Jim Blaine’s blog SECU-Just Asking! has continued almost daily for over four years.
His blogs have focused on SECU’s changes of policy, norms and practices which he and Mike Lord, his successor, developed over four decades.
These changes of direction included potential mergers, ending the partnership with Local Government FCU, considering business lending and expansion of the FOM. But his early and most strident criticism was the implementation of risk based pricing on consumer loans. The prior practice was to charge each member the same interest rate on loans of similar maturity independent of the members’ credit score.
Jim then exercised the owner’s option to recruit members who were open to his point of view to run for open board seats at the annual meeting. The first effort was successful in that all three member-nominated candidates won over the board’s chosen.
But since that first success the board has enacted bylaw and other procedures to make it increasingly difficult for independent candidates to run–and then eliminating any “live” member participation at the owners’ annual meeting.
Jim’s SECU blog is sometimes caustic and personal. But most often he tries to present his policy concerns with facts, logic, SECU’s experience, and occasionally referencing other credit unions.
Creating a Unicorn
He believed that long term success depended on creating unique value through innovation rather than following conventional wisdom or practice.
He would reference the unicorn as a standard for differentiation–mythical or real.
The Basic Question Animating His Commentary
Recently Jim began a series of blogs on SECU’s use of the the 30-year mortgage as the industry standard for home lending. A practice that includes periodic sales of those loans in the secondary market to minimize ALM risk.
This analysis began on September 18 with a blog titled: SECU “Reinventing The Wheel” With 1930’s “New/New” Mortgage Model.
Subsequent posts have demonstrated the advantage of ARMS for members in many circumstances, but not all. You can read his follow on daily analysis at the site.
What’s At Stake?
I chose this issue to illustrate what I see as Jim’s basic concern with the many changes suggested and introduced by his successors over the past four years. His critique is more fundamental than a difference of business judgment.
At the core is a profound philosophical difference in what it means to be a cooperative.
Jim’s believes the credit union is owned and exists strictly to serve the best interests of the members. The most important corollary is the coop’s loyalties cannot be divided between other stakeholders and their business values. Especially when choosing operational partners, interacting with regulators or even working with other credit unions.
Reading his critique of the industry standard of the 30 year mortgage, this concern comes through loud and clear. Yes, many persons believe and have been schooled to think that this is the optimum choice when it may not or would not be the best option.
For this is a product designed, facilitated and controlled by two quasi-governmental entities Fannie and Freddie. They determine what is best for consumers and their financial duopoly, not for the consumer requesting the loan.
When one looks at his other critiques, they often ask a basic question, Why is this action, change, or initiative in the members’ best interest?
What is occuring at SECU and many other credit unions is that industry stature and growth are the primary drivers of change. We see this reflected in mergers of long-serving, healthy independent credit unions, the buying of banks and outside businesses. Most critically this disdain for members well being is demonstrated in the elimination of any owner role in the election or other involvment at their annual meeting.
The coop model has been increasingly hijacked by leaders who inherited generations of member created financial wealth that they presume is now theirs to use as they alone determine.
One of the oldest lessons from all faith traditions is that a person cannot worship both God and mammon. A number of today’s credit unions have given up on honoring members’ interest as the highest good. Instead their goal is to become an industry asset leader, to paraphrase a recent CEO’s defense of mergers.
Or, as explained by the $9.0 billion Community America’s CEO Lisa Gitner (Kansas) in proposing a merger with the $3.5 billion Unify Financial Credit Union in Allen Texas: “Now, we have an opportunity to expand our reach and create more access to CommunityAmerica for you, your families, and even more people across the country. I’ve always led CommunityAmerica with goals that are defined by how many people we can help–not by how much revenue we can generate. That is the driving force behind a transformative milestone in our credit union’s history–and the reason I am writing to you.”
Or to put the issue more bluntly, what consumer or member is going to choose this credit union because it will now “have a presence in 18 states and 22 markets, with branches in Arkansas, California, Nevada, Tennessee and Texas?”