Chip Filson
Anything that can’t go on forever will eventually come to an end.
“The idea that we could strip-mine useful and productive businesses forever has an obvious flaw: eventually you will run out of productive businesses.
But there’s another, slightly less obvious flaw: long before the entire productive economy grinds to a halt, everyone who relies on it will get very, very angry.” (Cory Doctorow on November 20, 2022)
One of the most unusual recordings of Bach’s Christmas oratorio, Magnificat, is this by the Harvard University Memorial Church choir in 2001.
Recorded virtually, it is possible to watch simultaneously every soloist, the conductor and every member of the orchestra as individuals-and to hear their collective performance.
A joyous wonderful experience, visually and musically.
(https://www.youtube.com/watch?v=kQqmtUgttm8)
A Prayer of Thanksgiving
Written and offered by Dr. Colleen Hanycz on 1/25/21 at the “Introduction to the Xavier Community” event upon her selection as the 35th president of Xavier University
“Before I begin, I would like to offer a brief prayer of thanksgiving that I have relied upon heavily, especially throughout the past year as we have suffered as a community, and as a nation, and as a world, in so many ways:”
Let us remember that we are in the holy presence of God.
Loving Creator,
We asked for strength, and you gave us difficulties to make us strong.
We asked for wisdom, and you gave us problems to solve.
We asked for prosperity, and you gave us purpose and brains to use.
We asked for courage, and you gave us fears to overcome.
We asked for patience, and you gave us situations where we were forced to wait.
We asked for love, and you gave us troubled people to help.
We asked for justice, and you called us to be just and to lead with integrity.
Lord, we have received nothing that we asked for or wanted.
And yet, we received everything that we needed.
For this, we give thanks.
Gettin’ together to smile an’ rejoice,
An’ eatin’ an’ laughin’ with folks of your choice;
An’ kissin’ the girls an’ declarin’ that they
Are growin’ more beautiful day after day;
Chattin’ an’ braggin’ a bit with the men,
Buildin’ the old family circle again;
Livin’ the wholesome an’ old-fashioned cheer,
Just for awhile at the end of the year.
Greetings fly fast as we crowd through the door
And under the old roof we gather once more
Just as we did when the youngsters were small;
Mother’s a little bit grayer, that’s all.
Father’s a little bit older, but still
Ready to romp an’ to laugh with a will.
Here we are back at the table again
Tellin’ our stories as women an’ men.
Bowed are our heads for a moment in prayer;
Oh, but we’re grateful an’ glad to be there.
Home from the east land an’ home from the west,
Home with the folks that are dearest an’ best.
Out of the sham of the cities afar
We’ve come for a time to be just what we are.
Here we can talk of ourselves an’ be frank,
Forgettin’ position an’ station an’ rank.
Give me the end of the year an’ its fun
When most of the plannin’ an’ toilin’ is done;
Bring all the wanderers home to the nest,
Let me sit down with the ones I love best,
Hear the old voices still ringin’ with song,
See the old faces unblemished by wrong,
See the old table with all of its chairs
An’ I’ll put soul in my Thanksgivin’ prayers.
The national Thanksgiving holiday is a time of community and family gatherings. Local 5K and 10K turkey trot fun-runs, watching Macy’s parade in NYC-or on TV, rivalry football games, black Friday retail sales, children traveling from school or work to go home, new editorial or historical opinions on the Pilgrims and native Americans, and of course the feasting. Familiar recipes prepared once a year. Everyone sitting around a common table grateful for this pause in life’s hectic doings–just to be together.
Religious services are still offered which in the secular context of today’s Thanksgiving events recall the holiday’s roots.
It was Lincoln who issued an 1863 proclamation calling on Americans to “set apart and observe the last Thursday of November next as a day of thanksgiving,” partly to celebrate victories in the then-raging Civil War.
Lincoln’s action came three months after Union Army victories at Gettysburg and Vicksburg, and at a time in which ultimate triumph appeared in sight.
Reading the words illustrates the power of belief in a time of civil conflict; and shared gratitude for the blessings of life. A reminder of the “gracious gifts” that give the holiday its special meaning still today.
Washington, D.C.
October 3, 1863
By the President of the United States of America.
A Proclamation.
The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God.
In the midst of a civil war of unequalled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union.
Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore.
Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.
No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.
I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens.
And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union.
In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.
Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.
By the President: Abraham Lincoln
Last week’s NCUA board meeting had only one topic: the financial state of NCUSIF.
The interest rate context for this briefing was described by a CNBC commentator as follows:
“What we’ve seen in the last few years was a cost of money that was 0. Throughout history, that’s very rare. Now we have a cost of money that is high and going to keep going higher.”
The implications of this context were absent in the initial presentation.
The CFO’s presentation of the September 30 NCUSIF financial position was the routine reciting of numbers on slides, until the questions started.
Vice Chair Hauptman referenced the fund’s cooperative nature and the importance of transparency. He pivoted to making a pitch for CLF legislation to enhance liquidity for 3,600 small credit unions and “for the NCUSIF.” His first question was , what is an appropriate liquidity level for the NCUSIF? The September overnight number was $362 million.
That’s when the bombshell was dropped. CFO Shied said that the NCUSIF now held $1.7 billion in overnights. This is almost four times the amount initially presented. This increase was partly the result of $650-$700 million in additional 1% deposits. Partly because the fund was “pausing on long term investments.”
This $1.7 billion yields almost 4% or three times the year to date yield of 1.31%. For over a year the fund’s declining NEV showed that the robotic laddering over 7+ years was locking in significant NCUSIF underperformance for years in the future.
Why this dramatic balance sheet change was not part of the initial update is puzzling. It marks a change in the year-long investment explanation that changing the ladder approach in the face of the rise in rates would just be “timing the market.”
No one asked the obvious question. Is this a change of investment tactics to a managed WAM approach? Or just a temporary pause?
It was Board member Hood who brought out the impact of the underperformance of the fund. His three questions follow.
Q. Given how interest rates have increased, every security we have currently is underwater, correct?
Answer: That is correct Board Member Hood. The continued and sizable increases in interest rates mean that the entire portfolio other than the overnights is underwater at this time.
Currently the NCUSIF’s portfolio has lost over $2.0 billion in market value(NEV). The agency continued NCUSIF’s auto investment policies even when rates were at “historical lows.”
Now every security in the $22 billion portfolio is underwater. Even long term securities purchased this year in the rising rate environment.
The result will lock in below market portfolio yields for a long term (up to the WAM of 3.7 years). This underperformance means credit unions are on the hook should the fund’s operating expenses (liabilities) exceed its annual income.
Q. At a previous board meetings on the status of the Share Insurance Fund, we discussed the outside accounting firm we hired to look at the true-up issue and how this impacts the equity ratio. For the record, at one of the last share insurance board updates, we discussed that the true-up memo by the outside accounting firm states that the timeliness and accuracy of the data is required in the Federal Credit Union Act so this provision in the law, and I quote, “May provide some latitude from a strict interpretation, that the equity ratio must be calculated based on the financial statements amounts, particularly given the knowledge of the timing effect on the calculation of the equity ratio. Accordingly, it may be permissible to use the pro forma calculation of the contributed capital amount when calculating the actual equity ratio.” In a previous board meeting, I noted that the letter pointed out the current practice understates the equity ratio by several basis points and that there were several options for correcting this understatement. Can you please provide an update on next steps?
CFO Schied said a committee was studying this issue. The memo in question was presented a year earlier. One would hope that this considerable delay would result in a more accurate NOL calculation. For as Hood noted the present calculation understates the actual yearend ratio by 2-3 bases points.
Q. I see several sizable institutions changed in their CAMELS score. Is there any takeaway from these data? Do we think any of this has to do with the new “S” component–or any individual scoring component?
Answer: This does include elevated interest rate risk, but examiners also noted increased liquidity and compliance risk in these institutions. The downgrade in CAMELS ratings also reflects a lack of governance or poor risk management practices.
Other board members spoke to the importance of liquidity. This has become more pressing as any sale of a security from the portfolio would result in a realized loss to the fund.
With an NCUSIF portfolio nearing $22 billion and regular predictable cash flow, the last concern should be liquidity.
Credit union owners should receive more than a perfunctory reading of data on slides when an NCUSIF update is presented. The critical issues of investment performance, NEV risk management and detailed explanations of allowance expenses should be the routine.
Anyone can read numbers on a slide. What they mean should be the substance of every update. It should not require board questions to discover that the data presented was not timely, relevant or representative of current conditions.
Hood’s questions show the need for better risk management in the NCUSIF. They also demonstrate the need for a more professional and current briefing by staff.
From Scott Galloway:
“The undoing of many powerful people is that they enter a hermetically sealed bubble of fake friends. Enablers, not people concerned with their well-being. When the Elon-Twitter debacle started this spring, I wrote a post about power.
“My thesis: Power, unchecked, is a psychological intoxicant. OK, this isn’t so much a thesis, as it’s scientifically proven. Research shows power causes us to downplay potential risk, magnify potential rewards, and act more precipitously on our instincts. In other words, you lose your ability to self-regulate; you need others to do it for you. . .”
The solution: Every day, every one of us needs to ask ourselves an important question: Who keeps it real for me? Who will push back, who will tell me I’m wrong … who will save me from myself and the psychosis that’s led to so many successful people’s fall from grace. ”
Example: Ed Callahan had Bucky Sebastian as his “wingman” in work and life.
Last Friday’s blog described the multiple losses should the merger of Vermont State Employees (VSECU) with New England FCU proceed on January 1, 2023.
The members lose their credit union; 190 employees their career paths and individual agency; local communities– their partnerships; the state of Vermont– its leading cooperative financial institution; and the overall credit union system, another pubic example of purpose compromised by leaders’ self-interest.
The tragedy of the commons occurs when persons in positions of responsibility exploit the common resources of the community which they oversee for personal gain.
Should credit union leaders continually seek to acquire and merge sound, long serving credit unions, like VSECU, to fulfill their individual ambitions, I believe this will lead to the demise of the cooperative credit union movement.
VSECU’s example and innovative track record were so successful, that it was the subject of a 15- page analysis by Callahan’s September 2021 Quarterly Report. Several of these accomplishments were republished in five articles in January 2022 on cu.com, for example this description responding to the COVID crisis.
At September 30, 2022 the credit union reported $1.1 billion in assets; 71,625 members and 9 branches; $6.5 million in YTD net income and $102 million in equity. Average salary and benefits per employee exceeded $100,000.
Against this documented track record of long-term innovative performance, VSECU’s merger information offered nothing about the future. The credit union was already more than full service; it had pioneered special initiatives pursing a “greener” environment.
The continuing credit union’s leaders at NEFCU made no commitments to VSECU’s 71,000 credit union members’ who hold $922 million loans and $980 million savings. These members will be under the full sway of a board they did not elect and management that has no connection with their firm.
So undefined is this transaction that both CEO’s admitted in this twitter post, the consolidation would take over a full year to conclude and will require a completely new brand identity and name.
The back office conversions, product/service alignments and leadership selections will be the top priority at a time when members of both credit unions face economic uncertainty and anxiety from decades-high inflation.
In the Calling All Members website, the opponents point out that the two credit unions have very different fields of membership, histories, and market focus:
The continuing federal credit union’s Field of Membership will not be based on geography or residency. It will be numerous employer groups and organizations located in Vt, MA, ME, RI, CT, MI and even groups headquarters in San Diego and San Francisco. . . our statewide cooperative built by Vermonters for Vermonters will be gone—forever.
Two typical industry reactions to this latest example of a successful credit union being acquired by another include: “Not my problem” and “Didn’t the members approve?”
I believe this pattern of sellouts and acquisitions by cooperative leaders will ultimately lead to the end of a cooperative financial system in America. Here’s why.
The foundation of every credit union is member relationships. Almost all credit unions were started with no capital. They earned the loyalty of members by promising to be a different kind of financial firm.
Member-owners were invited to put their trust in their leaders and board. The affirmation of this process is the democratic one-member, one-vote design.
This merger now places VSECU’s relationships under the direction of strangers.
The action is based on the illusion that size is all that matters. Credit unions have never competed on size. It is a unique coop fantasy that coops can marry two mice and produce an elephant.
When size is the dominate goal, it becomes a trap of endless growth not creation of member value.
VSECU’s members have continually contributed more than sufficient resources to continue a long-term vision of hope empowered by local control and focus. The credit union has become a financial “sanctuary” established by members’ belief and trust.
Now their leaders (senior management and board) have abandoned them for the “Golden Calf” of “instant mass,” not substance. There has been no planning or discernment with those that built the institution and who own it.
The process of voting is nothing but an administrative fig leaf completely under the control and oversight of those temporarily in power and who have a vested conflict of interest. Only 21% of members voted. Of the total membership. just 316 votes (.4%) is the difference between those supporting and those opposing. This was certainly no vote of confidence in charter cancellation.
It would seem fool hardy to decide the fate of a 75-year old, high performing coop with such a micro thin margin of owner approval. It also raises the question of how the voting was managed by those who advocated only their side of the issue.
Regulators continue turning a blind eye and washing their hands of responsibility.
Mergers are the wild west of today’s financial markets. Second only to Crypto transactions, until that industry’s implosion is over.
Coop CEOs/boards are literally buying and selling millions of member relationships to firms with no connections, increasingly out of state, and who are unconstrained with what they can do with them. These kinds of hollow transactions and disclosures would normally attract the intense scrutiny of an SEC or FTC regulator if these were stock owned institutions.
Coop regulators would rather talk about inflation, consumer protection, fintech, DEI or other current topics rather than the elephant in their room.
Contrary to their assertion that this is just the free market at work, these are back-room deals, negotiated in private, devoid of transparency and without any public attempt to find the “best” deal for members.
Regulators avert their gaze pretending to be deaf, dumb and mute as they oversee the disintegration of the coop system.
VSECU’s leaders betrayed the trust members gave them. Credit unions embody the spirit of community. This action dissolves this special bond built by three generations of members.
The merger destroys the fundamental foundation of a cooperative leaving a financial eunuch in its place. It has no cooperative character or roots. Unlike a stock transaction, it lacks the credibility of a market affirming price. In these transactions, coops have devolved into purely private entities, controlled by individuals acting to consolidate and accrete their own power.
These are not people helping people; rather these mergers demonstrate CEO’s helping themselves.
One can understand why NEFCU’s CEO wants control of 71,000 member accounts with average combined member loan and savings balances of over $43,000. And to be given over $100 million of their collective savings while eliminating this vigorous, innovative competitor. No more “free” market choice for either firm’s members, or the general public.
This kind of transaction has no economic rationale or “market” driven basis. There is not a firm anywhere in America, coop or otherwise, who would not line up to accept such a generous “gift.”
VSECU’s leadership had embraced the Global Alliance for Banking Values (GABV) vision of “Finance at the service of people and the planet for the real economy.”
Their collective decision to transfer their fiduciary responsibilities to another firm show that corporate and personal values need not align. It certainly refutes the biblical adage that a person cannot serve God and mammon at the same time.
Self-interest may appear to succeed in the short term, but in the long term, it fails as a strategy. When the vision of the cooperative is “all I want is everything” personal ambition will fail for what only a community can sustain.
People are not stupid nor uninformed about these sham transactions. Most members follow their personal financial situation as a top priority. It is a heightened concern especially in a time of rising rates. When member generosity and loyalty is compromised by self-interested mergers, their support will fade away.
These transactions will end the unique public role for credit unions. Acting like banks, they will be treated like their for-profit competitors.
Regulators who have approved these pillages of common wealth for private gain will find themselves thrown in with all other financial overseers. The playing field will indeed be level.
There will be no credit unions on it. No tax exemption. Just wealth seeking institutions led by similarly motivated individuals.
The practice of buying and selling relationships is not new. It is part of the capitalist markets drive for greater and greater market share.
It is why the states and Congress authorized the tax exempt cooperatives as an option to prevent this exploitation.
A coop system reliant on values as a differentiator cannot long continue with coops and market capitalist wannabes side by side. For the latter will continue to prey on the former until everyone joins in the rush to get their share of cooperative gold.
Nothing will stop this pattern of private theft until persons of courage and confidence step up to call out this rapacious behavior. If this fails to occur, then as predicted on the Calling All Members site the national system of cooperatives, just like VSECU, will be gone-“forever.”
“On behalf of all Ukrainians, Happy Veterans Day and thank you for your service.
“For almost 250 years the men and women of the United States armed forces have prevailed against tyranny, often against great odds. Your example inspires Ukrainians today to fight back against Russian tyranny. Special thanks to the many American veterans who have volunteered to fight in Ukraine, and to the American people for the amazing support you have given Ukraine. With your help, we have stunned the world and are pushing Russian forces back. Victory will be ours. God bless America and Slava Ukraini.”
Volodymyr Zelensky
