Author: Chip Filson

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The Necessity for Coop Designs: Food Deserts Turn to Co-ops for Local Grocery Stores

On November 6, a New York times story In Land of Plenty, Few Places to Find Fresh Foods described the challenges of small, rural communities maintaining local shopping options.

The article led with an example of a small town in the Midwest that is a center for the farming community. As in many other small communities across the country local grocery stores have closed in the face of large regional competitors. “It’s the story of every small town; it’s a domino effect and it starts with the grocery store,” states a resident of Winchester, Illinois, a town of 1,500.

The irony of over five million people who make their living feeding the rest of the nation but having to drive at least 10 miles to buy groceries, has prompted local residents in a number of these circumstances to seek new options.

One solution is to set up cooperatives financed by residents to start their own stores. “This isn’t charity. This was self-responsibility. If you want a grocery store in town, you have to step up to it,” says one of the founders of Winchester’s for-profit coop which opened in August 2018.

The article describes multiple volunteers contributing community help and resources. Radishes and spinach are delivered from a local farm; milk from a local dairy; beef from a nearby ranch and eggs are delivered once per week by a local farmer.

Co-op design allowed local residents to mobilize resources for solutions that larger firms do not see as practical or profitable.

Parallel histories for farmers and consumer finance

Farming coops are one of the creators of this country’s collaborative business model at the turn of the 19th century. So popular were cooperative solutions in rural America, that the original bureau for federal credit unions was assigned to the Department of Agriculture in 1934 when the Federal Credit Union Act was enacted.

Credit unions in the past and even today actively serve “credit deserts”. These are communities where no locally-owned financial institutions are located. Credit policy and lending priorities are set at headquarters located outside the areas served.

Relevance for credit unions

Should these “fresh” initiatives be borne in mind as several hundred local credit unions per year cancel their charters to merge with larger, often out-of-area, credit unions? Is giving up local control, leadership and resource allocation compromising the unique capacity of credit unions to fill voids left by larger financial competitors?

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The Versatility of Co-op Designs

On Tuesday November 12th, the largest milk company in the Unites States, Dean Foods, filed for bankruptcy.

Among the contributing factors were too much corporate debt and changing consumer attitudes toward both branded products as well as the traditional dietary recommendation to drink three glasses of milk per day. In 2017 Americans drank 37% less milk than in 1970 according to the Agriculture Department.

The solution to continue providing distribution of dairy products according to newspaper accounts is “to sell itself to Dairy Farmers of America, a marketing cooperative that sells milk from thousands of farmers.”

This situation illustrates the ability of persons and firms affected by the market conditions can potentially ally via a cooperative to address changing circumstances for mutual benefit.

A Lesson for Credit Unions

What can credit unions learn from this example? When the taxi medallion crisis arose, credit unions were best positioned to help borrowers transition to the new, lower valuations. But these options were stopped as NCUA liquidated the credit unions experienced in these kinds of transition problems. Without a firm that can renegotiate and continue to serve these borrowers, the only option is to force collections even if this causes member bankruptcies.

Meanwhile Uber reported a $1.2 billion loss in the third quarter. 

It is forecasting a profit sometime in 2021 as it runs through investor capital. The taxi industry will adapt, just without credit union participation.

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Wisdom from the Field

“The primary purpose of MANAGING is to keep current systems functioning, while the fundamental purpose of LEADERSHIP is to produce useful change!”

Steve E. Kelly, President, Metrum Community Credit Union

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Impeachment Hearings and a Congressman’s Lament

Glen Taylor was a singing cowboy who worked as a country musician, construction worker, on sheet metal and as a carpenter.

He ran for Congress and lost in 1938, 1940, 1942, 1954 and 1956.

But he won a seat in the Senate in 1944 as a progressive democrat from Idaho. He was also the Progressive Party’s nominee for vice president in 1948.

He lost in his party’s 1950 primary after being called a communist.

In his farewell address for his one Senate term he described his political approach: “At one time, I stated on the floor of the Senate that I was going to vote my convictions, as though I never expected to come back. All I can say now is that I did vote my convictions and I did not come back.”

An observation true for today!

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A Great Place to Work: Minimum Wage at $41,000 per Year

Bank of America announced this week that they are accelerating the implementation of a new higher minimum wage to $20 per hour at the end of the first quarter 2020.

This equates to a full time salary of $41,000. In explaining this one year speed up of the increase, CEO Brian Moynihan also explained that the bank had reduced the cost of health insurance by half all with a goal of making Bank of America a great place to work.

The action also speaks to the increasingly competitive labor market at full unemployment described in my blog How Tight is Today’s Labor Market.

What Makes a Great Place to Work?

Starting salaries certainly matter, especially for a first job. But is salary sufficient to retain the people an organization relies upon to build a sustainable future?

Successful credit unions also create cultures in which people feel good about their work carrying out the organization’s purpose, what they do for and with members, and expanding career challenges.

Financial rewards are only one aspect of a dynamic and leading organization. Necessary, but not sufficient.

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Two Stories for Veterans Day

Veterans Day is a reminder of both the sacrifices and service of those who serve on active duty and the home front. These two vignettes capture courage in battle and the parallel commitment given by those praying for safe return to family.

Courage in Battle

Last week the New York Times reported the deep sea location of a destroyer escort sunk during the battle of Leyte Gulf in October, 1944.

While the article was about the technology used in discovery, the context of the battle was also summarized.

It prompted me to look up a fuller account, found here.

Two facts stand out from this description:

  1. The American task force, Taffy 3, was completely outgunned by the Japanese. “Just after sunrise on 25 October, Rear Admiral Clifton A. F. Sprague’s TG 77.4.3—call sign “Taffy 3”—the northwesterly-most task unit, made up of six small escort carriers, three destroyers, and four destroyer escorts, was stunned to confront four Japanese battleships (among them Yamato with her 18-inch main guns), six heavy cruisers, two light cruisers, and 11 destroyers.”
  2. So what did the Americans do in this naval mismatch? They attacked, again and again, launching three separate sea and air assaults during the morning long battle. “At this point, with the exception of John C. Butler, the escorts had expended all of their torpedoes. Given the dispositions of the two forces, it was also questionable if an advantageous firing position was even still possible. The destroyers and destroyer escorts had to resort to darting attacks at the Japanese cruisers while firing their guns, zig-zagging back and forth between the carriers and the enemy. Smoke screens partially shielded Sprague’s carriers, but the escorts were hit hard, yet remained underway and able to fight. “

And the outcome of this battle even with the loss of five ships and hundreds of lives was:

“The initiative, aggressiveness, and outright heroism demonstrated by Taffy 3, combined with determined U.S. naval air attacks, limited Japanese situational awareness, and pure dumb luck, the Americans had stymied Vice Admiral Kurita’s intent to destroy General Douglas MacArthur’s U.S. landing forces in the Leyte Gulf.”

Sam Cox, a retired Navy rear admiral and director of the Naval History and Heritage Command states in the Times article that as the U.S.S. Johnston DD 557 was sinking, the crew of a Japanese destroyer saluted the vessel.

“They didn’t think Americans had that kind of bravery,” he said, “so that surprised them.”

Serving at Home with Devotion and Courage

The most important event while on board a ship at sea was mail call. During the Vietnam War, deployments away from home ports, would extend for months. While away, there was no contact possible with home except letters. Military families serve along with their active duty kin. My wife wrote this letter while living “on the economy” in Hayama, Japan with our 15 month old daughter, Lara. Windham County, LST 1170, was supporting a Navy Seal and Vietnamese ranger outpost called Solid Anchor on the Cau Mau peninsula at the very tip of Vietnam. As Supply Officer, I paid the Seal Unit and their US support with military pay certificates (MPC), transported oven roasted turkey dinners to the base on Christmas and ran a ship’s store outlet selling boom boxes, current cassette tapes and geedunk (snacks). Mail deliveries aboard ship were by helicopter from Saigon on an irregular schedule.

February 2, 1971

Dearest:

It’s a “burr-freezing” morning as Lara and I say. Imagine her clinching her little fists and scrunching up her cute face and trying to shiver. That’s what it’s like. The thermometer has been in the mid-twenties at night, in the forties during the day. So it isn’t really cold but it sure feels it without any heat. . .

Even if June 1 is the beginning of a year unaccompanied tour, I’ll have a 90 day grace period so I can stay here and have our new baby and go back to the states 6 weeks later. In that way you may be able to see and hug the baby. If the ship isn’t in you may be able to take a little leave. The CO sounds like a compassionate guy. . .

Both Cindy and Margie (wives of shipmates) got mention in their letters that you were caught at Solid Anchor during the last mortar attack and that one American had been wounded but they didn’t know if it was you. I told than I had already heard from you and that you were only suffering from a mosquito attack. Please be careful. . .

Lara has just started another one of her biweekly colds so we have to stay in for a couple of days. I can’t figure out what I’m doing wrong—except maybe chilling her but it’s all her fault. She is the one that wants to stay out and won’t leave her mittens on. . .I’ll be glad when winter is over!

Mom sent me three more Montessori books so I’ve been reading–that’s why I haven’t written in a few days. . . Will write again tomorrow.

Love and Kisses, MA

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“ED” Talks for Credit Unions: Cooperative Ideas Worth Spreading

TED talks are a relatively new learning paradigm. Not only have these presentations expanded in both depth and breadth, but they have even become the curriculum for educational courses.

As described on their home page, TED is a nonprofit devoted to spreading ideas, usually in the form of short, powerful talks (18 minutes or less). TED began in 1984 as a conference where technology, entertainment and design converged, and today covers almost all topics — from science to business to global issues — in more than 100 languages.

Its mission is simple: to spread ideas. “We believe passionately in the power of ideas to change attitudes, lives and, ultimately, the world. On TED.com, we’re building a clearinghouse of free knowledge from the world’s most inspired thinkers — and a community of curious souls to engage with ideas and each other.”

ED Talks: a Clearing House for Cooperative Thinkers

I believe there is a parallel opportunity for such a resource in the credit union cooperative community. We have both a wealth of current leaders and historical examples that can be shared to educate and inspire change similar to the TED exchanges.

An “ED” Talk: Choice and Credit Union Success

In June 1986, the savings and loan crisis was beginning to emerge into a full blown industry debacle. Among the first causalities were the private insurance options available in several states (Ohio, Rhode Island) for mutual S&Ls. The closing of these funds led to concerns about the multiple private insurance options for credit unions.

In this environment of fear, Ed Callahan spoke to the summer leadership conference of the Association of Credit Union League Executives (ACULE).

He asserted that the five years of unparalleled success since deregulation proved credit unions had created the best financial system in the country. But there was a threat.

The industry’s success was based on choices. That vital characteristic was being undermined by “panic” and a failure of leadership.

Listen to this two-minute excerpt in which he makes the case with passion and logic for why choice is central to cooperative performance.

Best System:

The Insight for Today

Throughout credit union history there have been efforts to create single source solutions. Examples include state leagues, a one-stop option for required fidelity bonds, and a dominant service bureau data processing company (CUNADATA). It is easy to confuse a single, uniform solution as the best way to achieve cooperative system.

Ed states the years of success years after deregulation enhanced choice by opening up options that are now threatened by a monopoly share insurer.

His concern about no choice of a share insurer except the NCUSIF, is certainly as critical today as 35 years ago. For if this logic continues to prevail in credit union land and beyond, a potential next easy move is to have just one federal insurer called the FDIC.

While his example was share insurance, the message would be the same for all areas of credit union solutions. For choice to be sustained, leaders will have to be willing to support options even when their own organizations may not have chosen that path.

P.s. If you have an idea to share for your own “ED” talk, please send it to me at chipfilson.com.

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Political Polarization and NCUA Chairman Hood’s White House Video

Recently the White House posted a video of NCUA Chairman Hood praising President Trump’s economic program for benefiting African-Americans.

The video link and some of the subsequent twitter comments were reported by CUToday.

Stepping Into a Politically Divided DC and Country

The decades long trend toward more political polarization in both voter’s views and in Congressional debate and actions (or inactions) is not new. This approach to politics is a key factor of President Trump’s leadership style.

So it was not surprising that democratic Senator Sherrod Brown should question Hood’s video message in a letter seeking more information about the event.

The letter raises the issue of the wisdom of the Chair of an independent regulatory agency making such an overt political statement. No banking regulators, the FDIC chair, the OCC or the Chair of the Federal Reserve have made such endorsements. In fact Fed Chairman Powell, has repeatedly stressed the Fed’s and his independence. President Trump has responded by attacking the Chair’s policy priorities.

Past Behavior and Current Context

In the book It’s Even Worse Than It Looks, the authors Mann and Ornstein provide the history of the collision of American Constitutional practice and what they call the NEW political extremism. In Chapter 2, titled “The Seeds of Dysfunction”, the authors chronicle the impact of Newt Gingrich’s role on the political culture of Congress.

The following is an example of Gingrich and his team’s use of CSpan media to communicate their view of the “fat and pork laden” House:

A group of Gingrich allies calling themselves the “Gang of Seven” seized on the (House) bank scandal to take Gingrich’s confrontational tactics to new levels. Its ring leaders were Rick Santorum of Pennsylvania; John Boehner of Ohio, then only in his second year as a member; and Jim Nussle of Iowa. Their most memorable moment came when Nussle put a brown paper bag over his head while on the house floor, proclaiming that he was ashamed to be a member of Congress. . .  Gingrich’s goal of causing voters to feel enough disgust at the entire Congress that they would throw out the majority was within reach; he attained it a little more than two years later.

Today Jim Nussle is President of CUNA. So partisan tactics can be effective, or do they generate a counterforce that defeats its practitioner’s goals?

Credit unions have tried to forge a bipartisan appeal in Washington, even as prior Chairs have been politicians or supporters from one party or the other. The issue is not one of party affiliation. Rather how does the leader of an independent agency best represent the interests of credit unions in Washington? Will becoming an overt partisan help or undermine support for the cooperative financial option in Congress and with credit unions throughout the country? Is Nussel’s past behavior and current responsibility a positive or a cautionary example for how credit unions should navigate the ever increasing turbulent political currents of our time?