chief Information Officer (OCIO), support to credit unions provided through the Consumer Access Division in the Office of Credit Union Resources and Expansion (CURE), reasonable accommodations, and the hiring initiative. The estimated cost of these proposals is $737,000 for 2023, which is factored into the estimated budget surplus stated above. Six new full-time positions related to the NCUA’s cybersecurity efforts and CURE are part of the proposed action for Board consideration. 

Credit union concerns about the spending of their funds sent to NCUA are as relevant today as in 1984.   Staff routinely recommends and the board approves the carryover of funds unspent from prior years, not their return to credit unions.   Or, as in this situation, adding new positions and increased expenditure in other areas as described in the memo.

NCUA provides credit unions with the facts.  It is up to credit unions to respond.   After all, it is the members’ money.

When Directors Fall Short as Fiduciaries

Yesterday I quoted from  an NCUA letter which emphasized directors’ primary fiduciary responsibility is to the members, not the organizational entity.

What happens when this principal duty falls short?

Sometimes dissenting directors will just give up and resign.   Other times, the entire board votes to hand over their duties to another credit union via merger.

And the members?  Most of the time they just lose interest and take their business elsewhere. But very occasionally, they revolt. That is happening at SECU in North Carolina.

The former CEO Jim Blaine resurrected his blogging skills when he was contacted by current employees and members concerned about the direction of the credit union under a new CEO.  The daily blog SECU-Just Asking was began in December 2022 with this note:  Caution: Rant in Progress.

The website’s posts of events and opinions would not have become a rallying point if it had not touched on issues of interest to many.

Members Go Democratic

Now that public dialogue has transformed into action.

The primary check and balance on directors’ oversight  is voting to fill board vacancies in the annual election.

Rarely is this process effective.  For nominations and election procedures are controlled by the incumbent directors who try to avoid any election with more candidates than vacancies.

SECU members have become engaged.   The result of the public dialogue is a contested election according to  an article from Business North Carolina.

Social Media Mobilizes Members

Members turned to social media to rally support.  Here is a Reddit example.

How NC SECU is being turned into an elitist piggy bank (and the narrow window to prevent it)

For almost 100 years the State Employees’ Credit Union (SECU) provided low cost loans and financial services to North Carolina’s active and retired state employees, teachers, and their extended families. SECU historically has been one of the only financial institutions that charges the same low interest rates on mortgages, car loans, credit cards, and financial services to all members regardless of whether they come from a rich, middle income or working class family.

Unfortunately, this approach to treating everyone fairly is changing because of actions by the current SECU Board of Directors. This group – for the first time in the history of the Credit Union – has decided to charge middle class and lower income members and their families HIGHER interest rates so that they can give upper income people LOWER interest rates.

And that’s not all the current board has done. They’ve also:

-Cut services, like the tax preparation assistance program that was available to all members.

-Raised interest rates for the majority of members and their families, while failing to raise interest rates for savings accounts.

-And finally, in an attempt to prevent their opponents from running candidates and entrench themselves in power they’ve changed the longstanding rules and bylaws for SECU Board elections.

This is wrong and we must fight back to save our Credit Union!

The current board is made up of 11 people that no longer represent the interests of the hundreds of thousands of active and retired state employees, teachers, and their families that the Credit Union was founded to serve.

What can you do to fix this?

The board changed the rules to make it extraordinarily difficult for anyone new to serve and to try to silence members’ voices. The board’s new rules require a candidate to get 500 signatures, obtained in person, in 5 days time.

In order to stop this board’s attempt to convert SECU into another traditional bank that looks out for rich elitists at the expense of regular folks, please sign the petition allowing these three candidates who support returning SECU to its historic mission to be on the ballot for the board election this fall.

(the three candidates and brief credentials were then listed)

Again, you are only signing to allow these candidates the opportunity to run for the board, so that we may continue this discussion. If they aren’t on the ballot, there will be NO discussion.

Please go to and request a petition form to submit.

Thanks y’all

Over twenty comments were posted to this appeal. Some supported, others asked questions.  Here is one:

I sense that SECU is currently being run by bankers who don’t understand the competitive advantages the credit union historically had. Banks long ago outsourced much of their lending decision-making to people looking at an application and a credit score on a computer screen. That saved them a lot of money (those local loan officers weren’t cheap), but it created an opening for someone like NCSECU to have an advantage. . .

. . .there’s no question that SECU could have made a lot more money over the years by risk-adjusting lending rates (preferably by something a little more sophisticated than just credit scores), but they were able to keep rates flat, because that fit their ethos as a non-profit better.

I just don’t buy that this is necessary now to keep the institution afloat–I have yet to hear a cogent argument for why this is the case now. It apparently wasn’t necessary in 2008 or 2001, but we’re supposed to believe that rates being hiked back to something more like historical norms is threatening the institution? 

Or to put it another way, what have they been doing so wrong lately that they aren’t able to weather this storm the way they weathered storms in the past?

A Test Case

Democracy is a difficult process in all circumstances.  American elections are just the most obvious example.

SECU may be the test that illustrates whether the cooperative model of governance can be a real check and balance by members.  Can democratic voting be the means to counter the ever present temptation to become an “elitist piggy bank”?

NCUA’s General Counsel On Directors’ Number One Responsibility

Fiduciary Duties “Are Properly Owed to People, and Not to Entities”

Credit union leaders often state priorities for their financial institution’s future but not how members will benefit. The following is NCUA’s view of directors’ principal fiduciary duty.

This analysis was in response to a state league CEO’s concerns about a proposed rule on directors’ responsibilities. NCUA General Counsel Bob Fenner wrote on March 15, 2011 as follows:

At the very beginning of your letter, you do not state that you are writing to NCUA on behalf of credit unions. Instead, you and your fellow authors state that “[a]s associations representing 18,280,456 members in nine states . . . we want to call your attention to several key issues.

. . . .” I presume that by “members” you mean the people who are members of the credit unions in your states, and I commend you for attempting to look beyond credit unions as entities and through to the people that credit unions were structured to serve. As our rulemakings make clear, the directors of federal credit unions must also represent the interests of the members of their credit unions.

The “Interests of Members”

I do not believe that a rulemaking clarifying that FCU directors owe their fiduciary duties to the membership of the FCU is a difficult concept or one that should surprise or concern directors. Section 701.4 is intended to make clear that the law with regard to federal credit unions is in direct alignment with the credit union philosophy; that is, that credit unions exist to serve their members; that credit unions are about people, not profits; and that the members own their credit unions. As the NCUA Board stated back in 2006 . . . when making important decisions affecting the FCU, directors should ask themselves the following questions:

What financial services do my members need and want? How do I know this? [And] [w]ill my decision today help the credit union provide these member services in a quality manner and at low cost to the members?

Fiduciary Duties Are Owed to Members

Your letter, however, states that “[i]t is our position that the director’s duty should be to the credit union as an organization, and not to the members of the credit union.” I disagree. As the NCUA Board has discussed at length in rulemaking preambles going back to 2006, for federal credit unions the law (as determined by the FCU Act) and philosophy align: the directors’ duties flow primarily to the membership. Id. at 77154-55.

As a practical matter, however, we believe that in the vast majority of situations what is good for the credit union will also be good for the members. See 75 Fed. Reg. 15574, 15575 (fn. 5)(March 29, 2010). . .

 . . .we also believe that fiduciary duties are properly owed to people, and not to entities. FCU directors must understand the people who are affected by the directors’ decisions and identify which people the directors are serving.

The danger is that, if the directors are allowed to focus only on the credit union when making a decision – without regard to how the members are affected – the directors can justify making self- serving decisions, or decisions that serve primarily the FCU’s insiders, under the guise that the directors are simply doing what is best for the credit union.

Ed. (emphasis added)

From a Tiny Seed

National Sunflower day is this week.

The center of America’s sunflower growth is North Dakota.  This year, the state’s farmers grew 625,000 acres of the cheery yellow plants, which can be used to make products like nut butter, cooking oil, confectionery seeds and bird food.

Below is my contribution to the annual celebration.  The seed packet said the Autumn Beauty should grow to 6-7 feet in height.   Hard to imagine from a little seed.

But one of the seeds decided to outdo itself.  It is now 12 feet tall with two stakes providing reinforcement.  Here is the crown with more flowers forming.

The current height and still growing.

A proud gardener with nature’s surprise.  Two smaller cousins on the way beside it.

“Be like a sunflower so that even on the darkest days you can stand tall and find the sunlight.”

A Leadership Example

What does a leader do when something goes awry in an organization?

Some will keep the event quiet, trying to handle the problem privately.  Others will revise an organization’s manual about how to handle such situations.  Some will go public saying the incident has been addressed and will not happen again.

These and other responses are reasonable, but are they sufficient?   Is the organization’s leadership more trusted or effective?

One of the most difficult challenges is when members violate the values of an organization.

Five years ago this was a leader’s response at the United States Air Force Military Academy  when confronted with an incident.

No viewer of this five minute address will question the ideas presented:  replace a bad idea with a better one; if you do not agree with this, then you do not belong; practice civil discourse; or the power of diversity.

The Power of a Public Commitment

But what makes this situation different from many is that the “CEO” goes public, placing his leadership on the line.

Transparency is the most critical component for an organization’s leadership especially if they aspire to be democratic, serve the public or just be respected.

Watch and learn.  The next time you want to make  a lasting point, tell the audience to Reach for your Phones!