Category: Co-ops in Capitalism

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A Credit Union’s Obligations to Members with TPS Status

Temporary Protection Status is an option under US immigration law to admit migrants who face life and death threats in their home country.

President Trump won a Supreme Court decsion saying he could reverse such status under his executive authority.   Trump immediately used the ruling to revoke this legal status for hundred of thousands of Haitian and Syrian families living and working in the US legally.

The order went in effect approximately ten days ago.  These immigrants are in legal limbo and uncertain fate. If any of these affected persons or any other immigrants taken by ICE are credit union members, what is your organization’s responsibility to them?

These individuals  are now without protected status or, at best, an unknown future.   Do you continue to serve?  Take deposits?  Make or collect loans? Transfer funds?  Close their accounts? Act as trustee?

Do you wait and watch to see what happens as some members may have other legal options?  Let  events just play out and put a hold on activity?

What is the credit unions responsibility Legally? Practically? Morally?

A Temporary Immigrant’s Story from WW II

The following example is from another era of global migration, This  excerpt is from Martin Gilbert’s In Search of Churchill.  My connection is at the end.

In the summer of 1940 my father, who was then serving with an anti-aircraft gun battery on Hampstead Heath, took advantage of a British Government scheme to send children across the Atlantic to safety.

My parents were not well off, and it seemed to them that I would be better cared for there. That July, a month after the fall of France, when the German Army was on the cliffs between Calais and Boulogne, I sailed in the care of an aunt with several hundred other children, to Canada.Our boat, the Duchess of Bedford, was in a convoy of fifty ships.  In mid-Atlantic, after the destroyer escort turned back, the convoy was attacked and five ships were sunk by the Germans.  

The Duchess of Bedford sailed on safely, via the iceberg-dotted sea off Labrador, to Quebec.  Those icebergs, marvellous for a child to behold, were among my first memories.  Shortly afterwards another boat with child evacuees on board, the City of Benares, was sunk and seventy-seven children drowned.  The scheme was then abandoned.

I was only three years old. Many years later I learned that at the time of the sailing of the Duchess of Bedford Churchill had been asked by the organisers of the scheme to give the oldest child a letter to Mackenzie King, the Canadian Prime Minister, thanking him for receiving us.  He was so opposed to any children being evacuated to Canada (he saw it as a “scuttle”) that he refused to write the letter telling the minister concerned:  “I will not send any message through the eldest child, or through the youngest child either.”  Thus I missed the chance to hold a Churchill letter in my hands, and to deliver it, though there were, I suppose, several children on board even younger than myself.

I hated Canada, not the country but the separation from my parents, and while the war was still being fought, I returned to Britain.It was Churchill himself, I later learned, who had noted, in his regular scrutiny of ships in transit and in port, that the ocean liner Mauretania, then a troopship, was sailing from New York in the summer of 1944 with several hundred empty berths.  He at once suggested that several hundred children be rounded up and brought back.  

As a result of his intervention I found myself all alone, with an identification tag round my neck, on the night train from Toronto to New York, arriving bewildered in the yawning cavern of Grand Central Station, clutching my brand new Canadian passport (“valid duration war”) and standing in a long, slow-moving line by the quayside on a sweltering New York summer afternoon.  I did not know, as we later steamed across the Atlantic towards Liverpool, that Churchill had specifically asked the Admiral to make sure (amidst his many other cares in the immediate aftermath of the Normandy landings) that there were enough lifeboats on board for all the extra children.

My Interest in This Temporary Asylum Story

In the spring of 1968 I was the only student of a tutor reading for an exam on the topic of Britain’s foreign policy between the two world wars.

The tutor was a junior fellow at Merton College, Oxford who had just been asked to complete Randolph Churchill’s biography of his father as the author’s health deteriorated. He was given unrestricted access to Churchill’s private letters and personal notes.

That junior fellow was Martin Gilbert.

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A Change at the Top of the Movement

There are a half dozen leadership roles in credit unions that have major implications for the entire movement.  Among these are the leaders of several trade associations,  a significant CUSO or  two, TruStage ( formerly CUNA Mutual), a couple of large credit unions who exercised public roles, and of course the NCUA Chairman.

The CEO position in any of these 6-10 positions does not confer leadership.  That  characteristic depends on the occupant’s’ ability and understanding of his or her leadership aspirations.  Another critical factor is whether the organization led by the CEO is perceived to be well run.

In almost every instance, credit unions expect these leaders to be capable administrators and aware of cooperative design’s unique role in America’s market driven economy.

One of these critical positions, the Chair of NCUA, is being appointed.  That responsibility is even ,more vital as there is no board role under the Trump administration’s view of executive authority over independent agencies.

John Crews, currently serving as the Treasury Department’s Deputy Assistant Secretary for Financial Institutions Policy is expected to be confirmed by the Senate shortly.   In terms of the experience one might like to see from a resume, there is little to indicate what priorities he will bring to the position.

This experience gap need not be a drawback.   Previous NCUA chairs have included recently defeated former members of congress and a variety of intra-governmental transfers from staff roles.

But especially in this administration’s view of presidential leadership, it is important to note what the Project 2025 Playbook states about financial regulation policy.  John Crews has worked directly for Treasury Secretary Bessent who is the key player in overseeing Trump’s policies for depository institution regulation.  It is feasible that he would function as Crew’s de facto boss.

Here are excerpts from the Project 2025 Playbook.

IMPROVED FINANCIAL REGULATION

From page 705: One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency. 

Merging Functions. The new Administration should establish a more streamlined bank and supervision by supporting legislation to merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory functions.

U.S. banking law remains stuck in the 1930s regarding which functions financial companies should perform. It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits. Doing so makes markets less stable. All financial intermediaries function by pooling the financial resources of those who want to save and funneling them to others that are willing and able to pay for additional funds. This underlying principle should guide U.S. financial laws.

Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth.

From page 706: Direct government ownership has worsened the risks that government-sponsored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles:  

  • Fannie Mae and Freddie Mac (both GSEs) must he wound down in an orderly manner.
  • The Common Securitization Platform57 should be privatized and broadly available.
  • Barriers to private investment must be removed to pave the way for a robust private market.
  • The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission.

(End Quote)

.Who Will Lead the Credit Union Movement

To succeed as a movement based on cooperative principles, credit unions require leaders with both vision and practical wisdom.  NCUA is likely to have neither under the Trump administration’s version that all policy is ideological.  Hauptman’s tenure as solo chair certainly followed that direction.

But this challenge of leadership capability is not new.  Credit unions have had major turning points in the past.   Leaders have emerged with energy and ideas that have resulted iln reforms and excitement.   That might happen at NCUA.  It has occurred before.

This time the task would seem more urgent and necessary.  The administration’s approach to policy,  pay to play, may be very attractive for some in credit union land.  For others, there is the ambition to bring new ideas to better align with member needs, not just add more to the balance sheet.

Which approach will credit unions support?

 

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When the Call Comes, Will you Be Ready?

We live in an era of deep public distrust and overt, transparent corruption-by both public and private organizations and their leaders.

The public has increasingly learned to accept publicly announced wrong doings and self-dealings.  The result is passive acceptance. The logic is these actions can’t really be corrupt because disclosure would result in accountability or at least push back bythose whose duty it is to oversee.

It’s Lonely with a Public Conscience

As these events multiply they become especially hard to oppose openly. Particularly when those in positions of responsibility, public duty and trust, take no action; or worse bless these overt acts of deceit and self-enrichment.

Taking a personal stand is very difficult when we can be accused of just increasing public division with our concerns, opposition or actions.  It is often a lonely stance, takes courage and everyone has a life to get on with.  Why confront organizations or individuals whose conduct is indefensible on any reasonable basis of fact or judgment?

But still some do question, oppose and take a stand.

Two  Communications in this Era of Open Corruption

Yesterday I received an email from a “concerned citizen” I do not know. The person had just received a Notice of Merger.  I will address the pro forma merger notice and disclosures in another post.

This is what the person wrote of his general concerns:

I am writing as a concerned citizen regarding the proposed merger of . . . This transaction warrants public scrutiny due to serious questions about executive accountability, board oversight, and whether members’ interests are being prioritized.

After presenting the details in the Notice that troubled, the writer states:

I believe the following questions warrant independent investigation:

  • What decisions over the past several years led this Federal Credit Union to this position?
  • Did the Board provide adequate oversight of executive leadership?
  • How were the executive retention payments negotiated and approved?
  • Were alternative options considered before recommending a merger?
  • How does the Board justify these compensation arrangements to the member-owners?

The writer closes with this sentence:  I believe these circumstances raise legitimate questions about governance, accountability, and fiduciary responsibility that merit independent reporting before members vote on the proposed merger.

In a calm, thoughtful and factual analysis (not included) this common citizen is saying the system is broken. Members are given no common sense understanding or factual basis to decide on this merger to end their charter and turn over total control to a distant organization

The SAFE-BECU Announcement

The second communication was BECU-SAFE’s joint public announcement of their proposed merger “approval’:   The National Credit Union Administration, the Washington State Department of Financial Institutions and the California Department of Financial Protection and Innovation have approved the proposed transaction.

Those who follow the multiple posts and public comments on this event at SECU-Just Asking know there has not been a single objective fact or specific member benefit presented or documented,  Instead only vague future promies are used to justify the  transfer of this 85 -year, $4.5 billion credit union franchise to the total control of a third party organization with no local standing or organizational commitment.

This is a public robbery,  One  orchestrated by those charged with the duties of care and loyalty and then “approved” by those appointed to protect the public member-owner interest-the state and federal regulators.

This combined private and public leadership abdication is justified by this sentence: The final step is approval by SAFE’s membership, with voting information expected to be distributed in the coming weeks.

Except under California law,  a merger requires the approval of the majority of all members, in this case over 245,000 owners.  That outcome would never happen.  Both credit unions know this.  Therefore they will have negotiated an “understanding” that instead of this specific approval standard, the CDFI will be asked to waive this requirement.  SAFE will request CDFI accept the outcome regardless of how many members vote asserting that the majority of those voting approved the merger.

The reality is that 98% of the vote is by ballot. In that Member Notice mailing the  package of information  will contain pro-merger marketing  generalities previously  issued,  These PR claims will be vacuous in  substance and facts. No contrary opinions provided,  nor the formal legal agreements between the two boards.

What To Do?

The deep stench of overt corruption and the failure of public and private accountabilibty hangs over credit union land. We are living in a time when anything goes.  These self-dealings and outright takings of generations of members’ accumulated wealth is a decade long effort. The stakes are just getting larger.  California will be the next happy hunting ground for bigger and bigger deals.

Citizens are now seeing daily instances of bad behavior, openly proclaimed, overtly defended and without any norms or options as a check and balance. These “concerned citizens” are aware, but where do they turn for an “investigation. “

No Guardrails Exist

One of the most disappointing failures is those in positions of authority to even  acknowledge the facts of these mutually privately organized robberies of members’ accumulated wealth and future direction.  Here is just one of many analyses posted on SECU Just Asking that shows a side by side current financial comparison in which BECU shows lower performance than SAFE on every vital measure.

These predatory plunderings of  the credit union system seem to have free rein. Billions of member assets get transferred to outsiders’ control with no concrete owner benefit or return-except to the dealmakers. The rule of law, the lack of regulatory oversight and missing director accountability demonstrate the absence of any formal or informal.constraints.

The consequences of this system-wide corruption can be ignored until a tomorrow that never seems to come.  Then one day tomorrow comes.   Someone decides not to be silent, speaks up and begins truth telling.

It could be a lawyer who still believes in the ethical norms of the profession versus the political and commercial benefits of going along with public wrong-doing. It could be a director rising above the expected uniformity of the self-selected board culture in which the person belongs.

Or maybe it takes a Senator to ask publicly why the whole member owned cooperative model has become a cesspool of deals that sell out members’ past success and future direction.

For it is not institutions that will save our rights, liberties and properties; rather, it is the individuals within those institutions who decide to stand up for the right and the rights of members.  Or perhaps the members en masse take up their pencils or pitchforks to say we want to take back our credit union.

 

 

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A Credit Union Family Keeping the Faith

Many years ago a young financial executive working in a midwestern S&L wanted to explore opportunities in credit union land.

He called Callahans to ask for a copy of our new Credit Union Directory which he bought.  Shortly thereafter he began a career, first as a senior officer in an Indiana credit union, then as CEO in  Kentucky and finally a longer tenure at a leading Michigan credit union from which he retired.

He is a person who always sends you a greeting on your birthday.  His most recent message was about passing down the “faith” in the family.

Chip,
I thought you might enjoy this story.  Yesterday Pete picked me up from the car dealer where I left a car for service.  On the way home he was talking about his lease coming up in 2 months.  I asked him where the lease was financed, and he said Michigan State FCU.  I didn’t know they did that.  Then he told me when he leased the vehicle he insisted on the lease being with a credit union and not a bank.  When they pushed back a little, he told them to work it out or the deal was off.  And they did.
Now that is both sons pushing back against bank promotions instead of credit unions.  Pat’s story was when he worked in Tennessee opening an outfitter’s store.  The local bankers came in to get the corporate account and asked for his personal account.  He insisted his CU served him well.  The conversation degenerated into an argument about bank vs CU and finally one banker said,  “Actually he’s right… Let’s go.”
Looks like I got a couple of diehard converts.
Or, apples don’t fall far from the tree.

 

 

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Looking for Writing Help to Tell a Unique Credit Union’s Story

I am seeking a person to help research, interview and write a story about a remarkable CEO and his leadership of a credit union.  We know the end.   Approximately 18 months after he retired, the board member who followed as CEO merged the credit union.

The events occurred almost 10 years ago. The credit union was over $100 million and had a powerful economic impact on the community and residents of Carlisle, PA.  This small town, like many others, was going through an economic transition, or downturn, depending on your point of view.  One example is the Washington Redskins summer training camp, which was one of the businesses to move or close during the CEO’s long tenure.

Loans and Jobs for Bosnian Immigrants

The credit union had developed a remarkable record of consumer and small business funding for numerous community groups.  Some time ago, the CEO sent a brief example of one of these unique local programs possible with cooperative design:

Many displaced families from the Bosnian conflict had resettled in the Carlisle area and hundreds of individuals worked for one of our SEG groups, a warehouse/distribution center.  Most came with basic needs such as autos, home furnishings, etc. and most, understandably, without credit scores. 

To foster assimilation into the community, Cornerstone did scores of loans at the time to these individuals and to their credit and my recollection, none were charge offs.  Over the years Cornerstone has done hundreds of loans to these individuals including first mortgages and small business loans as well as financing a mosque and three separate community centers. 

In addition,  Cornerstone has had at least five individuals on staff in front line and back office positions who also provided translation services.  At least three of those hired received their U.S. citizenship while on staff.

Serving the Entire Community

The credit union had a number of other remarkable services and lending initiatives serving the  community.   For example, all of its dozen or so ATM’s were surcharge free for everyone, not just members.  In a high school student branch, a program was developed to help every senior receive  a credit score by graduation through a unique share secured loan program.

During my first visit I talked with the owner of three local radio stations, each with programming intended for a different listening audience.  The credit union had funded each license acquisition.  The current CEO’s father had first borrowed and later turned the business over to his son. The CEO recalled that the father had a tattoo on his arm. The number was his ID from the Auschwitz concentration camp.

A Story  that Needs Be Told

The credit union was merged ten years ago.  The CEO and his wife and long time supporters fought  to continue this institution as an independent community resource in an effort that will inspire today. For it illustrates how goodwill, passion and belief in a better tomorrow are possible with leaders who serve with grace and humility.

I am looking for a writer willing to review the collected record  of the events, interview this former CEO and several other participants to tell the story tor today’s credit union followers.

I believe the research and writing will  be a multi-week project, either part of full time.  Pay is negotiable.

If interested please send me a brief resume, why you might want to tell this story, and how to contact you to discuss  your approach.   It would be helpful  to have some familiarity with financial services and/or knowledge of credit unions, interview experience, and the ability to create a portrait of a modest person who did some great things for people as a credit union leader.

Thank you for your interest.

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The Tragedy of the Commons

In business and political analysis the term “tragedy of the commons” is used to describe situations where there is no private, only general public use, of a natural or shared resource.  The most common examples are public lands such as national parks or rivers or ocean beachfronts.  Even the air or access to sunlight in a dense city are considered open resources available to all, until someone tries to convert them for private use or control.

The following is a private-public use model that has not fared well because the public benefit, acknowledged by a  license, is overtaken by individual abuse, even theft:

Where Have Honolulu’s Bikes Gone?
Just 60% of bikes remain in Honolulu’s bike-share system, Biki. That means people often can’t find a bike, making it harder to generate revenue and trapping the system in a sort of doom spiral.

Other examples are easy to find.  Individuals with access to a shared resource act in their own short-term self-interest and ultimately deplete or take private control of a resource previously freely open to all.

The Tragedy at Work in Credit Unions

As credit unions’ “ownership” equity is held in common by all  members,  there is no individual interest  assigned.  Rather, it is a common resource that benefits all.  And like the original “commons” open grazing areas n England, this collective resource is intended for  ongoing use by future generations.

The expectation is that through civic stewardship, elected or selected for oversight, the financial and other benefits would be preserved and protected from individual taking or private control.

But when this governance or operational norms fail, then  outside private interests will seek to assert control over what was a previous public or community shared resource. The new  “owners” may even assert they will enhance the resource and its benefit for all because of their better management skills or greater resources.

A Credit Union Example

I recently read the Member Merger Meeting Notice for a credit union that urged its member-owners approve the transfer  all their individual and corporate financial resources to a credit union in another state.

The board’s recommendation described greater future capabilities and benefits if the members would approve this complete change of leadership to this credit union with no compensation or specific agreement as to what those benefits might be.  This credit union was approaching $400 million created by the loyalty and support of their local community for almost 90 years .

The members were not informed they were giving up their ability to influence their new political and regulatory circumstances.  For the surviving entity was chartered under a completely different legal jurisdiction. Or that the new leadership team’s main office was  over 150 miles away.

The Notice said the reason for not returning the member-owners their common wealth, except for future promises, was that they still had the same financial stake in the new combination.  That is, before and after the merger, the member share value would be $1.09.

Misleading the Member-Owners

So the merger Notice suggests the members-owners are not giving up any real financial value.  Except the future of  this local independent community resource of $400 million is no longer belongs to them.  The entire investment of members’ local savings and equity are now controlled by an organization which openly promotes its ambition to be a multi-state operation built on a uniform set of products and services.

The ambition to consolidate for greater scale is presented to members as in their “enlightened self-interest” instead of blatant commercialism.  The credit union model has been hijacked by those who are skillful at presenting their institutional accumulations as necessary to better serve member-owners.

The fact that the merging credit union’s leadership and board would send members such a vacuous, non-factual, open ended statement about future benefits suggests a very shallow understanding  of their duty as directors.  There was no evidence of any fiduciary review, other options considered, or due diligence of the surviving credit union, The directors just requested members approve their decision for the free transfer of ten decades of locally created wealth to a distant, unknown and unfamiliar organization.

A Doom Spiral

The tragedy of the commons has infected credit unions on multiple levels.  However, the wholesale transfer of a valuable cooperative franchise to the control of outsiders who have no history, no presence, and at most, vague intentions, is destructive for the entire system.

It undermines the faithful loyalty and support by members who shared generation’s of resources for community benefit. And it destroys the reputation of credit unions for those now at the mercy of leaders  whose institutional ambitions have no alignment with their history or local circumstances.

These events may seem benign at first.  But they are creating example after example  where the movement has allowed its own  leaders to betray their core constituents.  Selling out members is a tragic example of destroying common wealth.  More critically, it  is an example that undermines the member-owners’ trust in the movement’s democratic leadership model of accountability.

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A Special Credit Union Advantage

What makes a credit union relationship special?  Is it being a member and saying “I own it”?  Is it some aspect of value which a may be important to a member?

Many organiations use the term member when seeking consumer business. But why do members often continue to carry their  credit union’s credit card or keep an account open when they move away and take the bulk of their business elsewhere?

Sometimes it is easier to understand what matters in a relationship from seeing another life situation.

Leaving the Country

Last Sunday I received an email from an Ukrainian working for an American-Ukraine support group. The real name and city have been changed.  It read in part:

I’m back from Ukraine. . .

Next Thursday, I’m bringing my sister and niece from Ukraine to stay with us for six weeks so they can have a much-needed break from the reality they have been living in.

I also just learned that the Melynks (name changed)  did not receive the final paperwork needed to extend their humanitarian parole. Since their current status expires on July 22, they have decided that Nadia  and their three youngest children will return to Ukraine, while  Denys and their oldest son will remain here for a while to wrap up a few projects and take care of practical matters, including their house rental, car, and other commitments.

It is heartbreaking, but they do not want to remain in the United States without legal status.

Two years ago my wife and I along with a local church helped the Melnyks family settle into an apartment in Baltimore   The family had three children and a fourth on the way.  The father worked in construction in Ukraine, a skill much in demand here.  The mother was a music teacher.

Their relocation  was sponsored by a local family. Several other US  families, the  DC church and a number of Ukrainians living here helped to support their move as refugees to America.

Why Did the Family Leave?

The family could have filed appeals.  Their 18 month old is an American citizen.  I do not know how they made their decision and all the factors they considered.

But as an outsider looking at the news about America today, our national leaders attitude to immigrants, and the ever-threatening presence of ICE even with legal migrants, I suspect one factor may have been a simple human emotion.  They did not feel they belonged here.

Belonging is a sense of comfort,  a place of welcome  where we are known and an aspect  of our identity.   It is like ownership, but more deeply personal and individual.   The emotion cannot be generated via creative marketing appeals.   It is the result of experiences that cause one to feel part of an organization.

The Consequences of Belonging

When we do not feel we “belong,” we no longer attend meetings, revisit past places of residence, go to church, or even follow organizations that were once important parts of our lives.  For example schools or colleges where we invested years in learning, or with organizations where we worked for decades and may have made meaningful contributions.

Some organizations do try to retain and honor prior affiliation and relationships.  The event can be as simple as invitation to the organization’s annual meeting or holiday celebration. Sometimes this is  through reunions, newsletters to keep alumni informed or even recognizing former members for prior service.  Even when done for practical purpose such as alumni contributions, the result will depend on whether there is a sense of an enduring relationship.

But more often it is to recognize that a sense of belonging ensures the past, present and future are all vital to a community, an organization, or even a family’s sense of identity and meaning

In his many leadership roles, and especially on the national stage at NCUA, Ed Callahan make a continuing very public effort to recognize and honor those who came before him.  Sometimes in public events such as the celebration of the Federal Credit Union Act’s 50th Anniversary.  Or the simple act of attending the funeral of a nun in Youngstown, Ohio who had been a teacher while he was a student.

February 19, 1984, NCUA Chairman Ed Callahan and fellow board members welcome Catherine Filene Shouse, niece of Edward Filene, on the first day of issue for the credit union stamp. Salem, MA.

June 1984, Washington DC.  Current NCUA board members welcome back prior NCUA administrators, General Counsels and senior staff to celebrate the 50th Anniversary of the passage of the Federal Credit Union Act.  NCUA headoffice 1776 “G” Street.

Whether People Go the Extra Mile, or Leave

A sense of. belonging creates loyalty and the willingness to go the extra mile whether this be in one’s relationship with others, a volunteer commitment,  with an employer, a community or even one’s home country.

It is a vital skill that defines effective leadership, especially in a democracy.  It creates trust and mutual respect.  It is not a transactional relation that can be bought.  It is an earned outcome.

And when push comes to shove sooner or later in all our decisions about where we invest our time and resources, it will be in those situations where we feel we belong.  For this Ukrainian family at this time, America was not going to be their future homeland.

This loss is America’s. It should remind us of the many and often much less consequential  life situations where we are responsible for others feeling  that they belong.  Like being part of your credit union.

 

 

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A Most Essential Leadership Skill

In a market.full of AI, fintech and virtual innovations clamoring for testing, how does an organization cope with all the calls for these future “necessities”? What is hype?  What could be an essential component to add to a credit union’s platform?

Several years ago I taked with a successful CEO about his recent offering of crypto (bitcoin) to  members.  He said the members were asking for it.  He owned some himself.  Integrating with third party providers was straight forward. There was no risk to the credit union,  The transaction fees added another source of revenue.

The CEO was very open about his reasons.  He was one of fewer than ten credit unions then offering this member option.  Now was the time to just let the members decide.

From crypto to financing cannabis banking to marketing partnerships that save members money by spending more, the opportunities are endless for the latest game changing service or product enhancement.  Sometimes there is some member interest.  Sometimes the change is a third party rollout, wanting to test launch an offering with a known market to establish a proof of concept.

What CEO wouldn’t  want to be seen as a insightful leader versus a fast follower by peers?  Besides a lot of the traditional service culture strategies can take time, can be hard to measure and at times boring.

The Crypto Example

Paul Krugman is a Nobel Prize–winning economist recognized worldwide for his work on international trade and hisopinionson the economic issues of the day, often from a progressive point of view.

An excerpt from his cJuly 10 onversation with Dennis Kelleher:

There is no legitimate use case for crypto. They’ve had 18 years to come up with one. They keep throwing things up like “an inflation hedge” or “source of stability.” Every one of them has turned out to be baseless.

The only real use for crypto is tax evasion, money laundering, and crime. It’s the preferred mechanism of choice for global terrorists, sex traffickers, and rogue nations like North Korea and Iran.

You have to ask yourself why crypto has basically hijacked the political agenda of Washington. It’s because they followed the Sam Bankman-Fried model of buying bipartisan support by spending hundreds of millions of dollars in campaigns. And this is the astonishing thing, Paul, that people don’t know. . . .

The Critical Faculty

So how does a coop or any leader decide what to test in a era of mixed messages and uncertainty about the future?  It is a challenge as old as the parable of the seeds and the sower.

Where ever there is fertile ground both weeds and seeds will take root.  Some may try to take out the weeds, but that can be hard especially early on when the plants are just sprouting, and later when mature growth is all mixed together.  The story suggests the choice is not strictly binary– that is the proof of a plant, a new product or even an idea can be clearly  projected as either a weed or the fruit of a seed.

What is required by  a reader of the parable, or a CEO in real life is discernment.  Some appeals by  entrepreneurs  or political leadership seeking support for their agenda will be compelling and relevant. Others, not so.

The ability to distinguish the important and lasting from the temporary and unproven comes from experience.  This is the ongoing learning about one’s prior decisions and the people and process that were used.

Discernment is a lifelong challenge both for CEO’s and in life.  Because change is inevitable, it is a skill that ultimately determines one’s ability to choose not just as a CEO  but more importantly the right in one’s personal life choices.

And if the parable is representative, at times we will grow from  seeds, and at other times perhaps weeds.  The test is whether we can see  the difference.

 

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Credit Unions Using History to Prepare the Future

Following is an introduction to a video lecture by historian Timothy Snyder  titled “What is history?”  (link) 

We speak often about history, but we are careless with the past. When we choose not to know what has happened before, we are also choosing not to influence what will happen after.

If we don’t care about history, we find ourselves in an eternal present, denied any sort of imagination about the future, and nurtured on lies about a past in which we were innocent.

History does not mean these misleading tales; it means a search for knowledge, using a certain set of tools; it means a process that enriches and humanizes, one that allows us to name things by their proper names.

Implications for Credit Unions

Whether you are a student at Western CUNA Management School or elsewhere, one purpose of education  is to understand the road to the present.

These stories are vital for both individual credit union success and for creating system-wide priorities.

For example, beyond the founding stories of committed credit union organizers keeping records in a drawer at the work site, how were future decisions on FOM expansion and leadership changes made in different eras?   What part of the legacy did the credit union preserve and what no longer applied?

Understanding an organization’s past events, both successes and disappointments, provides a perspective for future options. Most major decisions involve assumptions about options-those considered and others overlooked.

How Are National System Priorities Set?

The same benefits are available at the national level for system issues such as regulatory oversight, legislative changes in statutory authority or enhancing the cooperative purpose in American society.

Rarely do we look back to learn from the past.  Regulators do not  conduct postmortems of failures preferring to move on versus evaluate where change might be needed.  For example think of  instances when NCUA has described credit union failure as due to “fraud” or “lack of board oversight” instead of asking why these multi-year deficiencies went undiscovered in exams.  Using fraud or other credit union failure excuse deflects from  regulatory accountability.

How are national legislative priorities determined?  For example, the recently branded Credit Union Board Modernization Act included  in the 21st Century Road to Housing bill, implemented without the President’s signature?

The legislation transitioned federal credit unions to a “risk-based board meeting schedule” giving well-managed institutions the flexibility to meet just six times a year (with at least one meeting per fiscal quarter) instead of the previous blanket monthly requirement.

The legislation also targeted requirements for newer/lower-rated credit unions as follows: New (“de novo”) credit unions and those with lower supervisory soundness ratings (composite or management capability ratings of 3, 4, or 5) must continue to meet at least monthly to ensure proper risk oversight. (AI)

This is modernization?   Allowing boards to meet just six times per year is based on an NCUA process that reduces examination frequency for higher rated credit unions!   How do either regulators or boards  understand the state of risk by less frequent contacts?  And when something untoward happens, the solution is to meet more often?

Do either the volunteers or the regulators believe less frequent contacts are a “modernization” step?   Looking  at the recent and past failures (Jefferson Financial, Creighton, Unilever, etc.) and the two year plus NCUA exam cycle heading into the 1980 financial crisis, suggest the real problems do not arise from too many meetings.  It is just the opposite..

This “modernization” feels like a  PR effort to  convey legislative activity rather than addressing substantive  issues of volunteer and regulatory effectiveness.  Regulatory and board oversight are management and leadership issues, not a regulatory burden to be remediated.

History suggests the potential for real congressional change happens about once a decade.  The three person board (70’s), deregulation (80’s), Member Access Act (90’s),  and the financial crisis (00’s).

There are fundamental issues about the future of cooperatives including the role of the NCUA board (or even a separate coop federal regulatory system), the rights of members, the purchase of banks, the dearth of new charters and the merger payoffs schemes fueling consolidation.

With a knowledge of the past we know there will be an opportunity for major legislative change to further coop purpose and effectiveness.  But is anyone even thinking about that plan?

Could that effort be a topic for students in the final year of their credit union educational experience?  After all, it’s their professional future they would be shaping.

 

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Do Credit Unions Have Values?

At the Western CUNA Management Scoool, students are discussing the future of credit unions.  Is the cooperative system just another financial option for Americans or does it have a different public priority from its founding  and subsequent tax exemption?

Some assert what makes credit unions different is that the system is based on values.  Some would point to the seven or eight cooperative principles as one indicator of the difference from for-profits.

But can institutions have values?   America was founded on values, especially the freedoms and rights founders asserted were enabled  by democratic rule, that is the consent of he governed.

Are Organizations People?

The Supreme Court has repeatedly ruled that organizations (such as corporations and unions) are “legal persons” and possess First Amendment free speech rights. Landmark cases like First National Bank of Boston v. Bellotti (1978) and Citizens United v. FEC (2010) established that political spending and advocacy by organizations are protected forms of free speech.

But institutional design, or legal character,  do not guarantee virtuous conduct.  Individuals are the source for corporate decision making.   All organizations need individuals to participate and in some instance, to get their future back on track.  Even credit unions.

The Challenge of Power

Calling credit unions financial service providers is not incorrect, but the issue is why we believe that is credit unions’ defining characteristic.  The challenge is not that the description is wrong, but why is it the primary focus.

People can lead credit unions but may have their outcomes  set on the wrong things.  Some believe and act as if it the size of the balance sheet along with the supposed advantages of scale are the critical factors in credit union success.   Size denotes market power and can lead to market and financial dominance.

But credit unions succeed not with conventional approaches to market conquest, but with relational power.   That is the trust and service that promotes members’ financial well being.   Trust does not come in big or small packages.  It is present or not in an organization’s action.  A lesson Rudy Hanley used to guide his tenure at Schools First for almost 30 years.

Institutions don’t have values.  People do.  The responsibility for ethics and justice lie not in some abstract organizational concept, but  directly with the individuals who design, participate in, and regulate that system.

The democratic credit union governance can be an advantage in achieving this relationship power.  For democratic participation  should  enable constant debate to restate what ethical boundaries and values should be embedded in the financial rules of the game.   Is this how your credit union acts?

Discuss with your fellow students.