A Jubilee Event

“Forgive us our debts, as we forgive our debtors.”   We say these words in the Lord’s prayer.  Where have we seen this ever done in “real” life?

Society, especially market-based ones, do not practice debt forgiveness.  Capitalism is built on finance, i.e. all kinds of debt—corporate, consumer and government.

In the bible, the Jubilee year – occurring after every seventh Sabbath year, thus, every 50 years is an economic, cultural, environmental and communal reset, when the land and people rest, and all those who are in slavery are set free to return to their communities. (Leviticus 25:1-13).

Debtor’s prison or indentured servitude, was a reality in England and other countries for those who failed to pay up.  It was the basis of more than one of Dicken’s novels.  Scrooge is more than a Christmas story.  It was reality.

President Biden’s forgiveness of either $10,000 or $20,000 in student debt has been met with gratitude by millions of former students who have applied for this reduction.

On the other hand, multiple organizations and opponents have taken to the courts to stop the plan absent Congressional approval.  The question of whether the President has the authority to do this unilaterally is now before the courts.

Some former students who paid off their loans, feel this action is unfair to those who honored their obligations.

Credit unions were founded to provide debt.   Credit for members funded by savers.   Often the  phrase “for provident and productive purposes” is intended to show debt as a positive event.

Founding stories such as that at BECU where a small group employees contributed 50 cents each in 1935 to create Covenant credit union to provide tool loans during the depression, are apocryphal.

Credit unions spend much effort and processes to make sound loans, track delinquency and minimize loan losses.

But debt forgiveness?  That is rare indeed. Recently this video by Canvas Credit Union shows the power of debt forgiveness. Addie Greenacre, a long-time Canvas member, wife and mother was surprised with a $40,000 loan payoff as part of a drawing during an auto refinance promotion.

It is a powerful example of what removing the burden of debt can mean to a person.


How do credit unions founded to provide debt ensure that loans lift up and don’t become a lifelong burden?

Looking at the Canvas Credit Union model one sees an organization dedicated to financial well-being. In their words, We’re here to Help You Afford Life.

While this “debt forgiveness” may have been a promotion, it demonstrates the power of jubilee thinking for people, and a community.

As credit unions review their personal loan portfolio at yearend, seeking those with the longest tenure or constantly rolling over draws, might a debt jubilee be a timely addition to every credit union’s service profile?

It can literally change a person’s life.  Isn’t that what credit unions were meant to do?










The Tragedy of the Commons:  The End of a Movement?

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.

Documented Success

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.

Why Should Credit Unions Care?

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 Abdicate

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.

Financial Eunuchs

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.

The Members Will Respond

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.

Trafficking Relationships & Destroying Good Will

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.”


Votes Counted: Closest Election Ever

The elections this week were full of last minute drama.   There will be many consequences yet to be sorted out from the results.

In one  case the vote was especially close.  Only 318 votes separated the two sides.   The percentages were 51.1% versus 48.9%.  Certainly one of the closest elections ever.

Voting participation however was not particularly high in this critical ballot.  Of the eligible voters, only 21% cast votes.

“Highly Engaged Members”

The results were announced in this document on November 9th after polling had closed.

However this was not a republican vs. democrat political election.  It was a vote to extinguish the charter of a 75-year, innovative state chartered financial cooperative.

The official tally was 7,622 for the merger and 7,304 against.   The result is that $1.1 billion VSECU and its 71,000 member-owners will no longer have their own credit union.

It will be merged into the $1.9 billion New England FCU, officially on January 1, 2023.

Voting matters.  By law the charter belongs to the member-owners, not management or the board.  The leader’s duty is fiduciary, to always act in the members’ best interest.  Voting is the core of democratic design.

So when almost 50% of members vote against a strategy that management has tried to sell them for almost a year, such a no confidence result would cause most responsible leaders to rethink their plan.

When announced in February, the opposition was visible, public and well thought out by conscientious members who launched their own website,  Calling all Members.  The State Employees Association Board of trustees voted to oppose the merger.

Even controlling all the communication and marketing resources, member contacts and legacy relationships, the vote barely exceeded the required majority.  The members sense there is something that doesn’t add up in this charter cancellation.

The Merger Math

The merger explanation contained two specific benefits:  the NSF fee would be reduced by $10 and access to NEFCU branches would be opened.  Both “benefits” could have been done immediately without merger.

The reasons for merging was given in rhetorical phrases about future plans and a new partnership, but no specifics.

The math for coop mergers is simple,  1 + 1 = 1.   There is no increase in members, loans, capital or any objective market share measure. Instead one charter goes away along with its independent leadership and business strategy.    VSECU relationships, good will and member loyalty is dissolved after 75 years and three generations of building its unique identity.

There was not even a thank you dividend for the $100 million in collective equity now transferred to the control of a new board and management with their own financial priorities and strategy.  They have no operational or political connection with the 70,000 members who created this common wealth.

The  merger announcement included the VSECU CEO’s observation:  Our membership is highly engaged in the democratic process as member-owners evidenced by the highest credit union voter turnout ever in our history,” noted Miller. “As we look toward the future, we are excited about the opportunity this partnership promises and ready to take VSECU into our united future for all of our members.”

A Weaker System

There are other consequential problems with this transaction.  The first rule of financial soundness is to not put all one’s eggs in a single basket.  This merger increases concentration and reduces diversification for both credit union members and the Vermont system.

Separately these two credit unions competed for market leadership and innovation.  Now they are 47% of the Vermont credit union market by assets and 40% of members.  That concentration should raise both financial as well as public policy issues. As the American Banker’s lead story on February 23, 2022 described the situation, Vermont’s Largest Credit Union Merging with Rival.

Vermont’s credit union system is smaller, losing it largest state charter with total credit unions numbering just 17.  Traditionally, the state charter has been more innovative and flexible than the  federal option, but the largest example of that difference is now gone.  The political sway in state debates is lessened both institutionally and by members.

Here’s What’s Next

From VSECU’s  press release:

The two credit unions will continue to operate separately as VSECU and NEFCU until January 1, 2023. On that date, VSECU will become a division of New England Federal Credit Union. No changes will occur for members of either credit union while integration of systems, services, and products occurs. While there is no firm deadline for the conclusion of the integration, it is expected that the combined credit union will operate as one entity later in 2023.

Currently, it’s banking as usual at VSECU, soon to be a division of New England Federal Credit Union, until we identify and create a new name for our combined organization.”

With  50% of  “highly engaged” members opposing  this cancellation of their independent charter, how many others feel the same way?    The new name, organization and operational integration is over  a year away.   How many will wait around to see what this new identify and “vision’ looks like?

Banking Values?

A number of years ago VSECU became one of a very few American credit unions to join the Global Alliance for Banking Values.

The vision of this global network is:  Finance at the service of people and the planet.

Our collective goal is to change the banking system so that it is more transparent, supports economic, social and environmental sustainability, and is composed of a diverse range of banking institutions serving the real economy.

In support of this effort VSECU announced its own expanded vision five years ago:

 “To inspire a movement that brings people together to empower the possibilities for greater financial, environmental, and social prosperity.”

The goal? To align our organization with a larger movement of values-based and impact-driven organizations in Vermont and around the world.”

Two major initiatives were begun as part of this restated purpose. One was called Powered by VSECU to stimulate social and economic opportunities through innovative partnerships around the state.

The second was Alternative Capital, to help small businesses and coops raise financing including direct investments in coops.  VSECU was  one of the few credit unions making these coop investments.

This new vision from 2016 lasted just five years.   The merger has no expressed vision.  The credit unions will continue what they were doing until they figure out the combined operations and develop a new name and brand.  Both credit unions are giving up their historical legacies.

Many VSECU’s members sensed that this combination promised nothing and took away what the valued.  The fact VSECU management gave up on their vision less than five years for an undefined merger, foreshadows a challenge retaining  the trust of the members who built this organization.

What is Being Lost

More is at stake than just member-owner patronage.

At a time of increasing economic uncertainty and record inflation, the one institution members have counted on is no longer theirs.

Members have lost their capital, their independent leadership, their long established relationships and their unique identity.

Moreover in this stressed economic moment, members of both institutions will spend millions of dollars on vendor contract cancellations, product and operational conversions, and payments due when benefit plans are terminated.

Both sets of employees will eventually be rationalized.   No organization needs two marketing, HR, mortgage lending, and operational leaders.   There is no efficiency from scale without redundancy reduction.  Aspirational professional career paths are eliminated.

The credit union system in Vermont loses its state leader and its ability to influence local regulatory and political institutions when change is desired.   Larger credit unions tend to separate their self interest from the system that spawned their creation in the beginning.

The national credit unions system has lost one of its examples of green leadership.  VSECU Eyes a Green Future in Vermont, is just one story of a series at creditunions.com portraying the credit union’s business innovations. The stories exist no more.  The institution is gone.  Size becomes the goal, not values.

The Betrayal

With widespread opposition and an absence of any concrete benefits or plans, the merger has cost thousands of members and multiple interdependent organizations real losses.   The transaction comes at a time of heightened vulnerability for members and institutions.

Positive momentum is lost.   Priorities become institutional assimilation projects, not serving local communities.

As one member read the posted results he wrote that within a year or so employees will be gone to “pursue other opportunities” and collect the benefits from their terminated plans.  He ended saying:  The board and senior leaders were hired to serve the members. What makes me deeply sad is not the money, it’s the betrayal.”

To build a successful credit union on a foundation on member loyalty and trust takes years.  Both can be lost overnight.  In a single election.


A New Class Act?

Risk based lending (RBL) was introduced to credit unions in the mid 1990’s.  Many credit unions now use this approach in some or all  of their lending offerings.

The debate continues as to whether this is consistent with coop principles.  Here is one CEO’s view.

(from Jim Blaine)

Balanced lending…

Many, many credit unions have successfully implemented risk-based lending to the benefit of each and every member. More and more members are calling out and demanding increased risk-based lending by credit unions. Never has one concept been so uniformly and enthusiastically accepted by the masses. RBL is the top requested service on every member survey – right?.

One CEO told me that RBL was an easy sale to the Board after one Board member got back from an RBL seminar cruise. Evidently, in the bar, the Board member was chastised by an RBL advocate with the arguments: “You mean you charge the same loan rate to an admiral as you do to an E-4? You mean your school superintendent pays the same rate as the first year teacher?  The blue collars get the same deal?! Do your maid and gardener get the same rate you do?  That’s not fair! You’ve got to start running that credit union like a business these days!”  

It’s an especially easy sale, when you lace the poison with a few high heat words like unfairness, subsidy, unprofitable, freeloading – free riders. Fairness, of course, is something every credit union person supports. Every effort should be made to assure fairness is a fundamental, core value of the credit union philosophy.

Evidently for the first seventy or eighty years of the credit union movement, boards and members didn’t care much about fairness in lending. Unfairness existed in all credit unions since none used risk-based lending….

Secret formula…

Critics try to make an issue out of the “unfairness” in RBL. They always want to claim that while RBL may achieve consistency in credit union lending decisions, RBL was never designed to achieve fairness. With RBL, members are divided into risk “classes” (A,B,C,D,E, etc.) based on a secret formula of risk criteria.  

Although the secret formula for risk criteria isn’t advanced enough to tell us which exact member will default, it is explicitly accurate in knowing which “class” to which you and I should belong. There are no shades of gray in an empirical, statistical model. Don’t tell me about the divorce, the flood, the death in the family, or the reporting error. Your statistical record speaks for itself. The secret formula knows who you really are in your heart of hearts.    Cut the whining, pay the rate; fair is fair!

Complainers also don’t seem to appreciate the need to eliminate the subsidies within a credit union to “low class” borrowers. The financial stability of the wealthy few is being imperiled by the working class majority. If the poor can’t pay their loans, logically they should be charged a higher rate. 

A New Class Act?

But we haven’t even begun to fully exploit the benefits of risk-based pricing for the membership. Hope we can use the secret formula to help make some of the other operations of the credit union fairer. We’re already getting behind on the innovations being implemented by our guiding lights over in the banking industry.

Some local banks have used secret formulas to determine even more precisely which customers are profitable and which are unprofitable. Who wants an unprofitable customer? And there certainly isn’t any difference between an unprofitable customer and an unprofitable member, is there? Hey, credit unions aren’t welfare states, are we?

Those creative banks have started coding customers into green, yellow, and red “classes” at the call centers. Regardless of how long you’ve been waiting, green goes to the head of the queue. Greens have separate, fast teller lines and receive special services. Bright, bright greens can even receive “private banking” services so they never have to rub elbows with “the riffraff”. Don’t we want to serve our “best” members, too?

Whose credit union is it anyway?

Serving the members based on the distinction of “class” will go a long way toward increasing a sense of fairness and building unity within the credit union. We certainly haven’t been “a class act” in the past but surely everyone agrees that – in a cooperative – some members are more equal than others.

Can Credit Unions Be Uniquely Cooperative?

Apples and Oranges

(from Jim Blaine)

Comparing a b#!k to a credit union is as silly as comparing an apple to an…
Credit unions are uniquely different!!!

If you’re one of those cynics who think “nothing is unique”,
 then name one word in the English language which rhymes with orange
Don’t rush I’ll wait….
Alright, alright if you’ve had a couple of craft beers, I will accept “door hinge“..

The Power of the Credit Union Press

Many challenges confront credit union focused news reporting.  Publishing daily via social media is hard.   Staff is limited.  Original stories take time to develop.   Amplifying press releases is often an easy solution when faced with daily deadlines.

Credit Union Times and CUToday  have developed  important reporting niches however.   If readers  follow these original stories, they can provide insight into events that have consequences for the future of the cooperative system.

Following Court Documents

Peter Strozniak of Credit Union Times  follows  court cases about credit unions.  On October 4, he reported on the embezzlement at the $3.2 Prairie View FCU: Former CEO Pleads Not Guilty to Embezzlement Charges.   Some of the details in his coverage included:

  • The CEO’s scheme lasted from 2010 until August 2020;
  • She embezzled over $211,000 from 34 elderly members accounts;
  • Created fraudulent loans for over $791,000;
  • Formed 58 nominee loans by creating fake share loans in the names of relatives and friends

In eight of this ten-year fraud time frame, the credit union reported annual operating losses on its call reports. The credit union was merged in the first quarter of 2022 due to “its poor financial condition.”

The question that jumps out  is how could NCUA examiners have continually missed this illegal activity for ten years?

Peter did not go there with this story, but the details certainly raise a core question about NCUA’s supervision of the FCU.  It was small, with few employees and only 600 members.  The call reports showed  losses for most years.  What does this case imply about the  efficacy of NCUA’s annual examinations?

CU Today Goes to the Public Record

For most of this year, CU Today has summarized the merger activity posted from NCUA’s web site, Comments on Proposed Mergers.

Their latest reviews showed “CUs seeking to merge in multiple other CUs at once, combo’s in which the merging and acquiring CUs are both losing money, and several examples of credit unions reaching across state lines and even across country for merger partners.”

This reporting which includes the latest data and quotes from the member notices, takes a lot of work. Some examples.

One summary is for AIM Credit Union in Dubuque, IA.  It is merging two Keokuk credit unions.  Members of both merged credit unions were given identical Notice statements.  They will be voting on the same day at the same location, First Christian Church.  The two towns are 150 miles or about three hours apart.  Was a local merger of  the two credit unions considered?

In the merger of two Michigan credit unions, Community Alliance Credit Union ($108 million) with People Driven Credit Union ($355 million), the top three executives can receive a total of $542,000 in severance.

Community reported  midyear capital of 8.39% and  a loss of $73,000. The members were offered nothing of the over $8 million in capital being transferred.  Is this an example of taking the money and running away?

The three-year old Maine Harvest FCU with 56% capital is merging so that “its mission of lending to farms and food producers will be better preserved with a larger credit union that embraces that mission.”   Was this option researched at the start?  Why not create a partnership, versus merger, with a larger credit union if more services are needed?

The $210 million Emory Alliance Credit Union in Decatur GA is merging with Credit Union 1 whose main office is listed as Rantoul, Il.  One wonders why?  Were no local options available?   Did Emory do any due diligence on behalf of their members, especially of Credit Union 1’s recent initiatives before recommending this out of state takeover?

Finally, the $226 million Parsons FCU in Pasadena, CA  is merging with the   $1.1 billion Skyla FCU in Charlotte, NC.   Parsons has almost 11% capital.  Merging with a credit union across the country, especially with very strong instate options, would appear contrary to every common sense notion of member service and value. What is the reason for this  “merger” almost 3,000 miles away.

Presenting the Facts for the Public

CU Today and Credit Union Times are serving a vital public, cooperative service developing this fact-based reporting.

Both media raise important questions about motivations and fiduciary duty of persons responsible for these events.

This original reporting  raises critical questions about the directions of credit unions, the regulator’s oversight  and how members’ best interests appear to be so cavalierly and repeatedly disregarded.

Sooner or later the stories behind these events will come out.   The political and repetitional consequences will impact every credit union even when excesses may be the work of only a few.

A diligent, informed and questioning press is critical in holding those in positions of responsibility to account. CU Today and Credit Union Times are doing the job of the 4th estate.  Are credit union leaders getting the message?


An Old Tale, Updated for Credit Unions

Down On The Farm…?

(by Jim Blaine)

George Orwell masterfully described the erosion of values and the rise of exploitation in his classic novel Animal Farm. The book written in 1945 is a satire of the decline in the Russian Revolution from idealism to the overlord State of Stalinism. To Orwell, what the Revolution had become in post-WWII Russia bore little resemblance to the high hopes of 1917.

In case you’ve forgotten the plot; in Animal Farm the slothful, tyrannical human proprietor of Manor Farm is overthrown by his much abused and neglected farm animals. The revolutionary animals quickly come to realize that when united in cooperative effort, they are quite capable of sensibly managing the farm and their own affairs. 

Each animal, by nature and design, has different capabilities and unique qualities. Separately they are weak. But, cooperatively, working together; the united effort becomes far greater than the sum of the individual parts. Each animal contributes in full measure, in its own special way, to the overall success of the enterprise. 

The cows and chickens provide milk and eggs for food. The sheep provide wool for cloth; the dogs provide protection; and the horses provide strength for plowing. The pigs, who seem to be the brightest, provide direction and management (surprise, surprise!).

Every civilized society, every social movement, every cooperative effort needs and creates a set of guiding principles – a social compact, a credo, a charter which explains shared beliefs and values. The animals of Animal Farm were no different. They carefully crafted rules for their new social order and painted them on the side of a barn for all to see.  

                  ORIGINAL PRINCIPLES:
 1. Whatever goes upon two legs is an enemy.
 2. Whatever goes upon four legs, or has wings, is a friend.
 3. No animal shall wear clothes.
 4. No animal shall sleep in a bed.
 5. No animal shall drink alcohol.
 6. No animal shall kill any other animal.
 7. All animals are equal.

Over time, several incidents occurred which seemed to be out of keeping with those original purposes. The pigs were found sleeping in the former owner’s bed; alcohol reappeared at social gatherings of the pigs; an animal who complained about the changing values was killed; and the pigs seemed to be working less and consuming more than their fair share. 

When the animals returned to the barn to review their original principles; they found, much to their surprise, that those principles somehow had evolved into something a bit different!

1. Whatever goes upon two legs is an enemy.
2. Whatever goes upon four legs, or has wings, is a friend.
3. No animal shall wear clothes.
4. No animal shall sleep in a bed with sheets.
5. No animal shall drink alcohol to excess.
6. No animal shall kill any other animal without cause.
7. All animals are equal, but some animals are more equal than others.

The pigs, however, were always there to explain away questions, concerns and objections. Bad became worse at Animal Farm! Eventually, when the animals returned to the barn, they found a whitewashed wall with just one remaining principle.


“All members are equal, but some members are more equal than others.”

“Isn’t that what we originally revolted against?,” some quietly asked.

So, what’s the point? In the beginning, there were several essential ideas which formed the core values of the credit union movement: one member, one vote; cooperative; non-profit; equal service to each member; consumer advocacy; volunteer leadership; unstandard answers; shared concerns; us not me. 

 Have you checked the barn lately?    
When did we abandon the average man and woman – the working class; change our focus to the primacy of the bottom line; lower ourselves to worshipping before the false altar of market share; begin acting in the best interest of “the credit union” – not the members !?!; and start offering excuses rather than solutions?

Hey really, what happened…   

Who let the pigs in?

False Prophets and Chasing Idols

The email marketing headline read:  Is there a merger in your future?

Another suggested the opportunity to protect the CEO’s fate by adding  a “change of control” clause to the manager’s contract.

Many credit union leaders and most vendors are selling a vision of the future they want to help implement.   The focus is on the future, not the present circumstances.

The more apocalyptic the future predictions, the more urgent the message.   These prophets pretend to know the unknowable.   But the failure is not in their projections.   It is their misunderstanding of the present.

What Prophets Do

When leaders present their vision, they are making predictions about the future they hope to bring. In fact, prophets do exactly the opposite! They insist the future is highly contingent on the now.

From all the flotsam of events, beliefs and analysis, real prophets  have the ability to identify what really matters.  Focusing on this is essential for ongoing success.

That’s not predicting the future as much as it’s naming the way human reality works today and tomorrow.  The true prophet dares to tell what is essential in the face of marketing hype, rhetorical cliches and the latest innovation that will cause members to leave current institutions behind.

An Example

Decades ago I first met Rudy Hanley, the long time CEO of SchoolsFirst FCU in California.   He asked how I approached strategy.   As I outlined the model and summarized  growth options, he stated that the credit union’s primary goal was not growth.  It was ensuring the members’ trust.   No matter the circumstances or cost, the critical success factor was continuing to place member confidence at the center of every decision.

If member relationships were built on this foundation, he believed growth would naturally follow.

This is not every CEO’s priority.   Some believe size guarantees success, the bigger, the stronger and the more resilient.   Others put their trust in technology and introducing the most compelling solutions or latest crypto offering.  When winning in the open competition of the market seems to slow, others will chase the chimera of buying out or merging competitors.

All these approaches can bring short term success.  However member-owned cooperatives were established and succeeded as an alternative because of the unique consumer-member relationship.   Emulating the corporate strategies of banks and other commercial firms is following false idols.

There are a host of idolatries at the center of the cooperative system today.   Many aspire to the prestige and stature of banking competitors.   Making money becomes the number one priority albeit always clothed in the phrase of serving members.

Instead of seeking those who are often victims of current financial choices, credit unions aspire to serve everyone.  Speaking truth about why coops exist becomes prophetic because the “powers that be” that benefit from the system, cannot see this simple message.

The Transition of Leadership

The challenge of understanding who coops are and how credit unions are unique is especially front and center in leadership transitions.

One CEO who recently oversaw this change in his institution observed these dynamics:

It’s hard for today’s leaders to make their bones when they are up to bat.

Then lazy new leaders simply fall in line with the best practices of the day, currently community banking tactics 101.

New leaders will not see staying the course as the means to their hopeful ends.  They have been given the reins for change, not just continued success.  They are vested in their peer’s approval not their members, nor history’s standards.  

The new actors today are vested in their choices.  Logic will not be enough – it’s too nuanced to turn back the belief that change is the catalyst to bigger things.

These are a prophet’s words for the present.   Will anyone hear the message?  Or will there have to be a cost to chasing idols versus trusted service,  the core of Rudy Hanley’s leadership?



When The Bullet Hits The Bone…

Two credit union press releases this week reminded me of the 2012 post below by Jim Blaine.

The first was the announcement that five Minnesota credit unions had loaned $31 million to Opal Holdings, a New York real estate developer and investment firm, to purchase a 17 story office tower in Bloomington, MN.  “The financing included two senior secured notes on equal footing issued in June: One for $22.1 million at 5.1% for 36 years and the other for $8.1 million at 5.32% for 40 years.”

The second from Summit Credit Union stating it had completed the purchase of the $837 million Commerce State Bank  “in the largest credit union acquisition of a bank in the state’s history.”

“Twilight Zone”  (by Jim Blaine)

Nobody said it better than Golden Earring.  No, this is not the golden earring you fearfully imagine sprouting some day from your teenager’s nose or navel.  It’s the late ‘70s rock group and the song is “Twilight Zone”.  The question:  “Steppin’ out into the twilight zone.  Entering the Madhouse, fears that have grown.  What will become of the moon, and stars?  Where am I to go, now that I’ve gone too far?”…  The answer:  “You will come to know, when the bullet hits the bone!  Yes, you will come to know, when the bullet hits the bone!”

The Heartland….

The Amana Colonies, 26,000 acres of picturesque Iowa farmland, sheltering seven immaculate villages, are up Highway 151 about 100 miles east of Des Moines.  This is the Midwest, the Heartland.

The place where the Deere and the antelope play.  A warp in time through which, you may, perhaps, be able to catch a glimpse of the future – the future of the credit union movement.

The Amanas were settled in 1855 by the Society of True Inspirationists.  The sect was formed in Germany; adopted a communal structure; and had unique, idealistic, and firmly held beliefs – sound vaguely familiar?  The communities were self-sufficient and prospered richly.  

All things were shared.  Products, such as woolens, handmade furniture, meats and wines, were sold to the outside world.  A sterling reputation was built upon high standards of craftsmanship and a close attention to detail.  The “Amana” name – remember that refrigerator? – became synonymous with quality and value – sound vaguely familiar?

“Why don’t you download this app…”

The Amanas appeared to be the true Utopia, the new Eden.  But trouble, eventually, always comes to Eden.  At first, the Inspirationists called it “The Reorganization”, then “The Change”, and finally, “The Great Change”.  It started as a murmur, became a grumble, heightened to an argument, and ended in 1932 as a split.  

Eighty years of success forced onto the scaffold of change by a diminished intensity of beliefs, a cooling of religious fervor, a forgetfulness of original purpose and vision – sound vaguely familiar?

Their world, however, did not come to an end in 1932.  The Amana Colonies continued on.  The communal structure was abandoned; the religious and the secular were separated.  Homes and personal property were divided; stock was issued in the businesses and agricultural interests.

The Amana Society Corporation now controls and manages the businesses.  The Amana Church Society now deals with spiritual matters.  Today, the Amanas are on the National Registry of Historic Places and the Amana Heritage Society strives diligently to preserve the cultural heritage of the community and its descendants.  Today, the Amanas are still many things, but mostly the Amanas are a novelty, an oddity, a quaint museum of past hopes and ideas.  

Why did this happen?  The guidebook says:  The Amanas were… “a goal:  visioned through faith; created and established by faith; named for a faith and dedicated to a faith”.  And, “the first generation had an idea and lived for the idea.  The second generation perpetuated the idea for the sake of their fathers, but their hearts were not in it.  The third generation openly rebelled against the task of mere perpetuation of institutions founded by their grandfathers.  It is always the same with people.” – sound vaguely familiar?Which credit union generation is this?  Are you still living for “the idea”?  Is your heart… still in it?

“… destination unknown.” 

“Steppin’ out into the twilight zone.  Falling down a spiral, destination unknown.  What will become of the moon and the stars.  Where am I to go, now that I’ve gone too far? 

…You will come to know, when the bullet hits the bone.  Yes, you will come to know when the bullet hits the bone.”

Keeping the Credit Union Difference Alive

A timeless observation from Ed Callahan:

The disturbing word banded about this year so far is “comparability.” It came up in President Bush’s plan for solving the S&L mess-to make the NCUSIF’s accounting comparable to those other funds. . .

Comparability is also echoed in the phrase, “bank envy” the desire of some credit union people to enjoy more of the powers of banks. . .This comparability stems from a kind of inferiority complex.  Those that embrace the notion that by becoming more comparable, we are somehow elevating ourselves. In fact, the opposite is true. . .

Credit unions are different.  They were set up to be different and should remain different. They are different because we put the emphasis on the people we serve.  Our strength is we help people.  

Callahan Report, July 1989