Chip Filson
The fight for Cornerstone FCU’s Independence. The members postion is clear.
Lining up to vote and make their voice heard.
What happened next? The rest of the story.
And don’t overlook the video of the members voices in the story:
(https://www.youtube.com/watch?v=-bWTWlgYvMw&list=PLF00vnVWOq4yp44pYYX77o2-BClvcQAyG)
All organizations and most individuals will at some point in their journey encounter a crisis. These could be threats to their livelihood or maybe existence.
It is important to remember that crises do not form character; they reveal it.
Yesterday the NCUA board met in public during grave uncertainty about the agency’s future. The board members’ response in this time of uncertainty will be for another time.
Today the President of Ukraine meets with President Trump. Zelensky has been leading his country in a war that has entered the fourth year.
This post is about the character of the people who elected him President during this battle for their freedom. And an example of American supporters.
I want to introduce you to three Ukrainians. Here are the first two, an obstetrician and his nurse attendant in their “office” near Kiev.
They literally have their hands full with their work-in this case, twins. And an exhausted mother.
Their children’s hospital was hit by a Russian missile and destroyed last fall. So in November 2024, a group from St. John’s Episcopal Church , Chevy Chase, MD, held a fundraising dinner with St. Andrew’s Orthodox, a local Ukrainian church.
They hoped to raise funds the doctor needed to purchase a new neonatal unit for their rebuilt hospital clinic. That evening, the group of Americans contributed the entire amount. The funds were sent to Ukraine immediately. A new neonatal unit was purchased and put into use within 60 days of the dinner.
Here is the third Ukrainian I want you to meet. This photo of a current occupant of this new unit came yesterday. Ukraine’s next generation.
Amercans and Ukrainians are together working to build a better future for this new generation.
As context for this Presidential discussion about continuing America’s support for Ukraine, I believe two recent articles provide insight into the character of the Ukrainian people. The first is the initial two paragraphs from a longer analysis called:
Ukraine’s deep history of peacekeeping in other wars
Even in the most difficult times, Ukraine has demonstrated a willingness to help others by participating in peacekeeping missions worldwide. However, the world has delayed decisive help now that Ukraine is the one that needs peacekeeping. It is a question of justice: can countries who contribute to peacekeeping count on reciprocity when they are threatened?
Before the full-scale invasion, Ukraine was known for its peacekeeping efforts. It participated in 36 military operations, becoming the ninth largest contributing country of military personnel to UN peacekeeping missions. (click the above link for the the full article which describes these UN missions)
A digital-only English language news site was started in late 2021 by young Ukrainian journalist entrepreneurs, called The Kiev Independent. It is a subscription only model, publishes dozens of stories daily and relies entirely on online “member” subscriptions.
When the February 2022 Russian invasion began, it focused on daily war coverage for readers outside Ukraine.
When the January U.S. AID cutoff threatened other local Ukrainian language news outlets, the Independent asked its readers to send funds to support these smaller news sources. Here is the report about this effort of less than a week:
Feb 8, 2025 from Editor-in-Chief, Olga Rudenko
Even more good news. Last week, we launched a fundraising campaign to help out three Ukrainian newsrooms in the cities close to the front lines. They were all hit by the freeze of U.S. foreign aid and we wanted to offset some of the damage.
We aimed to raise $50,000 and ended up raising $66,000 in just three days. Over 700 people contributed — a huge thank you for that! We are now in the process of transferring the funds to the newsrooms. Each will get about $23,000, which will cover their expenses for the next couple of months. They are shocked and grateful.
These are brief but I believe representative examples of the character of the country which elected Zelensky President.
The public reports of their meeting will display two examples of leadership. One whose character and that of its people is under daily wartime attack. And one who uses threats as a standard political tactic.
The character example I prefer is that of the US-Ukrainian group that helped restore the neonatal unit of a children’s hospital near Kiev.
Bylaws require every credit union to hold an annual meeting. The agenda includes reports by the Chair, CEO, other timely updates and the election of directors for open seats on the board.
In many credit unions this event is purely administrative and perfunctory. It is merely a compliance task, carefully managed to end quickly, and to avoid any real member dialogue.
Such an approach this year could be the most costly political mistake a credit union could make with its members. Here’s why:
The future of the federal regulatory system is being overhauled for greater efficiency, simpler design and more direct White House control. No more independent agency policy making. One example of a question being raised is whether the government should have two separate deposit insurance funds.
Credit unions, like most industries, have deployed traditional lobbying capabilities to counter political risks to their operations. These common tactics include raising more PAC dollars, hiring lobbyists with ties to those in office, funding PR campaigns, etc.
Credit unions will never outspend or out-hire their opponents. Money is not the source of their political influence in DC or in their respective states.
Consultant and former OCC examiner Ancin Cooley offers this assessment:
In reflecting on the history of the credit union movement, one fact stands out: our strength has always been rooted in our members and communities. . .While political wins and advocacy play a role, we must never lose sight of our true source of standing. . .our focus should be on empowering our members and meeting their needs.
Activating Member-Owners
People’s voices and votes are the ultimate power in a democracy. The first call to action with members should be in the upcoming annual meetings. To make this event a rallying cry, the traditional approach must be rethought. However, this is not a new challenge.
In March 2023 Silicon Valley and two other banks failed in quick succession as the Federal Reserve increased interest rates. Many credit unions instantly changed their meeting’s scripts. In one I attended, the CEO after summarizing the prior year’s performance, pivoted to explain why her credit union and the industry generally did not have similar problems.
The message was to assure members their funds were safe. Do nothing and trust your credit union.
This time the message is quite different. The challenge is to educate members about changes being considered and ask them to act, not just stay the course. Member-owners contacting their congressional representatives, en masse, is the most powerful influence on political behavior.
In 1998 the Supreme Court ruled in favor of a banking challenge to changes NCUA made in its field of membership regulations in the early 1980’s. If implemented, the decision would have limited credit unions to their original, or a single, field of membership. The law the Court interpreted had to be changed and fast.
One of the means to both engage and empower members was a newly created website called The Committee of 70 Million. The name was an echo of Revolutionary War grass roots organizations.
It was created by Scott Patterson, a recently hired techie at Callahan & Associates. Although the country and credit unions were in an early phase of the Internet era, with social media still unknown, this platform could be linked to every credit union on the Internet.
The site explained the what was at stake and suggested multiple ways members could reach out to their congressional representatives. Here are six slides from a much longer review in 2001 of the site’s options, information and impact.
The site was then adapted for voting in the Presidential election year 2000.
Trump promised total disruption of the federal government bureaucracy. He is on course. Now is the time for mobilizing member-owners.
The annual meeting should be converted to a town hall format. This is an opportunity to connect and inform about the political changes. The members’ questions and reactions can be used to plan next steps. After all, it is likely 50% or more voted for Trump’s message.
Credit unions must gain members’ respect and trust for the steps you will propose. The most important message however, is that this is not just another political fire drill.
Note: To receive the full slide deck, contact Scott Patterson at spatterson@gmail.com.
The prime agenda item for Thursday’s NCUA board is the NCUSIF’s year end audit and setting the NOL cap for December 2025. The political context in Washington at this moment makes this meeting critically important.
Will the public discussion reinforce the understanding of the Fund’s extraordinary performance and its unique cooperative design? Will its decade long performance of insured losses below a basis point, confirm its critical role in credit union’s unique purpose in America’s financial system?
The 2024 external CPA audit was released last week. It continues to show the financial stability of the cooperative system and the strength of its unique deposit insurance model.
This track record is especially vital in this time of an administration challenging all aspects of federal agency performance. This includes the federal regulatory structures, including FDIC’s oversight. For some the NCUSIF’s functions appear quite similar. Could its future also hang in the balance?
It will be vital that the Fund’s uniqueness be affirmed during this update. Especially these three characteristics:
How Board members present the NCUSIF’s demonstrated financial success may be crucial to its continued independence, not to mention NCUA’s. If credit unions lose their fund in a regulatory realignment, would the singular credit union system be far behind?
We knew yearend 2024 financial outcomes would be superb based on the November 21, 2024 NCUSIF board update as of September 30. The yearend equity ratio is above .302% showing the importance of the NOL cap. If it had been at its longtime cap of 1.3%, credit unions could have received a small dividend for 2024.
Will the Board’s discussion of this and other topics be anchored by full transparency, supported by real facts and the historical record versus hypothetical conjecturing?
The fund’s effectiveness is not based on its total assets, but rather, as in all insurance underwriting, its size to relative to insured risk. For example, the allowance account at $237 million is set aside from retained earnings. It equals 1.3 basis points of insured savings at yearend. Only once in the past ten years have total cash insured expense losses exceeded reserve level.
Specific areas of importance for board oversight include:
Yet the fund continues to invest long in November, extending its duration risk, at a time of a reset in what a normal yield environemnt may be. To sustain the Fund’s equity ratio a yield between 2.5-3.0% is necessary based on 40 years of actual operating results. The critical topic is what will the board require to improve the Fund’s interest rate risk management and turn around this continuing portfolio underperformance?
The continued use of Federal, not private GAP accounting misleads, mischaracterizes and distorts the fund’s actual financial standing. The terminology and schedules used with the Fund’s accounts are totally irrelevant since the NCUSIF is not an appropriated entity.
Federal GAAP removes specific information accounts from the NCUSIF’s financial statements. For example is the portfolio’s actual value $22 or $23 billion? Where is the net income total? Or retained earnings? These traditional GAP terms do not appear.
The federal terms and schedules used are not relevant for the NCUSIF and convey an incorrect impression that the NCUSIF is somehow a federally appropriated fund. Or red meat for an uninformed DOGE analyst.
At a minimum private GAP financial statements presentation should be presented alongside the Federal GAP. For private GAP is how all three of NCUA’s other managed funds are presented.
I am looking forward to the meeting. Every credit union should as well.
Often events for good or otherwise are quickly forgotten. Deeds are overwhelmed by subsequent activity. We want to live in the present, project hope into the future, and allow the past to stay there.
The following is a situation of self-dealing where all the principals are doing their best to help us forget.
The circumstances of the $634 million Finance Center (FCCU) merger with Valley Strong was analyzed in A theft of $10 million or Just Spreading Goodwill, You be the Judge. (January 26, 2022)
The two credit unions’ main offices were 240 miles apart. Prior to the merger, FCCU had reported member capital of over $100 million (17% net worth), a falling loan to asset ratio which at points were below its net worth ratio. The two primary executives, the CEO Michael Duffy and the COO Nora Stroh were brother and sister. They had been in these leadership role since the early 1990’s, They had paid themselves over $1.0 million in compensation in several years prior to the merger. CEO Duffy also served on FCCU’s five-person board.
The member’s Merger Notice contained all the rhetorical promises (consolidation of energy and resources) for a future of better products and expanded services. Bonuses for FCCU’s five senior executives and future employment prospects were presented.
A complicated formula for a member dividend from the credit union’s $100 million net worth was outlined. And, the diversion of $10 million to a non-profit newly organized by CEO Michael Duffy and FCCU’s board Chair Morales, with a ten-year Valley Strong funding commitment of $2.5 million, was presented as a merger benefit.
Two years later in January 2024 I wrote a follow up story: The Pied Piper of Area Code 209 or What Happened to the FCCU Members $10 Million?
Part II of the analysis detailed the immediate fall in Valley Strong’s financial performance, the $800,000 in merger bonus payments to four FCCU’s senior executives with their continued “employment” at Valley strong. Their salaries ranged from $353,000 to $1.088 million.
The blog also presented the financial filng of the newly created FCCU2 charity from its initial IRS 990 report. Part II The Pied Piper of Stockton. (February 1, 2024)
In a Game with No Rules (February 2, 2024) two FCCU member’s comments critiquing the merger’s premise and “giving away the member’s $10 million” showed the reality from the owners’ perspective.
California and NCUA regulatory approvals were critiqued. Their combined inaction was more harmful than mere benign neglect. The cooperative system’s fundamental soundness was being compromised. I asserted that credit union mergers have become a game without rules. Longtime, sound credit unions were being transferred out of existence where the only concrete benefits were for the CEO and senior staff who initiated the transaction.
The CEO, senior executives and board of FCCU negotiated the merger of their overcapitalized institution in return for $800,000 of immediate bonuses and continued employment in vacuous responsibilities (Chief advocacy Officer, Legacy Ambassador). The undisclosed terms of their future employment compensation and benefits resulted in their receiving $2.5 million in 2022, per the IRS 990 form filed by Valley Strong.
These five senior executives gave up all leadership roles and accountabilities. They no longer report to a board and their performance is not subject to external examination or audits. The team which they supposedly joined is 240 miles distant (Stockton to Bakersfield). But their full pay and more continued.
This continuing compensation was in addition to receiving the benefits from retirement plans they previously awarded themselves in FCCU and reported in the IRS 990 filings.
Old habits are hard to change. The continued self-dealing, clothed in philanthropic disguise as evidenced in FCCU’s final years, continues with the diverted $10 million (sic) in members’ equity.
In 2022, the first full year of activity by the newly created 501C3, we learned the following as described in The Pied Piper, Part III:
In the continuing credit union Valley Strong’s 2023 IRS return, three former FCCU senior executives were still on the payroll earning the following: Nora Stroh $1.662 million; Steve Liega $1.311 million; and Michael Duffy $1.021 million. The two senior “at will” FCCU employees in 2022 were no longer listed.
Stroh’s total compensation was the highest of any credit union employee, and Liega’s the third highest just behind Valley Strong’s CEO. Both former FCCU executives had unusual compensation \structures. Each received salaries less than the prior year 2022. In Valley’s 990 Schedule O listing, Stroh received other reportable compensation of $ 1.332 million and Liega, $971.537.
No other of the 39 Valley Strong employees listed any amount close tp these numbers. This unusual compensation suggests a transfer of some asset other than normal salary/benefits and bonus cash payments.
Even with the two “at will” FCCU employees gone, the three remaining at Valley Strong received total compensation of $3.994 million . That amount was $1.473 million greater than all five together earned in 2022. None of this post merger largess was disclosed in the Member notice as is required by NCUA rules.
The effort to transform the FCCU 2 foundation into a non-public, inaccessible entity continued in 2023. IRS filings are required only once per year, often filed late into the next reporting period.
Here are summary totals from The 54 Fund’s first three years filings. 2023’s is the most recent we have.
| Year | Assets Y/E | Income | Expenses | Grants |
| 2021 | $11.974 M | $19.7 K | $5.2 K | $0 |
| 2022 | $12.058 M | $368.7 K | $106 K | $272.5 K |
| 2023 | $13.302 M | $592.1 K(1) | $222 K | $438.5 K |
(1) Revenue before deducting a $157.5K loss on sale of investments.
As part of its “going dark” operations, the Fund affirms in IRS Part XIV 2 that “the foundation only makes contributions to preselected charitable organizations and does not accept unsolicited requests for funds.”
The Fund has no office or web site. When calling the the telephone listed a recording says an answering machine has not been connected. All directors and the books and records are reportedly held at the single post office box address. It must be a very big box!
I could find no public information about ithe Fund’s activities other than the listing of donations in the IRS filings. I would surmise that many Stockton recipients would be grateful for these annual tokens of manna from this minimalist financial resurrection by FCCU’s former leadership team.
Despite this ongoing lack of pubic information, an analysis of 2023’s filing shows:
In summary, the Fund distributes only the bare minimum required by the 5% IRS test. It grew total assets by over $1.3 million from increases in the market value of investments. Operating expenses rose at a faster pace than contributions.
The Fund has received two $250,000 initial payments from Valley Strong as part of a ten-year $2.5 million pledge reported in the Member Notice. This planning suggests he Fund never intended to distribute all of its assets. Instead it has become a personal petty cash account for a rump group of former FCCU leaders to further an impression of public philanthropy-with members money.
The 54 Fund’s financial giving meets only the minimum IRS contribution requirements. This charity is a closely held, unelected, private entity with no public accountability. The former CEO of FCCU keep the books. His self selected previos directors make all decisions. The purpose continues their pevious public performance as Stockton philanthropists. But it is not their money they use but the former member owners of Finance Center Credit Union which they closed down.
Similar to the final five years of the credit union’s operations, the Fund has became a personal platform for promoting Michael Duffy. It is not resolving the needs of the former member-owners of the credit union or the Stockton community with its multiple, tiny token grants.
FCCU’s senior executives and board negotiated a merger that rewarded their own self interest, not the members’ well being. The 2023 extraordinary compensation Valley Srong paid to two of the former FCCU senior executives was not disclosed in the Member Notice. This failure was on top of the additional $2.0 million sent to the new Fund versus the $10 million listed in the Notice.
This continuing saga of self-dealing was designed by the CEO of FCCU, but was enabled by the Valley Strong Board and CEO. They only had eyes on the prize of free capital and a $630 million asset transfer. The inaction of NCUA and California state regulators who approved this deeply cynical transaction is a critical failure of supervisory responsibility.
Cooperative mergers, for a number of CEO’s, have become a Game with No Rules. It is whatever one can get away with in private deal making. There is no added value for members. just future promises. Board members approve these transactions and payments oblivious to their fiduciary obligations. The process of members voting is nothing more than a sham. Regulators routinely approve communications that lack any meaningful substantive disclosures. Those who benefit from the event control the entire member manipulated voting approval.
This continuing blight on the cooperative system undermines the basic foundation for the soundness of any financial system: the trust of the users.
This is however an opportunity for cooperative leaders to demonstrate both moral and common sense clarity. Who wlll stand up and say “enough is enough”?
Without leaders’ voices, this rampage will continue. The future of an alternative cooperative system is at stake. But not from political change from DC, but rather from internal decay.
Some credit unions act out the belief that their future is the same as that of the for profit, self-interested commercial competitors. But this internal corruption is only succeeds until members see the reality behind these tortured transaction. Their response may be either fire (anger) or ice (apathy). Both are equally fatal to the member-owned model.
Note: Because of embedded video links and pictures, this post is best read in the browser format)
Three years ago today Russia invaded the independent country of Ukraine.
The attack’s intent and the expectation of many outsiders was that the country would be subjugated in a matter of days, or at most, weeks.
Three years later, Ukraine has shown the incredible resilience of people willing to sacrifice for their country’s freedom.
The fog of war, time, elections and competing events have clouded the perceptions of some about the largest conflict on the European continent since WW II..
In this current moment of uncertainty about the war’s end, we must state the obvious: Ukraine has won. They have fought the second largest army in the world to a standstill. Their nation’s courage has earned them the respect of freedom loving people the world over.
Their determination against overwhelming odds inspires all persons yearning for freedom the will to prevail. Most importantly, Ukraine’s fight is protecting all other democracies in Europe from Russian imperialism.
Putin’s quarter century dictatorial reign is at great risk. Russia is desperate for a ceasefire. Its central bank rate is 21% and its inflation 9%. Between 900,000 and a million troops have been killed and wounded. An estimated 25 to 30 of its oil refineries have been hit and disabled. Economic change is frozen by sanctions.
And Ukraine’s democratically engaged population has shown the Russian people the need to rediscover their humanity and self-determination. The example of the Ukrainian people’s revolution is why Putin began this conflict.
Following are scenes from three years of total war showing clearly what the world understood then, and is still the reality today.
Zelensky’s words days after Russia’s direct attack on Kiev: I am here. I don’t need a ride; I need ammunition.
(https://www.youtube.com/watch?v=z3cU9d9ciY4)
Om February 28, 2022, New York’s Metropolitan Opera opened its performance by singing Ukraine’s National Anthem. The sole person without music, hand on heart, is a Ukrainian. One of hundreds of spontaneous presentations showing the American public’s support.
A soldier and his wife await their first child.
A civilian engineer builds drones for the front line.
Opening day at Wrigley Field, Chicago 2022.
(https://www.youtube.com/watch?v=59k-qONWAlc)
Soldiers on recuperation receive sunflowers.
In the first days, civilians practice with wooden guns, until the real ones are available.
Citizens create a roadblock on a road that leads to the Zaporizhzhya Nuclear Power Plant, in Enerhodar, Ukraine, March 2, 2022.
The siege of the Azovstal steel plant in Mariupol, Ukraine was a key part of Russia’s invasion of Ukraine in 2022. The plant was a symbol of Ukrainian resistance and the last holdout in Mariupol before the city fell to Russian forces.
Ukrainian Flag in the Sanctuary of Chevy Chase Pesbyterian Church, Washington DC 2022
Music Mission Kiev Women’s Chorus Concert in Alexandria, VA (2024)
A country whose people’s spirit will never be broken.
(https://www.youtube.com/watch?v=sgTI8FPwW0Q)
One US analyst described Trump’s public support for Russia’s terms for a ceasefire as follows:
Putin gets the domestic glory he craves and lets him save face by winning a war that would’ve likely outlived him.
Plus he gets 19% of Ukraine — over 43,000 square miles (27 million acres), capturing a significant chunk of Ukraine’s railway network, power plants, pipelines, military bases, heavy industry, tons of anthracite coal, vital Black Sea ports on Crimea, and a big fat buffer zone with non-NATO Ukraine.
Following is the response by the editor-in-chief of the Kiev Independent addressing Trump’s about face in America’s support for Ukraine’s freedom.
Her words portray the courage, character and resilience of a nation that will be free. Plus the hope from three years of sacrifice that inspires her fellow citizens today.
On the brink of catastrophe — again: A letter from our chief editor
Hello, dear reader, This is Olga Rudenko, editor-in-chief of the Kyiv Independent.
In a few days, we will be marking the third anniversary of Russia’s full-scale invasion of Ukraine.
If you read the news, you know that we’re coming to it in a difficult, surreal state. Our key ally, led by Donald Trump’s new administration, is turning against us and is siding with our enemy, Russia. After three years of resistance that cost Ukraine lands and numerous lives, it seems like the invader can prevail after all.
How do I begin to describe what it feels like here, on the ground?
First of all, it feels oddly similar to these very days three years ago. That anxious February of 2022, filled with a buildup to a disaster. We saw it coming closer but didn’t want to believe it would happen — it seemed so insane, impossible to imagine. A military invasion to take over a free country? Impossible. Just as impossible as it is to believe that the leader of the free world will side with the Russian dictator. And yet, it’s happening.
Three years ago, late on the night of Feb. 23, I left the office around 3 a.m. with two other editors. Toma Istomina, the Kyiv Independent’s deputy chief editor, waved at me on her way to her taxi and jokingly said, “Well, I hope we will see each other tomorrow.” In two hours, Russia started its invasion. Toma and I saw each other two months later.
Today I’m writing this message to you at our office in Kyiv. Sitting across from me is Toma, frowned and focused, her curls pushed away by large headphones as she’s editing something urgent. Like three years ago, we are exchanging jokes to lift the mood. She has the driest sense of humor — a perfect fit for the times.
The atmosphere is painfully similar to three years ago: defiance in the anticipation of a catastrophe.
But this time, despite the odds, I feel a bit more confident. Here’s why.
On the second day of the invasion in 2022, when it became clear that the Ukrainian military was fighting tooth and nail against the invaders, I wrote a short and emotional post on Facebook. It read: “No matter what happens next, our defenders have already won for us the feeling of dignity that will stay with us forever. Russians will never dream of having it.”
That’s the first reason that makes me feel stronger and more prepared for what comes next. I know the resilience of the Ukrainian people — the special internal strength that comes with the centuries of defying the odds, of surviving despite the forces that seek to eliminate you. I feel it in myself and in everyone around me — both in native Ukrainians and our allies who are here with us. That strength is something no one can take from us. Not even two of the most powerful leaders in the world working together.
The second reason that makes me more confident in the future than I was three years ago is knowing that we don’t stand alone. Yes, presidents and leaders can try to sell us out, either for personal gains or out of sheer cowardice. But I know that there are many millions of people around the world who stand with Ukraine. They reach out, offer support, write letters. A lot of these letters start with: “I’m so ashamed that my country isn’t doing enough…” or a similar sentiment.
In these three years, Ukraine’s supporters have shown what it means to truly stand up for what’s right. To show up. To fight. To show kindness. This war has made us see the worst side of humanity — but, it has also shown us the best.
So whatever comes next, we have our strength and we have you.
Let’s remember that this isn’t over. Ukraine keeps fighting. Today, when we finally wrap the day and go home, we will hear the air defense working — Russia’s drones have been attacking Kyiv every night this week. We will publish the last stories of the day from our bathrooms, the safest place during an attack. Nothing is stopping here.
The Kyiv Independent’s team is staying on the ground in Ukraine to bring you the truth about what’s happening here — as we have been for three years.
We can do it thanks to you. Our readers’ contributions make up the majority of our funding. Thank you for standing with the Kyiv Independent — your support helps us keep going.
Thank you,
Olga Rudenko
Editor-in-Chief
The Kyiv IndependentFebruary 20, 2025
Five observations on credit union subjects.
From Steve Jobs on credit unions:
“While many economic and social factors weigh into the success of a credit union, I’ve seen first hand the difference a passionate team can make on the bottom line. The most successful credit unions we’ve worked with have not had the best marketing, they haven’t had the most college degrees in one room, nor have they had the best circumstances.
The credit unions, which have the most success, are winning because they personally believe in their credit union. They have a mission statement and a vision they are passionate about. Their members are friends and family.
“If you don’t love something, you’re not going to go the extra mile, work the extra weekend, challenge the status quo as much. What separates the good credit unions from the great credit unions? Culture. Vision. Passion.” (Source: SECU Just Asking)
From Mark Arnold on leaders: Jim Collins found that great companies build leadership from within. He goes on to say, “Visionary companies develop, promote and carefully select managerial talent grown from inside the company to a greater degree.”
From a CSIS panel discussion on current government reform efforts:
I led two major reviews in 1999 and 2011 of top down reform experience around the world. Of the many lessons I learned, two stood out: the process of reform is as determinant of the outcome as the goals of reform. Even the best-designed civil service reforms falter when national leaders fail to lay out an affirmative vision for the role of government.
Governments, after all, are mission-driven. They are dependent both on a service ethos on the part of public employees, as well as the public’s trust in those who serve.
From Mike Higgins, consultant on scale:
The “there used to be 14,000 banks and now there only 4,000″ is an old and tired statement used to justify scale. . .there are some strong arguments that scale is not the answer.
Complexity of scale is a real thing – and complexity occurs in a lot of areas simultaneously – it’s like watching a fight between two octopuses – lots of tentacles in motion.
Two notes from Who Pays for all Those Generous Credit-Card Rewards?
It’s also worth remembering that lots of Americans don’t have incomes or credit scores that provide access to the most desirable credit cards. This means that debit-card and cash users, who tend to be lower income, are essentially paying for the credit rewards enjoyed by wealthier Americans. . .
“Nobody ever got rich through credit-card rewards, yet lives have been ruined due to credit-card debt,” Wang says. Sticking with a debit card, which comes with many fewer risks, “I think it’s totally reasonable for lots of consumers.”
Knowing history helps us navigate current uncertainties, even severe problems. This is a story of a credit union that was mismanaged. There was front page publicity about the problems, NCUA’s role, and direct quotes from NCUA, including Chairman Callahan.
The year was 1983. The credit union was charter number 435 which opened on January 1, 1935. State Department FCU also served NCUA employees.
Here are the opening paragraphs of an August 16, 1983 Washington Post article investigation of the situation:
The State Department Federal Credit Union has operated at a loss since last year and has been placed on a “problem list” by federal regulators, according to credit union officials.
The federal action is based on the credit union’s overall financial condition, but it comes at a time when the credit union’s administration is under attack from some of its members for the amount of money it spends on receptions and trips for employes and board members to conferences in places such as Las Vegas, Munich and Paris.
The credit union, which has $166 million in assets and 36,000 member accounts, reported a loss of $346,095 on total income of $8 million for the first half of this year. Last year the credit union, with a total income of $15.7 million, lost $224,200.
Examiners from the National Credit Union Administration (NCUA), which regulates federally chartered credit unions, told the board of the credit union in a meeting July 27 that the member-owned institution has been placed under special surveillance, according to Edward N. Gulli, general manager of the credit union.
Here are further detals from this lengthy report:
NCUA examiners said the credit union “would have no problem” if board members “took the steps to turn it around and become very profitable again.” . .
Some 7 percent of the 11,200 federally regulated credit unions in the United States are on the NCUA’s “problem” or “watch” list, according to Layne L. Bumgardner, director of supervision and examinations at the NCUA. . .
In an effort to conserve the credit union’s cash, Gulli said the board has voted to stop traveling first class, which was previously allowed on any trips of more than three hours’ duration, and to suspend any travel until the end of the year. However, he said travel to conferences is a necessary part of credit union activities and will be resume .. .
During 1982, the credit union spent $51,628 to send board members–who are State Department employes performing the credit union work as volunteers, receiving no extra salary–to conferences in places including Paris and Munich. . .
They spend money like water on trips, and they say they don’t have the money to hire additional tellers or pay better interest. They think we’re dumb,” said Mary Drakoulis, an employe in State’s Freedom of Information office who was one of the original organizers of protest against the credit union management. . . .
The article included five paragraphs listing individual board and senior executive travel expenses. Here is one example:
A June 26 to July 1, 1982, trip to a credit union industry conference in Las Vegas by six board members and three of their spouses costing $3,099 in hotel expenses at the Las Vegas Hilton and $9,520 in first class airfare. Five board members and a credit union employe traveled to Las Vegas again for a similar conference in May of this year. . .
NCUA’s chairman, Callahan, said the question of what is or is not a proper level of expenses is up to the members to decide. “We do not usually get down to splitting hairs as to which expense is appropriate. If it is a problem institution, I’m sure their expenses are being scrutinized,” said Callahan, who is a member of the credit union.
Even Larry Connell, the former NCUA Chair and now CEO of Washington Mutual Savings Bank was asked for comment. He stated: “To me,” he said, “the best enforcement is for the membership to vote on whether to continue the management. I would think the members should have reasonable access to the records of the credit union.”
Finally, the President’s compensation was published. Federal charter salaries are not required to be disclosed as is the case with state charters.
Because Gulli’s salary increases are based on the (board) recommendations, not the (U.S.) president’s decision, he got a raise last year of 18.47 percent, while federal workers got a raise of 4 percent.
Gulli currently makes $89,000 a year, about $9,000 more than Secretary of State George P. Shultz. He said that since he is not a federal worker, his salary should not be compared with the secretary of state’s. He pointed to a recent industry study showing the median salary of executives employed by the top quarter of government credit unions with assets of $80 million or more is $84,502.
“I don’t have a chauffeur-driven car or a plane at my disposal,” he said, referring to Shultz. He said he got a 15 percent increase in lieu of health insurance and a pension plan.
First, the credit union survived this very public airing of its leadership’s perks and excesses, its poor performance and being added to NCUA’s watch list.
Today State Department FCU is a $2.9 billion institution with 88,000 members, 6 branches and over 200 employees. It’s 2024 performance mirrors the industry’s overall trends: delinquency 1.14%, ROA of .34%, net worth 10.5% and loan and share growth around 6%.
Secondly, the transparency on these issues was an important catalyst for change. Members were provided the information on senior management compensation, board and staff travel and their stewardship of the members’ funds.
These details should be standard operating disclosures for all credit unions today. Special events and major business initiatives such as a bank purchase financing should be routinely provided. Such transparency not only provides essential owner information for the annual election of directors; it also induces accountability.
Thirdly, senior NCUA officials from the examiners, the RD, the DC head office and even the Chairman spoke directly to the press. If one reads between the lines, the reporter was questioning whether the regulator should be more forceful in stopping these activities. The response was that this was the responsibility of the owners, unless the excesses undermine the operations. But members must have access to all relevant facts whatever the circumstances.
Finally, the article several times refers to the entire credit union system and their role in the economy.
Credit unions are nonprofit organizations originally formed to help employes get loans when banks did not make consumer loans. The industry now has $93 billion in assets nationally and 48 million members. The State Department credit union is 46th largest among 19,630 credit unions in the country.
Each credit union today is a representative for the entire cooperative model, for good or otherwise.
My colleague Bucky Sebastian’s rule as a public employee was to never say or write anything that you wouldn’t want to read on the front page of tomorrow’s newspaper-or the lead in a blog post. However the solution is not to avoid the topic or say you can’t comment. That will just make the press more interested.
Every credit union will have performance problems. Economic cycles are just that, cycles, not straight line performance. Managers are not perfect and board oversight will vary.
The best way to prepare for these inevitable ups and downs is to be transparent with pro-active disclosure habits in all seasons. This creates a pattern that demonstrates responsibility to the owners, even in times of performance shortcomings. State Department survived this very public thrashing by the Post. NCUA was upfront about its role.
Without this practiced accountability any credit union can risk becoming the next poster child for a cooperative system that seems to have lost its way. And added to the lists of examples kept by those seeking to undo the special role of credit unions in the American economy.
Osacar Abello is the economic journalist for Next City, a web publication which reports on innovative examples of tackling long standing urban challenges.
He has written a new book, The Banks We Deserve. It is about the future of credit unions as much as he focuses on banks. He offers this reason for writing.
So how many community banks do we need? I’m not sure that me or some policymaker or expert should be the one answering that question. Maybe it should be up to each community that feels ignored or frustrated with larger, distant financial institutions to take some of that money creation power for themselves and see how they do with it.
We’ve never done anything big in this country without little banks. Yet the number of community banks in the US has been steadily declining for decades, giving way to big banks that have little connection to the communities they claim to serve.
The massive, unprecedented shift toward such a highly concentrated banking sector has weakened our ability to take action at a community level and leaves many people, especially those who have been historically marginalized, without access to capital.
In The Banks We Deserve, journalist Oscar Perry Abello argues that community banking has a crucial role to play in addressing urgent social challenges, from creating a more racially just economy to preparing for a changing climate. At their best, community banks unleash the agency and aspirations of the communities that establish them.
Abello challenges people working on racial justice, community development, or addressing climate change to start more community banks or credit unions as part of their work, while also calling for policies and regulatory reforms that will help tilt the landscape back in favor of community banking.
The Banks We Deserve tells the stories of new community banks — like Adelphi Bank, in Columbus, Ohio, the first new Black bank in 20 years; or Walden Mutual Bank in Concord, New Hampshire, the first new mutual bank since 1973 and the first chartered specifically to finance a more sustainable food system; or Climate First Bank, in St. Petersburg, Florida, which has grown exponentially since opening for business in 2021. He hopes these stories inspire others to take some of these same daunting-but-not-impossible steps.
My takeaway: Credit unions have been evolving into this community role since deregulation. Who is telling their story?