Category: Co-ops in Capitalism

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The Unmatchable Credit Union Spirit

This is a story of a credit union led by an extraordinary CEO.  It is so heartening that the writer prepared two articles to describe fully her accomplishments.

The headline says it all:  The Tiny Credit Union Powering Brooklyn’s Economy.  The author’s writeup illustrates the power of passion and commitment in service to a community.

This account is a beautiful gift for all who believe credit unions can do something special.  It demonstrates the good will created with a small amount of resources and dedicated leadership.

My summary is to encourage you to link to the full accounts.

Part I: How it Got Started

“With just $50 million in assets, Brooklyn Cooperative Federal Credit Union is a rounding error compared to the nation’s largest brand-name banks. But in terms of impact on marginalized communities, this tiny institution punches well above its weight.”

In this first segment, the writer, Oscar Abello, describes how the current CEO Samira Rajan -a graduate of Harvard’s Kennedy School of  Government became involved.

She joined the startup in 2001 in a catch-all position as an AmeriCorps VISTA volunteer program.  This paid her a stipend as the new credit union didn’t yet have enough income to offer her a salary.  She became a loan officer.  First loan she made, went bad.

In 2008 she became CEO.

The founding CEO Jack Lawson was a PhD student in economics at the New School in the late 1990s.  He was looking for a part-time job related to his research.  He received a grant from a local foundation to support his goal of organizing a credit union for the Ridgewood-Bushwick Senior Citizens Council.  Over time this startup evolved to become Brooklyn Cooperative.

Until his departure in 2008 he focused on seeking grants from local sources and the CDFI Fund to underwrite the startup expenses and “build the runway” for sustainability.

This process continues. Since Rajan became CEO, the credit union has received eight grants from the CDFI Fund, totaling $11.3 million.

Part II Focusing on Character Lending

The credit union today can underwrite loans with little to no collateral, to members with an average credit score below 650, and to members without social security numbers.

Residential mortgages for one to four family homes are more than half of Brooklyn Cooperative’s current loan portfolio.

But its small business lending efforts are especially critical for the credit union’s local impact.

Counting by the number of federally-guaranteed the Brooklyn Cooperative is ranked fourth, behind only TD Bank, Chase and M&T Bank.    The  cooperative’s average 7(a) loan size is $24,000.

The writer’s description of the CEO’s relationship with NCUA is also enlightening. This is Rajan’s candid opening comment:

“Every three years, we have literally a new examiner come in and they’d be like, we’ve never seen this before. Yeah, I know you’ve never seen that before. New examiners have to get their whole head wrapped around the fact that you’re going to be doing lending which is non-conventional, that you’re deliberately going to be lending, knowing that your loss rates will be higher than the normal and you’re going to be lending to borrowers who on paper don’t qualify. … It flies in the face of what apparently you’re supposed to be doing, which is lending only when you definitely have a 700 credit score.”

For the full account of this remarkable institution, read both articles.  At the close the author asks the following of his readers and those who work in the cooperative system:

Brooklyn Cooperative is proof that it’s possible to build a financially sustainable institution that provides credit for a variety of purposes to people and communities like those it serves — Black and Brown, immigrant, low-income. . .it raises the question: should there be more credit unions like this one across the borough? Or across New York? Or across the country?

Serving Strangers

During this season, the mail brings more requests for donations than Christmas cards.  There are two broad categories of asks.  One is the multiple nonprofits serving the arts or education-choral groups, museums, Chautauqua and public television.

More plentiful are the organizations serving human need:  Hope Hospital in Seattle, Achungo Community Center (Kenya), World Kitchen and dozens of local efforts to assist others, often strangers,  this time of year.

A carol that recognizes this ever present reality of human suffering is Christ in the Stranger’s Guise.   This arrangement by Karen Marrolli is from a summer choral workshop in Montreat, NC, and includes the words.  They portray for me, Rajan’s example of service to her community.

(https://www.youtube.com/watch?v=CM2Ii1GclOE)

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Tidings of Discomfort

To understand today’s blog, I would ask the reader to first look at this TV news report on credit unions from KPBS.  It is accompanied with a two-part written story by Scott Rodd, the station’s investigative report published on November 29, 2023.

The reporter has a good understanding of credit unions’ public image. His TV story opens with an interview from a  member who states “they (credit unions) are not supposed to be in this for making the big bucks.”

https://www.kpbs.org/news/quality-of-life/2023/11/29/san-diego-credit-unions-charging-millions-overdraft-fees

The link to part 2 of the second story is here.

Devasting Commentary

The story counters the long asserted public image of credit unions as serving the “little guy.”  The key data point is that credit unions are no different from banks when it comes to overdraft fees charged members,  even though cooperatives routinely present themselves as “better than banks.”
He quotes the CEO’s statement in  San Diego County Credit Union’s annual report that her goal is “putting people first and profits second.”   This would be an interesting ranking for any coop leader.

The reporter reinforces this contrast of public image versus organizational behavior by pointing out the CEO’s total compensation has “increased seven-fold over the last decade to nearly $12 million dollars according to the according to SDCCU’s latest financial statements.”

The articles provide examples from other area credit unions of the role of overdraft fees along with six figure CEO salaries. His thesis is that credit unions are not actually what they claim to be, “community-based alternatives to big commercial banks.”

Lessons from This Reporting

The two-part story was triggered by the first disclosure of overdraft fees required by all state chartered financial institutions in California.

By focusing on this newly disclosed datapoint, the writer suggests that credit union rhetoric and practice do not align because “these fees are typically paid by “the most vulnerable” customers.”

Several observations.  Compared with banks, credit unions are not as transparent in operational disclosures.  Member-owners have significantly less public information than do bank owners. This is not just about OD fees but many  other areas of operations including executive compensation.  Only state charters, not federal credit unions, must file a IRS 990 which requires compensation data be disclosed.

Lack of transparency prevents members from having critical data about their credit union’s performance, in both ordinary and special circumstances such as merger or buying banks.   Regular public information is also the best antidote to limit self-serving behavior.

Credit union leaders work in a capitalist economy.  Often it is difficult for those in coop leadership roles to overcome the residual lures of capitalism.  It is easier to adopt the priorities and practices of for-profit competitors than create the innovative options member-ownership offers.

The result of this investigative reporter’s story is “brand devaluation.”   It presents credit union as no different from the alternatives cooperatives were meant to counter.  It is a loss of real  value  in the both the public and political market place.

Talking to the Press

Repeatedly throughout his two part series, the reporter tells of his attempts to interview the leaders of the credit unions he is covering.  These efforts for comment include the California Credit Union League.

By not participating, credit unions reinforce the idea that they do not have an explanation or response to the writer’s point of view.

One leader is an exception: Bill Birnie, CEO of Frontwave. He goes on camera to talk about the credit union’s courtesy pay product. He discusses his current salary openly with the reporter.

He apparently was the only credit union person willing to engage on this sensitive topic.  The story was more than just OD fees and the members this affects. It goes personal by contrasting this practice with the compensation of those implementing the fees.

Leadership is more than trumpeting success. It  also requires a willingness to address criticism and possibly poor judgments. This is especially so when done in public where the critic may have the last word or “already has the story written.”

Leadership when confronted with alternative points requires character, a willingness to listen, and the courage to sit down with one’s questioners.

In this case, apparently only one person  was willing to stand up and be responsible.  I don’t think it was an accident that it was Bill, who came to credit union leadership later in life.  Here is a short synopsis of his career before coops:

Bill is a 25 year veteran of the US Marine Corps, retiring in 1997 at the rank of Sergeant Major with combat service in Operations Desert Storm in Kuwait and United Shield in Somalia.

Bill is an example of what it means when “we thank someone for their service” and what it brings to their subsequent civilian roles.

A Seasonal Song in a Time of Conflict

One of the most recognized Christmas songs is I Heard the Bells on Christmas Day.

On Christmas day, 1863, Henry Wadsworth Longfellow—a 57-year-old widowed father of six children, the oldest of which had been nearly paralyzed as his country fought a war against itself—wrote a poem seeking to capture the dynamic and dissonance in his own heart and the world he observes around him.

The words go from despair (There is no peace on earth,” I said;”For hate is strong, And mocks the song”) to hope:

Then pealed the bells more loud and deep:

“God is not dead, nor doth He sleep;

 The Wrong shall fail,

 The Right prevail,

With peace on earth, good-will to men.”

Here is Bing Crosby’s recording.

(https://www.youtube.com/watch?v=CPjwEI2f_DI&t=8s)

 

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A Surprising Listing on LinkedIn

Jason Lindstrom, CEO at the $535 million Evergreen Credit Union in Portland, Maine posted the following yesterday:

We’ve got a great Board of Directors and are looking for great people to join our Board. Please let me know if you are interested.

Are you a passionate Maine business owner, community leader, or senior manager looking to collaborate with professionals like you? We’re looking for hardworking Mainers to serve on Evergreen’s Board of Directors. 🌲

On our Board, you’ll be sharing your knowledge and collaborating with Evergreen’s leadership team to create change in our credit union for our members and positively impact your community.

Evergreen Credit Union is the 5th largest credit union in Maine with over $535 million in assets to date. We’re proud to serve over 28,000 members throughout 6 counties in southern Maine. We’re excited for Evergreen Credit Union to grow as we continue to bring award-winning member service and products that help our members every day.

Ready to start? To submit your application or inquire, email ceo@egcu.org by December 15.

An All Hands Effort

I called Jason to find out more about this unique approach recruiting new board volunteers, all unpaid.

The credit union has nine voting members and three non-voting directors. As a community charter, it is vital for the credit union to expand relations with  local organizations.   Jason is on three 501C3 volunteer boards and a Maine League director.

In prior years and again this year, the credit union had placed ads for board openings in local papers, but received no response.  Finding volunteers has become more difficult effort for all his associations.  A different approach was necessary to attract persons whose might feel they had little spare time to give.

The board decided to go all out in its search for three openings in 2024 by using social media. An ad was placed on Facebook.  Directors and staff were asked to repost the announcement on their social media accounts, hoping to expand the audience reached.

Building Deeper Community Ties

In most credit unions, board recruitment is a private affair.   Candidates are incumbents, self-nominated, or sought from directors’ existing relationships.  The process is characterized  by political considerations versus a public invitation for leadership talent.

Evergreen’s strategy is to be more and more “community connected.”   Membership has been growing at almost 7% per year.   In a largely rural state, people value their local relationships and organizations.  Informing the community in this messaging effort is another illustration of their commitment to Portland and surrounding towns.

Reinforcing their community ties is integral to Evergreen’s business model.  Tapping into the Maine spirit that values relationships is vital to attracting motivated talent. And as Ed Callahan would say, “When you run with good people, good things will happen.”

 

 

 

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Next City’s Take on Credit Unions

Often outsiders offer fresh insight about what makes credit unions special then found in the industry’s own internal coverage.

Next City is a digital journalism site that provides innovative examples of individuals and organizations confronting the challenges of urban life.   Its focus is on solutions that improve the conditions of those  most disadvantaged in large cities.

Credit unions are frequent go-to examples.  The following are two recent reports that highlight their special roles.

Juntos Avanzamos: “together we advance”

The first story is: This is what a Credit Union Designed for the Hispanic Community Looks Like.

The article describes the efforts of Granite Credit Union in Salt Lake County, Utah to receive the Juntos Avanzamos designation.This designation certifies that the credit union is committed to serving Hispanic and immigrant communities by being accessible to Spanish speakers, conducting research on the local Hispanic community, offering accessible and relevant affordable housing programs, and more.

The story reports that the Hispanic/Latino population continues to rise in pockets across the U.S.  including by 37.6% in Utah from 2010 to 2020.

The article presents the history and process for the Juntos Avanzamos designation which now spans over 27 states.   The credit union model is an ideal fit for many of these new Americans because: “When you give someone an opportunity and take a chance with them when all other doors are closed, it builds incredible loyalty, sometimes for life.”

“The Fabric that Makes America”

A November 21, 2023 article, The Outsized Impact of Small Credit Unions, interviews Sue Cuevas, the CEO of the $4.8 Nueva Esperanza Community Credit Union in Toledo, Ohio.  The second credit union leader is Sheilah Montgomery CEO of the $24 million Florida A&M University Federal Credit Union in Tallahassee, Florida.

The CEO’s comments are candid and illustrate the realities of small credit unions with a deep commitment to serving their communities.  Here are short excerpts from the Q&A portion of the story:

Our overhead is much lower than some of your billion-dollar financial institutions. We have one branch, an ATM and eight staff team members. But we have a full-service financial institution. Because of our lower overhead, we’re keeping our interest rates lower than our competitors. . .For instance, we did loans with no credit checks.

On the Latino community in Ohio:  The pandemic really hit hard. A lot of (our members) lost their jobs. They were in restaurants, housekeeping, places that shut down. . . Where I’m located people don’t even know what a 401K is. Right now, we don’t offer checking accounts. Most of our credit union members speak Spanish. They don’t know how to write in English. So, checking accounts to them are very foreign. . .

Currently we’re located in the basement of a health clinic. You have to come down some very big steps. It’s not an advantage to my members. The parking area is also very limited. So, our initiative is to get into a much larger location above ground, which allows our members the ability to come in safely and park safely.

FAMU: Since we are a full-service financial organization, we offer a plethora of products and services and most recently we’ve expanded our business loan services to help small businesses, who we like to call the fabric that makes up America. We processed approximately $2 million in small business loans over the last 18 months.

These stories show credit union relevance is not based on asset size, but the power of serving others.  Their example should make us all proud of a system that attracts leaders living these commitments for their communities.

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Should the Past Matter? Mission and Co-ops

How important is the knowledge of an organization’s past for a new leader?  Isn’t the responsibility of any CEO to take a firm forward from the present to the future?  Moreover, can’t one rely on existing staff and members to affirm what is important to know from history-if needed?

This is not a hypothetical situation.  Credit unions will sometimes choose new leaders with no connection to the organization or even to credit unions.  An example is BECU’s new CEO. One current NCUA board member and the newly nominated member waiting Senate confirmation have no prior association with credit unions.

How History Informs the Present

Recently I attended the 300th anniversary of the “founding” of the Bethesda Presbyterian Church.  The date of 1723 is somewhat arbitrary as there are no specific records except the journeys of itinerate ministers who came from Philadelphia to Cabin John and Bethesda to hold services.

According to the cornerstone, a new church building was constructed in 1850 on the tallest hill in the area after the original 1829 structure was destroyed by fire.  The church was called Bethesda.  It was named after the pool of Bethesda in the biblical story of the lame man waiting to be lifted into healing waters.  That eventually became the name of the town that grew up in the area.

The 1850 church and Victorian era manse occupy four acres which includes a cemetery.  The Presbyterian church founded there, moved to a new location in 1925. Various other congregations have used the buildings since.  In 2019, the entire site was abandoned.  The buildings and surrounding grounds have had no maintenance.

Nevertheless the buildings have received an Historic Site designation which prohibits it from being developed as a commercial or residential project today.

The church has seen some historic moments.  During the Civil War confederate cavalry occupied the site before union soldiers drove them away.  Abraham Lincoln is said to have visited the church.

The building contains the original beautiful sandwich glass windows.  There is a slave quarters in the rear back balcony of the church.  The original bell was stolen from its moorings in October of this year.

Besides its long historical role, why should this past matter to modern day Bethesda?  When we moved here in 1982, the town was still small, marked by single and double story buildings surrounded by  family homes and apartments.  The metro had not opened.  One could drive in and park on the lot at the Hot Shop in the town’s center.

Today Bethesda is a developer’s dream with twenty story multi-use condos and offices multiplying like rabbits.  No small parcel is exempt from this vertical expansion, except for the Tastee diner that sits at the foot of Marriott’s World Headquarters.

Reason for Resurrecting the Site

What does an abandoned, overrun hill with two deteriorating buildings mean to this new mecca of upscale commerce and residences?

In a talk during the 300th anniversary celebration of the Church, a local volunteer historian presented his thoughts on why preserving a community’s history matters.

The church is old and freighted with history.  Which begs the question of why we are here, celebrating it.  To me, the answer is that shared history is an important part of what defines a community. We can only understand and celebrate what we are when we understand and appreciate how we came to be. And we look to the past to prepare for the future because, as James Burke wisely observed, “there is nowhere else to look.”

In the end, it doesn’t matter that we can’t pinpoint the founding date of this congregation.  What matters is that the history of Bethesda Presbyterian Church and its (original) Meeting House is literally the history of Bethesda—its rise, its growth, its weaknesses, its redemption.

No other building or institution comes close.  How did we begin?  Look here. How did we cope with slavery and its legacy?  Look here.  How did we evolve from a farm hamlet to a suburb to an urban center with all the strengths and challenges that brings.  Look here.

Credit Unions, History and Mission

Credit unions have played an integral role in their members’ lives and what it means to be part of a “community” initially called a “field of membership.”

It is not the buildings and products that define a coop, but rather belonging to a group whose mission is to take care of each other, even today.  Members bring their history, sometimes their entire lives, contributing to keeping it going.

That continuity of mission is why credit unions exist.  When that history is forgotten, ignored or seems irrelevant to the present, that is when we begin to lose our future.

A credit union can be much more than a financial institution; it is a means of creating and sustaining a “community” that cares about each other.  And whose history will have “its rise, its growth, its weaknesses, its redemption” just as this Bethesda spiritual congregation has experienced in its 300 years.

 

 

 

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Belief and Understanding: A Lesson on Cooperatives

This past weekend I learned about leadership at a rehearsal for the Messiah.  No, this not a blog about harmony.

In Washington D.C. the National Presbyterian Church organizes an annual community choir to sing the Messiah’s Christmas story during the holiday.

The chorus has no auditions, entails five three-hour rehearsals and a full weekend of dress rehearsals and the public performance.   This ambitious, one time assembly is led by the Church’s  long time musical director  Michael Denham.

This year’s chorus will number about 120.  It includes people of all backgrounds, from different faith traditions and no church connection.  They join together for the joy of singing Handel’s oratorio in this season.

In addition to the disciplines of the music, stresses on notes, cut offs for phrases, tempi and dynamic level Denham will explain the importance of the text.   This past Saturday his description of what he was seeking musically has relevance to all of life.

The tenor soloist opens the Messiah with two arias.  The words are from Isiah:  Comfort Ye My People and Every Valley Shall be Exalted.  The chorus then enters to affirm the prophet’s message singing: And the Glory of the Lord.

The chorus’s words, from Isiah, assert the truth of the Isiah’s prophecy:   The glory of the Lord shall be revealed, and all flesh shall see it together.

Denham focused on the words we were singing.  They are affirming the message of the tenor’s arias.  The words say why this prophecy is true.     The chorus sings because, The mouth of the Lord hath spoken it.

Denham acknowledges the many spiritual and secular backgrounds of chorus members.  In singing these words his expectation was clear: “ I’m not asking you to believe the message, but I am asking you to understand what is being said.  The words have meaning.”

Belief and Understanding In Cooperative Leadership

The most important competency for a cooperative leader is their understanding of cooperative design and its advantages.   Without this “grasp” one will rely on habits learned in other professional roles:   banking, government service,  lobbying or perhaps non-profit experiences.

Ideally one hopes that understanding brings, in due course, belief in the purpose and roles enabled by cooperatives.

If a leader has only a superficial understanding based on generalities such as “people helping people” or “protecting the insurance fund,” then other management priorities, learned elsewhere, will dominate one’s goals:  power,  personal ambition, institutional growth.  Effectiveness is measured by criteria other than how members’ and community well-being is  advanced.

For example in NCUA’s public board meetings last week I listened for reference to cooperative differences when discussing the budget, the NCUSIF’s financials and the state of the industry.

I recall no comments referencing the advantages of cooperative differences and design.

The Cooperative Journey

Credit unions were meant to be apart from the  market driven, capitalist culture which dominates American society.  And many individual’s personal goals.

Coops are about a community or group’s collective efforts working together.

The results are intended to be paid forward for the benefit of future generations, not cashed out for  momentary personal profit.  This inherited legacy is often taken for granted.  New leaders forget how their institutional roots were planted.    They honor themselves for what they have accomplished rather than acknowledging the inheritance of others’ labors.

Understanding cooperative operations is about much more than the mechanics of a financial institution.  It takes time and experience to learn  the history and how an institution’s success is intimately intertwined with the relationships with the people who own it.

The primary goal of a credit union is not institutional achievement or market dominance but a place  where people can thrive and fulfill their dreams. That is not the ethos of capitalism where competition is about winning and losing, taking over one’s competitors, maximizing profit and outperforming the market.

Credit unions are about life lived in community.   The design facilitates self-help and awareness of shared purpose.

They are also institutions that facilitate gratitude and at special moments, celebrate the joys of life together.  Especially in this season.

This understanding is a journey.   It is not learned from books  or from courses and certainly not gained when one achieves a  leadership responsibility.   Familiarity with the credit union story is certainly helpful.  Skills with the mechanics of management are essential.

But belief in the power of cooperatives, like other beliefs, is an awareness that occurs over time.   It is sharing experiences with others and seeing their stewardship and in some cases, the impact of their life’s work.

When cooperative belief joins with understanding, the result can change the world.  For that capability we should be grateful. For in much of the world purpose is equated with individual success.  Whereas for cooperative credit unions meaning arises in community.  That is something for which we should all be thankful.

 

 

 

 

 

 

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A Reader Writes on Mergers and Group Think

I  have written several  posts critical of merger rhetoric and the lack of any shared or concrete member value.

A senior executive who  participated in one of these events sent his reaction, which he asked remain anonymous:

My current belief (call it a strong opinion, loosely held ala Jeff Bezos) is that credit unions need to progress while returning to basics. Progress with less traditional banking/teller line activity, prioritize financial wellness and remote banking experiences. Return to basics with more transparency, increased collaboration and innovation.

It seems to me that in the pursuit of progress, the trend is to become tight-lipped. The other undeniable trend is the belief that scale is absolutely necessary and that the only viable method to scale is to merge/acquire. I don’t agree with the trends, but I don’t have anyone around me who seems capable of an open debate on the matters. 

Our greatest threat today, IMO, is group think.  Well…At least I hope you don’t mind me keeping the conversation going with you.  Currently, I have to stay off the record here.  I want you to know that I’m reading…and learning.  

Group Think & Credit Union’s Future

When internal staff are uncomfortable with the direction of their credit union, this is a sign those closest to the action see  problems.  But it is hard to speak up against a leaders who do not encourage dialogue, let alone dissent.

CUToday publishes periodic updates on proposed mergers with the details sent NCUA. Most are well-capitalized, many are small, but focused. Below is one data point that especially stuck out from each merger summary:

Name                                                Charter Date

Freedom Community CU, Fargo, ND:    1954

Mt. Carmel Church FCU, Houston, TX:   1954

Virginia Trailways FCU, Charlottesville, VA: 1949

Airco FCU, Pasadena, CA:      1957

Mt. Lebanon FCU, Pittsburgh, PA:  1936

Parkside CU, Westland, MI:   1953

United Methodist of MS FCU, Booneville, MS 1961

Elevator FCU, Olive Branch, MS:  1967

G.P.M. FCU, San Antonio, TX:  1970

Our Sunday Visitor Employees FCU, Huntington, IN: 1968

Lubbock Telco FCU, Lubbock, TX:  1940

The list goes on.  These credit unions have navigated  multiple economic crisis, technology evolutions, deregulation and regulatory backlash.

Yet their leaders have given up, even with strong balance sheets and decades of member participation.

These are not financial failures.  They are failures of morale.  The greatest threat to the coop system is not external, but internal.  The belief that the legacy of multiple generations of human investment they inherited, no longer matters.

Like any behavior, the more the pattern of giving up occurs,  the more acceptable the option appears.   Ed Callahan described this challenge as the danger of self-fulfilling prophecies.  If you think your team can’t win, you will probably lose.

The concern above was from a career professional about his credit union and group think.  To address his worry, he is looking for leaders who believe in the advantages of cooperative design.  And who realize it every day to further the legacy their predecessors handed to them.

FDR observed,  “Humans are not prisoners of fate, but only prisoners of their own minds.”  What better time for leadership that believes in creating the future, rather than surrendering to  “tight-lipped group think.”

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The Onboarding Process of a Credit Union Leader

Credit Union Times has been publishing  multipart interviews with Tru Stage’s new CEO, Terrance Williams.  He has a long resume, but is from outside the credit union industry.

He is not the only recent external CEO arrival.  Another newcomer in a major credit union role is Beverly Anderson who became BECU’s new CEO in December 2022. Her professional resume is almost all in banking.

For “outsiders” onboarding is a critical  leadership process for someone new to the cooperative system.  Currently a major transition is underway at NCUA as  new board member Tanya Otsuka will shortly succeed Rodney Hood’s whose term expired in August.

Similar to these new CEO’s, she has no direct experience with credit unions.  Rather her background is mostly as an FDIC employee.  While not CEO, she will have a significant responsibility in overseeing and managing NCUA’s priorities.

What Makes an Effective Executive Onboarding?

Both new credit union leaders above have been quite open with the press discussing their backgrounds and how they are making the transition to their new responsibilities.

Here is an excerpt from Tru Stage’sTerrence Williams on his leadership approach:

“I often talk about the fact that leaders who push change for change’s sake are likely to meet with doom or demise. Because I guess change for change’s sake is not something that’s worthwhile. But change to ensure that you are evolving to maintain relevance, to ensure that you are continuing to adapt to the ever-changing needs of members is really what’s paramount for us …

We have a lot of work ahead of us collectively to figure out how we ensure we create a level of relevance with the next generation of future members, and ensuring that we are designing processes and solutions and tools that align with their needs and how they wish to interact.”

Similarly BECU’s Beverly Anderson gave an extended CU Times interview describing her transition to becoming a first time coop CEO:

“What’s exciting about this role is, one I’m a first-time CEO, two I’m in the credit union movement for the first time, and three it’s my first time at BECU and here in the Pacific Northwest.  . .

“The first six, seven months or so have really been about listening and learning. I did 30-plus deep dives with the organization, used that time to get to know the team and have them get to know me, and learned a lot about the business.

“The second thing I did was begin to understand the movement. It was very clear when I started using language like ‘profitability’ and ‘ROA,’ and people very quickly suggested I use some different language. It’s helped me to understand that the movement is in fact very, very different. Our return is around return to member, not necessarily return on assets, and that was a very big shift and pivot, but one that I quite relished.

“The third thing was getting to know my board – I have a new kind of boss and leader, a board. . .they are encouraging, engaging, experienced in their own right, and they have a lot of support and commitment for this organization.”

Important Steps in an NCUA Board Member’s Onboarding

Following are a number events that could mark NCUA board member Otsuka’s approach to her responsibilities. These cues will come from the statements and actions she takes in the initial days of her tenure. They include:

What is her understanding of the role of the credit union cooperative system?  How does its purpose as a non-profit, tax-exempt, member-owned system fit  with other financial options?

Who is on her team as advisors?  What is their knowledge and experience with credit unions?

How does she learn about the credit union constituencies she is serving?  Who does she see or visit on her first forays into the system?

What points of view does she bring to credit union issues?   Does she ask for data, seek options, and/or reference experiences from prior responsibilities?

What is her view of an NCUA board member’s role?   Is it a part-time or full-time job?  An in-the-office or show-up-for-Board meetings responsibility?  Is her focus on high level policy generalities or demonstrated interest in concrete operating outcomes and results?

Also, how transparent is she about the learning process that goes with any newly installed senior executive?  Does she give unscripted interviews?   Is she candid about her approach and areas for learning?  Is she available or kept in situ by the agency? 

The bottom line is whether Otsuka will become the Chairman’s doppelgänger in her board role? Or, as an outsider with a new generation’s vision, bring fresh hope and enthusiasm  to the credit union system?

When one reads the interviews of Terrance Williams of Tru Stage and Beverly Anderson at BECU there is a sense of confidence, commitment, and positive leadership energy.

That is what one would hope for in any NCUA board member, but especially at this juncture of credit union opportunity and challenges and NCUA’s peripherality.

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The Lack of Public Confidence in America’s Institutions

Polling routinely tracks the decline in trust Americans have in their institutions, both public and private.  From a September 2023 Pew Research Report: “Fewer than two-in-ten Americans say they trust the government in Washington to do what is right “just about always” (1%) or “most of the time” (15%)

In the private sector, this distrust can accelerate business uncertainty, or lead to failure.  When economic challenges combine with  the ever present potential for market disruption, continued  success can seem more tenuous.

One area where these negative forces have all combined is in America’s newspaper industry.  One of the survivors is  Arkansas Democrat-Gazette, owned by the Walter Hussman family,

I recently heard him speak about how his paper has continued to succeed in this “dying industry.” Today the daily edition publishes the third or fourth largest amount of news stories after the national editions of the NY Times, Washington Post and Wall Street Journal.

The challenges and Response

In his remarks Hussman said the peak in newspaper ad revenue was $60 billion in 2006. Now it is less than $10 billion.  Many local papers and national chains such as Gannett have been purchased by hedge funds or outside investors.  Their business model is to provide “less and less” and ask customers to pay “more and more” to maximize their financial return, not the newspapers’ role for the public.

The separate Democrat newspaper bought out its Gannet-owned competitor the Gazette in 1991,  becoming the dominant  statewide publication.  Hussman’s view is that national news and sports are available everywhere.  What matters to his readers is local reporting.

To meet the disruption of both advertising and readership by social media, several years ago Hussman converted the six daily editions to an online format only, with just the Sunday paper still in distributed in print.  He provided free iPads to all subscribers. Teams of employees travelled  throughout the state to show customers how to use the online format.

That digital offering is continuously upgraded to include videos and other editorial material and links that would not be feasible in a print edition. Another factor in the conversion: “Today’s younger readers want the news to find them.”  The cost is $39 per month.  The savings in both newsprint and distribution costs has allowed the paper to remain profitable.

But what about the public’s general mistrust of all news media, both print and broadcast.   He cited that only 16% of the public trusts the media.   Everyone can choose the source today that most closely aligns with their views reinforcing existing “confirmation bias.”

Publishing Operating Core Values

Hussman described his firm’s response to this pervasive mistrust.  Every edition contains a brief Statement of Core Values, summarizing the organization’s approach to reporting.  Here are excerpts:

Credibility is the greatest asset of any news medium and impartiality is the greatest source of credibility.

. . . a news organization must not just cover the news, but uncover it.  It must follow the story wherever it leads regardless of any preconceived ideas. . .

The pursuit of truth is a noble goal of journalism.  But the truth is not always apparent or known immediately.   The journalist’s role . . .is to report as completely and impartially as possible all verifiable facts so that the reader can . . . determine what they believe to be the truth.

. . . as much as possible, there needs to be a sharp and clear distinction between news and opinion.

A newspaper has five constituencies. . . readers, then advertisers, then employees, then creditors, then shareholders.  As long as the newspaper keeps its constituencies in that order, especially its readers first, all constituencies will be well served.”

The Core Value Imperative

Hussman told the story about stating his core values when asked by a major television news network executive how to move his channel to a more neutral political public perception.

Most organizations, even credit unions, talk about and publish lists of value.  In many instances they affirm common sense principles such as integrity, openness, impartiality, etc.

There is a difference between virtue signaling efforts and core operating  principles as described by Hussman.

For the past week I have published brief excerpts from the Coach’s Playbook, a series of core operating statements by Ed Callahan.  Note that none of these was a list of personal values; rather they were the operating priorities he followed in multiple leadership roles with credit unions.

The difference between the two approaches is revealed when persons in authority fly from their responsibility to do “the right thing.”  Some will fall back on legal distinctions, some on tradition and others assert their positions of power or control of resources.

Banking on Values

Today is a celebration of Banking on Values, a global movement to change how finance can make change.

Their founding purpose:  “Banking is a powerful force.  From social equity to climate emergency the banking sector has a choirce; either ignore and exacerbate these issues or work together to overcome them.  . . banks must think bolder.”

Do credit unions today think bolder?   Are their values expressed in actual operating priorities?  How would they “square” their oft stated goals of growth and scale with the purpose to be a member-first design?

No one can question credit union financial success, the system’s stability and the avoidance of significant operational failures.   But is that what members and the country need at this time?

Can operating core values reignite credibility in purpose, or will we continue to float along with the rest of the financial sector?

Lip service to what credit unions should be will provide neither cooperative advantage nor market differentiation and success.  That is not the path of how we got to where we are today.

 

 

 

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Wisdom: The People’s Movement

The People’s Creation

“We don’t have to concern ourselves when people ask, “but what did Congress intend us to be?”  Our movement does not exist because it was created from the top (i.e. Congress) down.  Rather it was created from the bottom (i.e. the people) up.

We told Congress what we intended to be: cooperatives that would try to serve the needs of their members, whatever those needs might be.” (pg52)

Note: The Coach’s Playbook is a collection of the thoughts of Ed Callahan as a federal and state regulator, innovator and credit union CEO.  The book was published by Member Value Network.