Author: Chip Filson

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A Member’s Letter to the Board Chair

In the next week I will present three active situations where members are deeply unhappy with their Board leadership.  In every case the board has tried to ignore, at best, or at worst, silence, these efforts at  member engagment.

These cases are unusual but not in the board’s hunkering down and ignoring the owners. Rather it is in the members’ efforts to share publicly their frustration trying to engage as owners.

There are similar member attempts that have yet to rise to public visibility.  These cases are just a few of the concerns that members and even employees have shared with me.

Today’s example is from a member-owner and long time credit union professional who started his career with this credit union.  He then moved to manage a national CUSO of leading credit unions and became a consultant for several more credit union organizations.  In other words, he is a true believer.

This is his letter to the Board Chair.  I have added the subheads and deleted specific names or identifiers in the letter.

April, 2025

Mr. Chairman:

Since I first began to discuss the matter of board governance almost 10 years ago with (names omitted) and in my further discussions with you, I have stood on the position that it is one of the primary responsibilities of the Board to continuously improve, enhance and encourage member/owner participation.

Our credit union should represent the best principles of the co-operative business model, and my board should be acting in a manner that builds on those principles that make us different from for-profit financial institutions.  As we have discussed in the past, the continuation of the current practices surrounding the board nomination and election process and the annual meeting fly in the face of such principles and practices.

The Annual Meeting

Let’s address the issue of the Annual meeting first.  How exactly can you defend having a 9:00 am meeting on a Wednesday as having anything but a negative impact on encouraging member participation?  How can you defend the restrictive rules that control and limit the agenda and discourage any member interaction with the board at the meeting?  How can you defend the minimalist attempt to notify and promote the meeting to the owner members?  Where is the big banner proclaiming the date, time and location of the meeting on the credit union’s website? How about some signs or interactive messages in the branches? How about a social media campaign to your members using email and text messaging to encourage their participation?

I dare you to ask a teller or even a branch manager about when the annual meeting is being held, I have, and I was embarrassed for them.  How about the search function on the website?  Try entering, “Annual Meeting” and see what you get.

What are you afraid of?

What are you afraid of?  Give me one good reason why any member- owner should not be able to come to your meeting next week and ask you or XXX a question about anything they want concerning credit union governance, operations or products and services.  Why shouldn’t one of your owners be able to ask you what a board member actually does to earn around $40,000 per year, why the 2023 Form 990 reflects a Split dollar benefit loan to the former fired CEO in excess of$10 M, or what a subsidiary LLC does to earn $8.5 M per year?

Solutions Rejected

What really upsets me is that we have talked about actual solutions to these issues more than once.  I have even written and submitted sample by-laws which would require the nomination of at least two qualified members for every open board position so that there is an actual election that could be easily accommodated using electronic voting.

We have also talked about the need for term limits to make for a healthier board turnover and broader owner participation.  I have no complaint about the qualifications of the current board, but with several hundred thousand owners you can certainly identify enough other highly qualified options to have a real election for board positions.

Incumbents should be required to supply some modicum of justification for their re-election to a very important, difficult and highly compensated position.

An Oligarchy

The word “oligarchy” gets tossed around a lot today.  I would suggest that the current nomination process and pursuant “Non” election process along with the seemingly secretive and hidden nature of the Annual meeting is signal to any half-way informed owner that the credit union  is in fact a practicing oligarchy.  A governance model in which power rests in a small group.

The second of the Rochdale 7 Cooperative Principles is democratic control and the third is member economic control.  I ask that you and your fellow board members make an effort to make sure my credit union is the best representation of those principles.  I am hopeful that my suggestions will finally get the attention and action they deserve

S. A Lifelong Member

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A Conversation About the Times

Had a two-hour conversation with a retired CEO yesterday.  His observations about the state of the industry are almost like parables, sometimes dense but pointing in the right direction.   I paraphrase his thoughts.

An Era of Untruths

Today we are living in an era of irresponsible lies.  For example the law is not what common sense says it is; rather it is just a continuous nuance of interpretations for self-interest.

Coops were designed to be an alternative to banking based on intense motivation-a passion to change things.  The goal was not to become a tax-exempt back door entry to banking.

We assumed credit unions would be focused on the member, the man in the street, rather than  just another financial institution.  Today we have credit unions whose business is brokering and buying other credit union and/or financial institution assets.  It is a corporate strategy, not a retail, member-centric one.

Corporate Vs Member Focus

These corporate business variations are not based on citizens as owners.  It is not the traditional credit union model.  Rather these are financial variants built on the tax-exemption, versus cooperative principles.

It is like someone saying they are farmers because they own land.  Farming is both owning the land and working on it, not merely buying  an asset. These corporate driven business models want to use the coop model, but not the responsibility of member-ownership.

One or Two CEO Transitions from Failure

The outcome is that many very successful credit unions are only one or two CEO transitions away from losing their earned market success from building on core principles.

When the new leader arrives whether from a credit union or other professional background, it is almost inevitable that the unique coop legacy (and member focus) will be set aside reaching for some new business initiative.

This will not be motivated by member-owners’ needs but rather corporate ambitions for growth or an entirely different strategic focus or even personal ambition.

If one looks at the growth of mergers of sound, long serving credit unions, the motivation seems either a retirement windfall or, a growth strategy by the new CEO to enhance their personal goals.

Building Vs Running a Business

These efforts confuse the distinction that makes the coop model so promising.  Coops offer a unique way to build a business.  However newcomers often believe they have been chosen to run a business versus building on a legacy of passion and purpose.

The key to sustaining the unique credit union model is twofold.  First citizens as owners will need to be at the center of efforts to build on coop principles.  This requires leaders who are committed to a mission that others may not see as attractive.  It may even require cultures that we see in NGO’s, entrepreneurial and driven by purpose.   That’s how cooperatives  become leaders in serving their members as their reason for being.

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The Cost of War

Kyiv has declared a day of mourning after Russian missle and drone strikes have killed 24 residents and injured 134. The attacks lasting over 8 hours have left people trapped in the rubble of large residential buildings..  Photo from Kyiv on June 17th.

There has been no White House comment after the most intense. continuing  attacks on Kyiv since the initial invasion in 2022.

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A Failure to Cooperate and a Turning Point in Credit Union Events

In the March 1985 issue of Credit Union Magazine, the writer of the monthly Capital Events column raised a critical industry issue following the successful recapitalization of the NCUSIF in January.

The concern was whether a stronger, more efficient, cost-effective NCUSIFcould put the private share insurance options out of business.

One CEO of of a private insurer said No.  The changes at the NCUSIF will just lead to healthy competition, and that will be good for everyone.

A Vital Industry Resource

NCUA  believed a strong group of private insurers was a vital industry resource.  They saw it as a check and a spur for Agency oversight.  “The NCUSIF is where it is today because the private insurers showed what could be done. Without them, the NCUSIF could stagnate and credit unions would be left without a viable alternative,” said Chip Filson, Director of the Office of Programs.

At March 1985 there were 15 state chartered guaranty corporations insuring $15.5 billion or about 17% of total credit union savings.  Several pre-date the NCUSIF, but most were chartered in the early 1970’s. They covered about 40% of state charters.

The writer lists events raising the issue of federal deposit insurance sufficiency.  These included large bank failures such as Penn Square and Continental Illinois banks, the scrutiny from the Bush Task Force on Financial Regulation and the FHLB’s request for a special $10 billion assessment for the S&L industry’s fund, FSLIC.

An Option to Backstop the Funds

Because of the NCUSIF legislation, the credit union insurance options were not the primary concern in DC.  However, the NCUA had reached out to the private insurers with an option should there be a public crisis of confidence in deposit insurance.  Specifically, the CLF offered a low-cost liquidity line of credit to the 15 insurers collectively.  Draws supporting a credit unon  which would be collateralized by the credit union’s assets and a joint and several guarantee by all the funds.  It would give the private funds the same liquidity options that the CLF had for the NCUSIF.

The article closes with the note that the private fund’s trade group (ISD&GA) was considering the proposal.  The writer concludes: How the group responds may prove to be pivotal for credit unions and their insurers in the years ahead.

The insurance group did not take up the CLF’s offer primarily due to the joint and several support commitment for draws by an individual credit union or its insurance fund. The result was that political pressure at the state and federal level forced all but two of the funds to close their doors in subsequent years.  These were not financial failures per se, but rather the lack of political support at the state level.

This article some 40 years ago is a  case study of an inability to change or in the writer’s words, confident in the management and marketing skills to hold their own in the marketplace without altering the status quo.

Source:  Credit Union Magazine, March 1985, oages 17-18, by Brooke Shearer)

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A CEO on Leadership and Legacy

I received the following from a credit union CEO  reacting to recent examples of mega-mergers.  The credit union’s market approach is clear:

From the Credit Union’s Website 

Why eat at a local restaurant? Why support your local non-profit? Why help out a neighbor? Simple: you care about your community, get better service from people you know, and want to feel good about the way you spend money. At our credit union, you’re a member, an owner, and a participant in a local, not-for-profit financial cooperative. Our cards look pretty awesome, too.

His Comments On Mergers

While I’m saddened by the loss of credit unions in number, I also believe each CU must do what’s right for them.  However, because the reasons given for these recent mega-mergers are fairly boilerplate no matter the size, I suspect that $20b won’t be “enough.”

As a CEO of a smaller shop, the thing I find scratchy is the tendency of some larger shops to take an imperialist posture combined with hubris. As they say in parts of the south: You ain’t all that.

During a multi credit union event hosted locally,  a rep from a larger shop told one of my star employees, “you know, credit unions your size are going away.”

Size Is Not What Members Seek

The thing is, a credit union at $20b is still a smallish bank. In my market, I have BOA, Wells, Chase, etc… Who cares what size you are – just don’t be a jerk.

I think the big shops need to get over themselves and, quite frankly, some little guys need to quit complaining about how hard things are.

My immigrant grandfather opened a restaurant 75 years ago and it’s still going strong. Business has always been tough! When people use that excuse, I always think that the real problem is a leader who can’t rise to the challenge rather than the challenge is too great. Ego won’t allow a leader to admit they might be the problem.

A Legacy, Not a Payday

Obviously, merger has also become a retirement plan for many…and that stinks. My goal: when I retire, pass the baton to the next gen…I’d rather have a legacy than a fat payday.

 

 

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A System Built on Hope

Yesterday I received the picture below from  a new Boston resident walking around town exploring the Commons.  The plaque was placed in 1959.

It reads in part, Edward Filene (1860-1937): author, scholar, outstanding citizen of Boston and public benefactor. Acknowledged as the founder of the credit union movement in the United States.

Great leaders require two defining characteristics: vision and optimism.  Together they produce hope.

Two Expressions of Hope

From Emily Dickenson:

“Hope is the thing with feathers –

That perches in the soul –

And sings the tune without words –

And never stops – at all …

Carl Sandburg in the midst of the Great Depression wrote of hope in the commonplace scenes of life-1936:

Hope Is a Tattered Flag

Hope is a tattered flag and a dream of time.

Hope is a heartspun word, the rainbow, the shadblow in white

The evening star inviolable over the coal mines,

The shimmer of northern lights across a bitter winter night,

The blue hills beyond the smoke of the steel works,

The birds who go on singing to their mates in peace, war, peace,

The ten-cent crocus bulb blooming in a used-car salesroom,

The horseshoe over the door, the luckpiece in the pocket,

The kiss and the comforting laugh and resolve—

Hope is an echo, hope ties itself yonder, yonder.

The spring grass showing itself where least expected,

The rolling fluff of white clouds on a changeable sky. 

Have a hope-filled weeken

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Withdrawing from the Game

While the administration’s trade policy may have only an indirect impact on credit union fortunes, it is an example of how public policy can become sideways with America’s long term interests.  And our standing with the rest of the world.

What follows is a brief critique of the underlying assumptions about tariffs and how the rest of the world will react.  The analyst’s point is that poor policy assumptions lead to poor policy outcomes.

Policy is one aspect of the NCUA board’s role. The board no longer exists.  Future meetings have been cancelled and/or called tentative.

The board’s statutory role is to manage the agency.  That also is on hold.

The consequences of these absences of regulatory oversight will not be known for a while.  Meantime some credit unions will take the opportunity to push the envelope on corporate interests.

There will be fallout from this regulatory abdication on policy and agency leadership.  Like the trade example below, the market won’t wait to fill the current vacuum in supervision.

The Challenge of False Policy Assumptions

The following summary of US trade strategy is by William Reinsch at the Center for Strategic and International Studies *CSIS).
Even while uncertainty persists, not only about Trump’s intentions, but also about the half-life of his policies, his actions are being treated as the death knell for the global economy. Trump’s message to the world is that the United States is no longer a reliable partner. The obvious corollary is to find other partners, and that is just what others are doing—with the United States on the sidelines.

 

What is noteworthy is that it appears we are still making progress—in the same way and in the same direction as always. The difference is that the United States is not there; not under Biden and not under Trump. It is typical of Americans to think that we are leading —whatever we are doing is heading down the right path, with other countries running behind to catch up. In this case, however, it appears no one is following.
The new negotiations tell me that the announcement of the old order’s death was greatly exaggerated, and that the case for trade liberalization remains a strong one. Since the current administration is not going to change its worldview, the challenge for U.S. companies is to find ways to stay in the game even as our government has withdrawn from it.

 

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NOW. . . A Poetic Call to Decide

Had not seen our next door neighbors for a couple of weeks.  She updated me about events in their lives while working in the yard.  Her father who had been in hospice for almost a year died two weeks ago in Baltimore.  That took her away for much of the time.

in this same time frame, after 27 years in her career as a government employee, she agreed to take a voluntary early retirement, She is  in her early 50’s and would have preferred to stay in her job.  But given the uncertainty and possible legal changes to benefits, she decided to leave.

A Poet’s Insight

Poet James Russell Lowell wrote about these life altering decisions in his poem, The Present Crisis.  In its musical form as a hymn, it is titled, Once to Every Man and Nation.  The opening stanza:

Once to every man and nation comes the moment to decide,
In the strife of Truth with Falsehood, for the good or evil side;
Some great cause, God’s new Messiah, offering each the bloom or blight,
Parts the goats upon the left hand, and the sheep upon the right,
And the choice goes by for ever ‘twixt that darkness and that light.

Lowell wrote the poem as a protest against the Mexican-American war in 1848.

Life’s Choices In Credit Union Land

Life happens for all.  Sometimes the moral choices are chosen by us.  Other times they are thrust upon one by events.

These turning points can shape the rest of our lives.  My neighbor is now open to finding a new opportunity to help others, perhaps in non-profit work.

In credit union land, these pivotal events are unfolding daily.  NCUA’s leaders are in unchartered territory.  Will they step up or step back?

CEO’s are being tempted with buyouts, some sought and others dangled with incentives to transfer their legacy to another CEO’s command.  Do I do the right thing, or take the money is an ever-present temptation. And the classic rationale, everybody is doing it makes taking the payoffs seem defensible. 

As if the daily industry challenges were not sufficient, all Americans face a growing crisis in democratic governance at the national level.

It is easy to hunker down and just follow distant events on the news.  That is not my problem.  My attention must be on those things I directly control.  One point of Lowell’s poem is that we all have a choice in these moments:

Hast thou chosen, O my people, on whose party thou shalt stand,
Ere the Doom from its worn sandals shakes the dust against our land?
Though the cause of Evil prosper, yet ‘t is Truth alone is strong,
And, albeit she wander outcast now, I see around her throng
Troops of beautiful, tall angels, to enshield her from all wrong.

Importantly, Lowell   expresses  hope that once engaged, we will make the right choice in these critical moments. Because “amid the market’s din” our “souls” will tell us  what is required.  Are we up to the multiple challenges confronting us in our personal, professional and public choices?

We see dimly in the Present what is small and what is great,
Slow of faith how weak an arm may turn the iron helm of fate,
But the soul is still oracular; amid the market’s din,
List the ominous stern whisper from the Delphic cave within,—
“They enslave their children’s children who make compromise with sin.”

Our Moment

In our credit union lives and our duty as citizens, we are not living in an era of business as usual. Now is the moment to decide.

 

 

 

 

 

 

 

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The Question Is . . .

I watched CNN’s ive Saturday broadcast of the New York play Good Night, Good Luck. It portrays CBS’s Edward R. Murrow’s challenge to Senataor Joe McCarthy’s political attacks using anti-communist rhetoric.

Set in the early 1950’s the play recreates an era of political name calling not dissimilar to today’s dscourse.

There is a six-minute final address in front of the curtain by George Clooney who plays Murrow.  The words are from an actual Murrow broadcast.

It begins questionning whether corporate-owned media(TV is dominant) will support critical discussions  in an era of entertainment driven broadcast popularity.

The middle of the “talk” is a collage of quick frames of news clips from the past 70 years interspersed with popular TV shows.

The close is Murrow’s question–not what will politicians do, but rather what are we the people prepared to do?

Here is the final speech from the CNN broadcast.  The message is more urgent than ever for our lives, our work places and our country.

(https://www.youtube.com/watch?v=1hU9bWiazGM)

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Larry Connell, NCUA’s First Chairman, Dies

Larry Connell, appointed by President Carter as the first NCUA Board Chairman in 1977, died this past week in New Hampshire.

After graduating from Harvard in 1958 with a BA degree in economics, Connell worked for the Comptroller’s office(OCC) in ban k regulation. During this time he earned his JD degree from Georgetown University.

Connecticut Governor Ella Grasso appointed Connell as Bank Commissioner in 1975.   In that office he supervised commercial and savings banks, credit unions, and loan companies as well as acting as securities commissioner.

The Credit Union Years

President Jimmy Carter’s appointment of Connell as Chairman of the National Credit Union Administration (NCUA) came at a pivotal time for both credit unions and federal financial regulation.  Congressional legislation converted the NCUA from a single person administrator to an independent federal agency with a three person, Presidentially appointed board.

The same legislation established the Central Liquidity Facility (CLF) within the NCUA.  This was the cooperative system’s public-private partnership establishing lender of “unfailing reliability.”  At that time credit unions did not have access to the national clearing system or to the Federal Reserve

The first NCUA full board included PA Mack, a senior advisor for Senator Birch Bayh,  and Dr. Harold Black an associate professor of finance at the University of North Carolina’s School of Business Administration.

The First NCUA Board in 1979

As NCUA chair Connell was also a member of the Depository Institutions Deregulation Committee (DIDC) which was charged with the deregulation of rates and terms on the savings accounts of all federally insured deposits.  He was Chairman of the new congressionally chartered National Consumer Cooperative Bank (NCB) until his departure from NCUA in early 1982.

In March 1979 Congress established the Federal Financial Institutions Examination Council (FFIEC) to bring consistency to multiple regulators’ oversight of rules and call reports.  Connell was vice chair.  That same year he asked if I would serve as the state representative for credit unions.  The term was for two years and included periodic visits to Washington for state liaison meetings.  The primary discussions were about the wording for the new Truth in Lending and Truth in Savings rules.

A Career in Public – Private Banking Oversight

After leaving NCUA, Larry became President/CEO of the $2.5 billion Washington Mutual Savings Bank in Seattle.   This began a peripatetic 12-year career in bank crisis management as CEO or Director for banks and S&L’s across the country from Washington, Texas, New Hampshire, Maine, Illinois, Michigan and Washington DC.

After his work for domestic inistitutions Connell was deployed as Senior Advisor for the U.S. Treasury Department’s Office of Technical Assistance.  In this role he  advised governments on bank privatization policies and practices in eastern and central Europe, as well as in Russia, Turkey, Colombia, South East Asia and Africa.

At the Founding and the Transition

October 1981 welcome reception for Ed Callahan with P.A. Mack and Larry Connell

Larry was at the founding of the NCUA as the agency transformed to an independent board.  At his departure his successor, Ed Callahan, spoke of his vital contribution:

While Larry Connell’s departure will be a major loss to NCUA and to the credit union movement, his visionary ideas will continue to influence the financial community. Larry’s expertise in so many areas–economics, law and banking–helped to elevate the stature of NCUA during one of the watershed periods in American financial history.

An ever expanding group of people—from government, industry and the media—now actively seek the Agency’s views on a variety of economic and financial matters, not  just credit union affairs.  I can’t pay him a higher compliment. (The NCUA Review February 1982, page 1)

However Larry did continue serving credit unions.  He was an original trustee of the TCU family of Mutual Funds launched in 1988 by Callahan & Associates.

Larry  laid the foundation for responsive, experienced, and professional NCUA leadership. He believed in credit unions as a vital alternative for individuals and communities left behind by the for-profit sector.  He was a friend, a colleague and always open for intelligent conversation.

The NCUA Board’s leadership and support of credit unions.