Chip Filson
(https://www.youtube.com/watch?v=OSdGW_HBrLE)
A citizen inspects a partially destroyed residential building after Russian shelling in the Saltivka district of Kharkiv on April 9, 2023. A prayer for Ukraine.
(https://www.youtube.com/watch?v=N7cPNrpwfs0&list=RDGMEM8h-ASY4B42jYeBhBnqb3-w&start_radio=1&rv=dpEIplVu7Zk
The present does not exist without the past. This is a factual statement. However how we encounter the past, will strongly influence who we are today. And what we become tomorrow.
This year three of the world’s major religions have some of their holiest days overlap: Passover, Ramadan, and Easter.
The events, liturgies, and services of all three are honoring past events that shape how their followers live and worship today. This is more than remembering. It is continuing a legacy of belief and ideals that are powerful influences still.
An individual example of this commitment is this short interview with Bono about how he practices his Christian faith.
Organizations also honor their past. Sporting teams retire star players jerseys or numbers to remind today’s competitors of past glories.
Organizations and universities name buildings, endow scholarships or professorships with the names of founders, donors and leaders who laid the foundations for today’s ongoing work.
Recently a credit union asked if I might speak at their annual meeting. This is not something I have done recently so asked what he had in mind.
He sent me background on a keynote speaker. It read: Michelle Book, CEO of the Food Bank of Iowa, will be one of our keynote speakers this year. She is a friend. . .When Michelle took the helm of this Feeding America affiliate in 2016, it was on the brink of being decertified. Today FBOI serves 55 counties or over half of Iowa . . . Michelle will have an impactful message regarding changes our state legislature will pass into law this week which will result in . . .another barrier for 300,000 food insecure Iowans to receive their SNAP benefits.
Every event has embedded in it values, ideals and even prior grievances that motivate or guide its leaders.
Today is part of Easter Holy Week. Good Friday worship is a time of somber remembering the crucifixion of Jesus.
The spiritual often sung in these services begins: “Were you there when they crucified my Lord?”
The words are not meant literally. Rather they evoke the power of worshipping or honoring those who came before to enable us to be who we are.
Religious beliefs are more consequential and longer lasting than most secular traditions, for some but certainly not all people.
However spiritual practice reminds everyone that indeed “you were there” when others created the foundations all stand on now.
And what we will pass on, each in their own way.
Ken Burns: History has never repeated itself. There’s not been a single event that’s happened again.
To be able to perceive larger patterns, that’s our work in life. Why am I here? What is my purpose here? What is the meaning of life? These are the essential questions, but we’re distracted by all of these grievances.
Human nature is always the same. Greed and generosity, puritanism and prurience, virtue and vice, they’re always there. And they’re not just between you and another person. They’re within you and within me.
Managing money has always been political. And always will be.
A measure for credit unions: “The extent to which we apply social values more than mere monetary profit.”
Come to your Temple here with liberation
And overturn these tables of exchange
Restore in me my lost imagination
Begin in me for good, the pure change.
Come as you came, an infant with your mother,
That innocence may cleanse and claim this ground
Come as you came, a boy who sought his father
With questions asked and certain answers found,
Come as you came this day, a man in anger
Unleash the lash that drives a pathway through
Face down for me the fear the shame the danger
Teach me again to whom my love is due.
Break down in me the barricades of death
And tear the veil in two with your last breath.
A credit union’s relationship with its local minor league baseball team became more than a promotional opportunity. It evolved into a strategic expression and expansion of its mission.
The Dayton Dragons (Dayton, Ohio) have the longest continuous sellout streak in North American sports history –1,441 games. The team is the High-A affiliate of the Cincinnati Reds and plays in the Midwest League.
The team’s 2023 promotional video clearly highlights the credit union’s naming rights: the Day Air Credit Union Ballpark. However the relationship with the Dragons goes much deeper than naming one of the most iconic venues in Southwest Ohio.
Both organizations have created a partnership that grows Day Air, the Dayton Dragons, and the economic vitality of the region.
Joe Eckley, Director of Marketing for the credit union, describes some of their joint activities:
The Dragons are a Dayton entity–they draw from the outskirts of the region to provide family friendly entertainment to all comers.
Day Air serves the greater Dayton area– people doing good for friends and neighbors. All the big banks in town are headquartered elsewhere (New York, Cleveland, Pittsburgh).
CEO Bill Burke says that from a strategy perspective, the naming rights partnership made sense because of the close alignment of both organizations for the community.
As a result the credit union changed its three stakeholder model to add a forth criteria when it obtained the naming rights. All decisions are now run past the lens of the Credit Union, members, associates (employees), and the community.
The opening day on April 11 will continue the record sell out streak. For the credit union, the Dragons and the Dayton community, it is a local celebration of two great American pastimes—alive and well in America’s heartland.
In response to last week’s post on the impact of mergers on the future of the cooperative system, this former NCUA senior executive sent the following comment.
Mike Riley, December 1984
“Creative destruction” is uncomfortable to see in print. But it existed before Adam Smith, Malthus, Marx. Keynes, Schumpeter, and others began to try to explain the economic drivers and motivations that shape our world.
Cultural changes seem to be the main driver today. The personal seems to have switched to the impersonal, i.e. give me what I want on my terms with not much regard to others. Fast and low cost are the motivators. (disclaimer: I love Amazon.)
We have to deal with what we have. I am concerned about sound credit unions merging. When I was a new examiner, I had 30 -40 credit unions who were below $100,000 and none of the rest I had were over a million. And no, I did not start in 1934.
This was in the seventies. They were basically in small towns or in rural areas where there was a factory of some sort. As I visited them (most were happy to see me, albeit a regulator, to hear about the outside world), it was obvious that the Board and Committees were involved in the credit union. Their members and the Treasurer were most involved of all. They were making loans on washers, dryers, refrigerators. Most of their members had no real access to credit except at an exorbitant rate. No savings accounts available to the members.
The credit unions really cared about their members. I remember one credit union was trying to decide on whether to make used car loans. They wanted some advice from me. About 8 months later I came back and before I could start the exam they wanted me to go out and look at this used car and meet the borrower.
They were so proud of this accomplishment. (As a good regulator, I did check to see if the loan was to a Board member or family member.) It seemed to be a good loan. Not to get maudlin, but this shaped my views of what credit unions are. And fortunately, the larger credit unions were much the same.
After I moved on, I tried to keep track of these credit unions. Around 1990 I put together a list of where these credit union were. I couldn’t find a few; but a little other 20 had liquidated because the factory closed down or the key people left or retired. Another 30 or so had merged either voluntarily or involuntarily. About 6 were still alive and functioning. To be fair, at the same time the American economy was undergoing a major transformation and jobs and manufacturing were moving overseas.
This ongoing march continues. The merger of two sound credit unions without some legitimate reason doesn’t seem to be member oriented. I still think of the members of those small credit unions who received services such as buying a washer that no one else would do.
Bigger is not better if the member does not benefit. How many of these mergers produce lower loan rates , higher dividends, or distinctly better products at a lower price? Carried to the extreme we will be left with 20 credit unions that are no different than large banks.
Schumpeter opined “If someone wants to commit suicide, it is a good thing if a doctor is present.”
(by Marit Hoyem, a junior at Williams College)
Last summer I interned for Callahan and Associates where I wrote blog posts about my generation’s financial outlook and spending habits. As a Gen Z and local Credit Union member, I provided a perspective how credit unions can better serve their next generation of members.
Currently I am studying abroad in Edinburgh, Scotland where I faced new financial challenges and learned valuable lessons about spending, budgeting, and saving money.
During this time, I found myself reflecting on a prior post, “Hello Venmo (Goodbye, Checking Account)”. This discusses how Gen Z sees P2P payment services as de facto checking accounts, sharing money back and forth without ever using their credit union account. Please see that piece for information on Venmo and how phones facilitate Gen Z spending.
I first got Venmo in high school. What started as a way to split the cost of movie tickets or dinner through my phone has gradually evolved into a form of social media with friends. On the app we can see who our friends are paying and leave little messages with our payments that appear on a Twitter-like feed.
As I have gotten older, I have continued to do more transactions with the app, for much more money. Next semester I will split groceries and utilities as well as pay my rent using Venmo.
While I have done my fair share of splitting costs using Venmo while abroad, what has resonated during my experience in Scotland is how digital money affects how I budget and spend.
In Europe cashless payments are becoming the norm. In restaurants, grocery stores, and pharmacies, to make a payment all I do is double-click my power button and let Apple Pay do the rest.
After my first month in Scotland, I checked if I was sticking to my expense budget I was shocked to see I had gone way over the amount of planned spending. One of the issues was that I was paying in a new currency, pounds, and wasn’t always doing the mental math to see the amount in American dollars.
Although there are ways to check my payments daily on my credit union app, it was difficult for me to follow just how much was leaving my account while paying for food, bedding, and other necessities. I see the issue now–growing up in the era of digital money, I never had to take cash out of my wallet, physically count out dollars, or go to the ATM when I ran out.
This isn’t to say that my generation is irresponsible with their money or careless spenders and borrowers. Rather, our perception and experience of money is fundamentally different from older generations.
We grew up using phones, cards, and apps to pay for things, not cash. Credit Unions should note this difference in spending habits and offer money management solutions for digital transactors.
Something that helped me understand my budgeting issue was to go on my credit union app, look back at my recent transactions, and add up how much I was spending each week on necessities (such as groceries) versus indulgences (like eating out with friends).
I think a great service for Gen Z members would be to make this categorization easier. For example, splitting up purchases on a mobile app by month, by location, or by dollar amount to help members track their spending habits.
In a world of cashless transitions, seeing the money available and visualizing the cost of something is harder for everyone, especially those who only make purchases with their phone.
Credit Unions have an opportunity not only to be a checking account, but also to serve as an educational and budgeting resource for their members.
Empower and encourage members to track spending. Give them an opportunity to learn from moments of spending exuberance (as I did).
One of Austrian-American economist Joseph Schumpeter’s descriptions of capitalism was called “creative destruction.”
This refers to a competitive economy’s relentless efforts to innovate for advantage and market dominance. He described the process as: “the old way of doing things is constantly getting destroyed or supplanted as it is replaced by a newer, better.”
Some would suggest that business failures in a competitive economy are an inevitable and necessary event, even when they cause local hardship or dislocations.
The cooperative system is supposed to be immune from some of these economic forces. Credit unions are owned by their users, they have no traded stock, cannot be bought and sold as private firms, and reflect the values necessary for a communal, versus for-profit, enterprise. Their founding, focused on a ”local” constituency with a common bond, is intended to improve the welfare of a community, not just individuals.
One example of this “creative” process is in neighborhood across the street where I live. There is no home sold for less than $1.5 million and when offered, most list for at least twice that amount.
Even with this going-in price tag, Edgemoor is not a place for old homes. No matter the asking price, every purchase becomes a tear down. Here is an example from across the street this past week.
The builder, entrepreneur, risk taker and innovator.
The destruction phase.
The front view.
This home built during the depression was sold as is for $2.0 million. About five or more large white oaks were cut down before the demolition started. The land and location are so valuable that the builder will put up a mac-mansion of enough square feet to justify a new sales price at least double his cost.
Obviously, whoever buys this new home will believe this is progress, just what they were looking for. This is the free market at work.
We can debate the social and political implications of tear downs to build back bigger and more expensive homes, office buildings or condos. But the example is not limited to real estate. It happens in credit unions. It is called mergers.
The key question is whether mergers are helping or hurting the credit union system–to be more precise, the mergers of sound, well capitalized long standing credit unions which have served their markets for generations.
Everyone undertaking a merger believes their new creation will be bigger and better. Any downsides will be temporary. Mergers are just a way of getting to the future faster especially when asset size is believed to be THE essential for competitive competence.
Now to be fair, the house across the street had not been well maintained. The owners had lived there for four or five decades. The yard and landscaping were totally neglected. The 80 foot tall oak trees made the property look like an unkempt urban jungle.
So whatever goes up after this tear down, will certainly be a visual and living enhancement-except for the missing trees.
Similarly, some sound credit unions have not been well maintained. Leadership is just holding on until retirement; the board has given up leadership responsibility. Selling out looks like an easy way to take care of members when the motivation has gone.
It becomes time for a new generation of leaders to take over the credit union’s legacy and continue serving members in the future.
These easy-exit examples are becoming more numerous. Personal advantage, not member value, appears to be the motive.
The systemic risk is creating an “existential vortex” where all credit unions, not just the small, the poorly led or even the ambitious, are caught up in a system that is increasingly circling the drain.
There are no new charters. Industry assets are more concentrated. The leadership purpose is more and more institutional growth and success. The members, are not owners in any sense of the term, but merely customers used as the means to greater financial glory.
Credit unions competitive advantage has been collaboration and interdependence. This is how the cooperative system was created, their regulatory institutions were differentiated, and why purpose justified a tax exemption.
Creative destruction destroys legacies, whether buildings, companies or credit unions. New brands emerge. Old locations closed. New markets and business models tried.
Credit unions are not rebuilding on their old foundations. Instead large mergers are just the age-old, typical financial market strategy of buying up competitors to become more dominate and survive.
I don’t think the merging of well run credit unions is sustainable. It will take over two years before the new home is ready on the now demolished site and the new owners move in. This is also about the operational transition timeline of a large merger when members start to look for other options.
Unfortunately the creative destruction in credit unions is not putting new homes in place of the old; it is just moving all the occupants into the existing one.
Schumpeter believed that capitalism would gradually weaken itself and eventually collapse. Specifically, the success of capitalism would lead to corporatism and to values hostile to capitalism, especially among intellectuals.
In an historical irony, cooperatives intended as an antidote to the excesses of capitalism, are instead succumbing to the allure of free market takeovers.
Everyone wants to own a bigger house.
The following are three examples of a slowing economy.
In a call this week a CEO said he had budgeted 5% share growth and 3.5% loan growth for 2023. For the first quarter share growth is negative; loans increasing slightly.
The following is a message from the Vestry of a local church about their budget challenge
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At Disney: Recently reinstated CEO Bob Iger announced plans for 7,000 layoffs that will take place in three “waves.”
Sometime in June, the Supreme court will announce its decision whether President Biden has the legal authority to forgive up to $400 million of the approximately $1.8 trillion outstanding federal student loan debt.
Whatever the decision, the three-year payment moratorium on payments and interest accruals begun during the Covid lockdown, will expire.
Regardless of the legal outcome on Biden’s debt cancellation proposal, millions of borrowers will find their monthly income reduced by payments that must now be made.