Month: June 2025

If credit unions are a special idea about individuals’ collaborative financial efforts, we should care about human values and human rights when implementing this design.

I received the following from a member who had read several previous blog posts about mergers and just lived through the experience:

Recently, I was reading some of your articles, such as from 2017 regarding the issue of unjust enrichment by insiders in mergers. (Credit Unions for Sale) I didn’t realize what a longstanding problem this has been.   It seems like the whole structure is designed to enable those in power, in charge, to take advantage of those with less power, authority, resources, knowledge, and education.  

I don’t know who are the worst actors – the regulators who give the illusion of regulating to protect consumers, the BOD’s who are supposed to be looking out for members’ best interests, or the executive management who selfishly negotiate these deals at the expense of members, and try to convince members to give up their rights, their credit union, their net worth.   It’s a sickening rigged game. 

I see the motivation for the insiders who have millions of reasons for this, but how does the BOD benefit? Or regulators overseeing an industry decline in numbers and reputation?

A Rigged Game

Welcome to what democracy looks like with one- party government.  No loyal opposition.  In fact, no opposition, just obedience. Be a loyal consumer.  A satisfied customer, but not an owner.

The theory of cooperative design is that the one vote per member in election of their board members will act as a democratic check and balance to ensure the owners’ interest always come first.

It is an extremely rare event for those in power to fulfill this voting practice.  Boards become self-perpetuating; members are rarely encouraged to attend let along participate in the annual election.  And there is no voting, just acclimation for the board’s nominees.

The result is that boards and CEO’s believe they alone are responsible for determining the priorities and future of the members’ organization.  Even if this means transferring a long-standing, sound communal charter’s legacy  to another credit union where owners receive nothing and those last in charge cash out, often big time.

Democracy in a One-Party State

The defense offered by the regulator and the credit unions involved in these private deals is the members voted for it, often by overwhelming margins.

But what kind of a “vote” is taking place when those in charge control all the financial resources of the institution, the means for direct member and public communications, the timing and presentation of the election process, and the representation of regulatory oversight and approval?

The situation is the authoritarian’s dream of one-party governance. This is pretend democracy.  The people are told to vote for what the Board and executives will proclaim is a better future; albeit no longer under your control.

The results show the effectiveness of one-party rule.  Over 99 percent of mergers are approved.  An incumbent’s sure-fire strategy for self-enrichment.

To assert, as NCUA and state regulators routinely do, that the members’ voted for this is an  abdication of responsibility for member-owner rights. It destroys the core of credit union character. It demonstrates regulators as powerless or clueless in the face of this predatory  cooperative plundering of members’ equity. There is no governance by members, just subservience.

There Are No Limits

Ambitious CEO’s and boards see these free takeovers being negotiated daily.  There is no limit to the combinations being planned.  Just payout the initiators and receive the billions now up for grabs-for free.  The stakes will only get bigger, the payouts more creative and humongous, and the capitalistic model of acquisition dominate cooperative strategy.

But the history of one-party rule is not encouraging for the  long run.  The consolidation of power and resources grows, the lack of any meaningful role for owners is blatant,  and the sameness of all the “better products and services” becomes apparent to all.

Ultimately, the people will see what the member above observed.  The media will highlight the gaps between purpose and practice.  And the disruptions will start, small isolated at first, but real and threatening to those in authority.  Examples are already underway.

Most importantly, credit union leaders and members will learn what one-party rule means when this occurs with the federal regulator, not just in their individual institutions.  Then maybe the virtues of democracy will be embraced once again.