Author: Chip Filson

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Two Forms of Competition Always Present

Two classic strategies for creating competitive advantage are a superior employee centered service culture. The second is to embrace  innovation.

Following are two updates in both areas.

Minimum Wage in Banking Now Hits $25 per Hour

Bank of America will increase its minimum wage to $25 an hour next month, the final step in a long-term goal the company set several years ago. The move bumps pay up from $24, a level put in place last October, the company said Tuesday.

It translates to a full-time annualized salary of more than $50,000 and applies to all full-time and part-time hourly positions in the US. The change continues a series of hikes lifting the firm’s base pay from $15 in 2017.  Source:  Marketplace and (link)

Digital Assets and Innovation

I am a novice in understanding the world of digital assets from Bitcoin to all the stable coin options now being evaluated and offered by financial firms.

Whether used as a store of value or investment, payments between parties or for operating outside the regulated financial services sector, I have not been able to identify a compelling value proposition.

The hype and people rushing to get into this new form for financial service have only accelerated since the Genius Act passed by Congress last month.

Here is a summary of some activity and loopholes by analyst Aaron Klien from Brookings in the article: Interest by any other name should be regulated as sweetly (September 10, 2025)

Cryptocurrency is an asset masquerading as a payment instrument. Congress did not see through this illusion and created a dangerous loophole in the newly passed stablecoin law, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or “GENIUS Act”.  

The law is premised around a simple trade-off: Stablecoins are exempt from bank-like regulation and in exchange are prohibited offering interest on their coins. The law’s ink is not dry and crypto firms have already found a loophole, calling interest “rewards.” If we don’t close this loophole, it could cause massive problems resulting in losses by retail crypto holders, a bailout of big crypto, or a financial crisis.

Bitcoin started with dreams of being a global currency but has become an asset and, for many, a profitable investment (so far). One reason bitcoin works so poorly for payments is its swings in value. Enter stablecoins, usually pegged to the dollar, eliminating this problem. Yet, stablecoins are primarily used for buying and selling other crypto, not for ordinary transactions. While about one in seven Americans report owning crypto, only one in 50 Americans used any form of crypto, including stablecoins, to buy anything other than crypto in 2022.

So, if stablecoins aren’t used for payments, why do people own them?  For many, it’s the same reason they keep money in banks: earning interest. The new law prohibits interest, but what if someone called interest a different name? Would it pay as well?

Coinbase, the largest American crypto exchange, proudly markets 4.1% “rewards” for holding USDC, the largest American issued stablecoin. Crypto.com offers variable rewards based on market conditions, while highlighting its latest partnership with Trump Media Group on their crypto. Its competitor Kraken offers even higher: 5.5% rewards. Notice Kraken marketing an annual percent yield (APY) notation to look like interest. That’s what this is.

Technically, the new law only prevents stablecoin issuers like Circle, which issues USDC, from offering interest. Coinbase, Crypto.com, and Kraken do not issue these coins, they just hold their customers’ coins. Imagine if E-trade or Merrill Lynch offered customers money for letting them “hold” their stocks, and you’ll see the parallel.

The economics of this loophole are problematic. Crypto exchanges generate profit to pay “rewards” to people who deposit crypto through a combination of payments from the stablecoin holders and potentially using depositors’ funds to make their own investments. The larger the rewards customers are being paid, the riskier the investments generating that money. Banks do this with your deposits, but with tight limitations, constant oversight, and federal deposit insurance that fully covers 99% of depositors. Crypto exchanges have none of these guardrails, as FTX demonstrated when it took customer assets to speculate and collapsed. . .

Credit Unions Invest in Crypto

Klein’s analysis continues for another ten paragraphs.  What makes his concerns relevant for credit unions, is that there are numerous crypto related firms and credit unions now investing in stable coin services,  The primary goal is giving members access to the purchase and holding of digital assets.

Yesterday CU DAILY reported “Stablecore, a platform that enables community and regional banks and credit unions to offer stablecoins, tokenized deposits and digital asset products, said it has raised $20 million in funding, including from a credit union-backed fund.”  (link)

Stablecore’s purpose is to  serve as a “digital asset core,” unifying the critical components of digital asset offerings into a single platform.  The credit union  CUSO making the investment was Curql.

Both these announcements may challenge credit unions who are uncertain about their core values and competitive advantage.  So before you reach out to match competitors thrusts, remember success comes not from playing the game you find, but from defining the game you want to play.

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Do Cooperatives Change Market Practices?

An historical note to start:  Today is Constitution Day in the United States, because it was on this day in 1787, at the old State House in Philadelphia, that the final draft of the Constitution was signed.

From Jared Brock on capitalism’s financial incentives:

Turning anything — money, houses, scotch — into investment products skyrockets the price of things.

Financialization… the process of turning anything into an investment… skyrockets prices.

Think Taylor Swift concert tickets, Beanie Babies, baseball cards, cryptocurrency, etc.

Turning an item into an investment increases its price.

We’re currently witnessing this with the financialization of classic cars, high-end wine and scotch, and fractional investment in paintings.

A rare piece of canvas covered in colored paint is only “worth” $100 million if the investor knows he can rent that painting to a museum and re-sell it for $110 million in the future.

Because it’s more profitable to get rich by monopolizing stuff and lending it for a profit instead of actually working to create new stuff to sell, the rich are actually incentivized to bid up prices instead of creating new useable goods and services for others. Shareholders are actively trying to destroy our wellbeing for profit.

From a credit union observer:

“Cooperatives are the future of our ecosystem. It is how we take care of each other, how we take care of our community, and it’s how we can create generational wealth for all of us moving forward without being a part of this really extractive system.”

The question:  Do credit unions practice both these economic goals for example in mergers and bank purchases? Is being a part time coop good enough?

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Credit Union Members on Housing’s Margins

Who can credit unions help the most in this time of economic transition?  What one economist calls a “bifurcated” consumer economy.

If credit unions fail to serve members facing the difficulties described below, who will?

Housing At the Margins

From a Marketplace (link) report last week:

, , ,real estate data firm ATTOM reported that foreclosure activity — which includes default notices, auctions, and bank repossessions — was up 18% in August compared to a year ago. In fact, foreclosure activity on properties across the U.S. has been rising for the past six months.

It’s not up to pre-pandemic levels, but it does signal more trouble in the economy.

Home ownership is the single most important step to financial well being for the majority of Americans.  Does your credit union have a program to help members who are having difficulty meeting their mortgage payments?   What options do you offer?

Evictions

A related but different challenge are members facing eviction from rental properties when coping with job loss or other economic crisis.

A film from March 2025 talks about the many factors contributing to evictions.   There are two trailers one for the longer movie, Evicting the American Dream (link).

The second three minute trailer focuses on evictions and the economic forces driving this process.  (link)  Most impotantly this short excerpt shows the impact on the consumer’s credit report as well as all those listed on the eviction notice, often all the family including children.

Credit unions were formed to provide an option for those on the margins of the economy supported by the participation from  the whole community including those who are doing well.

When was the last time your credit union loaned to a member who had an eviction notice on their credit report?   How do you identify and reach out to those whose paychecks are not enough, or maybe lost?

Should we just serve those doing well who easily fall within our rule bounded services  or worry about  proverbial “lost sheep?”

 

 

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An Anthem for 9/11 and Today

Words from Into the Fire by Bruce Springsteen.

Into the Fire

The sky was falling

And streaked with blood

I heard you calling me

Then you disappeared into the dust

Up the stairs, into the fire

Yeah, up the stairs, into the fire

I need your kiss

But love and duty called you some place higher

Somewhere up the stairs, into the fire

May your strength give us strength

May your faith give us faith

May your hope give us hope

May your love give us love… 

(https://www.youtube.com/watch?v=OM6lw40VPLg)

By Dr. Andrew Roth, Booknotes #211:

What cannot be permitted to be lost is the heroism and sacrifice of those who ran not away but into danger that day to try to save others. Like Fr. Mychal Judge OFM, Franciscan friar, priest, and chaplain to the New York City Fire Department. Fr. Judge is an alumnus of St. Bonaventure University . . . Fr. Judge is the first official victim of 9/11 – Death Certificate No. 1. He ran into the burning buildings to give aid, comfort, and last rites to “his guys” the firefighters of FDNY. His daily prayer was “Lord, take me where you want me to go; let me meet who you want me to meet; tell me what you want me to say; and keep me out of your way.”

My wife Joan dined at the Windows of the World atop the World Trade Center on the evening of September 10th.  The morning of September 11 she was participating in a NABE economic conference at the Marriott World Trade Center.   She walked to the Hudson river, crossed to New Jersey by ferry, and joined four strangers  renting a car to drive home to DC.

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On the Waterfront

Lots of conflicting views on  the US economy.  Was discussing the prospect of state or local funding for an historic restoration project with a retired property developer yesterday.

He had moved to Maryland’s Eastern  shore from Montgomery County where he had many development projects. And of course financial ups and downs and many “interactions” with local and state government regulators.

Here is his observation from one indicator of the state’s economy.  Accurate for the entire situation or just anecdotal, I don’t know.  But it does remind us that as in  politics, all economic issues are ln the first instance local.

You’re right on. State resources??? I think the state declares bankruptcy in 2 years.
I drive across the Bay bridge a lot. Before Covid, always 10-15 tankers/container ships waiting at anchor south of the bridge to get into the port at Baltimore. Covid? Dropped to 3-5 boats waiting.
After Covid it picked right back up to 10-15. The port even retooled and floated in a $400 million  crane system that barely fit under the bridge. Everything was booming.
Now,  zilch….nada.. no boats, nothing waiting to unload.
The cost for that $400 million  crane to sit idle makes me cringe. The owners will go under, the bank that financed it will get hurt, and the loss of employment on top of those costs. Then add in the loss of tax revenues to the state and city and the loss of revenue to the truckers and rail systems every single day will add up.
I do not see resolution.
I see destruction.
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Which Members to Serve In a Bifurcated Economy?

In today’s uncertain economy some are doing quite well.  Others are worried about their future.  An analysis from  Louisiana Corporate’s September 2025 Economic & Financial Digest  describes this as the “bifurcated economy”:

“One of the most under recognized trends since the Covidpandemic is the increased bifurcation of the U.S. economy. High income households have thrived, thanks mainly to surging stock and home prices that have greatly enhanced the net worth of this cohort.

“Conversely, lower income households have fared less well, particularly after the generous pandemic related stimulus payments ran out. This cohort has relied primarily on income growth, which has notched decent gains early in the pandemic recovery amid labor shortages but has since tapered off as the economy has slowed. Indeed, recent data show that wage gains of lower-paid workers are not keeping pace with that of higher earners.

“Importantly, lower income households are likely to be more affected by the impact of tariffs because they spend a disproportionate share of their income on the most affected goods. What’s more, they have less of a savings cushion to withstand the hit to incomes that the tariffs on these goods impart.

“. . .wealthier households spend a larger share of their incomes on services and, hence, are less exposed to the tariff impact. They can finance their discretionary spending out of wealth gains and their larger savings cushions.

While a small fraction of the population, high-income households account for more than 50 percent of total spending. That means, of course, that economic growth is more dependent on the drivers of wealth – the stock market and house prices. That’s a positive influence when stock prices and housing values are rising, but a big risk if, and when, they sputter.

The Consumer  is Still Spending

Here’s how the bifurcation affects affects consumer spending from last week’s  Marketplace broadcast ( link) Consumers are feeling pessimistic about the economy, but don’t expect them to stop spending gave this analysis:

The Conference Board reported Tuesday its Consumer Confidence Index fell in August. Americans are getting less optimistic about their future income, and they aren’t sanguine about business and labor-market conditions going forward. In fact, both of those metrics in the Conference Board survey are sitting below the threshold that typically signals a recession is coming.

That lines up with the University of Michigan’s index of consumer sentiment, which deteriorated this month — from a level that was already pretty mediocre. . .. And yet, consumers won’t necessarily be pulling back on spending and hunkering down at home in a miasma of gloom and doom. . .

Consumers are also worried that tariffs will drive up prices and squeeze household finances. They say they plan to spend less going forward.

“For big-ticket items, but also for services, like going on vacation, going to restaurants,” said Conference Board analyst Stephanie Guichard. 

Expect these plans to be more frugal? Guichard of the Conference Board said we’ve heard them before.  “I mean like a year ago, they were telling us they were going to be cautious, and at the end of the day they were not,” she said.

Instead consumers kept spending it up. 

“And the main reason is, as long as U.S. consumers have a job and have income, they tend to spend it,” said Guichard. But here’s the thing: It really matters which consumers we’re talking about.

The Challenge

How should credit unions prioritize their member service needs?

 

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A Labor Day Observation

A point of view:

Republicans have held the federal minimum wage to $7.25 for 16 years now.  At that rate, someone working 12 hours a day six days a week with no holidays, sick days, or vacation will earn $27,144 before deductions.  (source: Andrew Tobias daily column)

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A Basketball Sonnet

Basketball

by G.E. Johnson

Once after dinner a woman and I walked past
An empty basketball court and she says,
“I played on a team my junior year in Belfast,”
And I say “Want to shoot some?” She says “Yes,”
Though she was wearing a long black dinner dress.
She kicked off her high heels and she caught
My pass and with great finesse
Drove to the baseline, jumped and shot
Swish. Two points. We played for awhile,
Man in a black suit, woman in a long black gown,
I loved her quickness and her heads-up style,
Her cool hand as she beat me hands down —
Her jumpiness, like a blackbird in the night—
Her steady eye, her feet about to take flight.

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A Call for an Open Mic on Mergers

From Ancin Cooley, Principal, Synergy Credit Union Consulting,Inc 

What strikes me is less the argument for or against mergers, and more the industry’s reluctance to say the quiet part out loud.

Credit unions have never been a monolith—states differ, people differ, and the movement was built on distinct missions and visions coalescing under a cooperative umbrella. Yet today we’re presented with a veneer of homogeneity, as if there’s only one “right” path forward.

There’s nothing wrong with believing scale is the answer. But the bigger issue is the lack of open, rigorous debate. Too often, positions are communicated by proxy rather than by leaders stepping up to the mic, standing on a stage, or going on camera to assert their view—and defend it against alternatives with factual evidence.

Consolidation, mergers, acquisitions—if these are the strategies, say it plainly. And let’s create space for others who see the model differently to test those ideas in the open. That’s how cooperative strength was built and how it should evolve.