Category: Co-ops in Capitalism

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A Lesson from the Latest FDIC Premium Assessments on Banks

Last Friday the four largest banks in American announced their  4th quarter and full year financial results.

All had one new, significant expense in the 4th quarter.  Here are the numbers from the New York Times article: Biggest Banks Earn Billions, Even after Payments to the FDIC Fund-(January 13, 2024)

Bank                         $ FDIC Payment

JP-Morgan                  $2.9 billion

Bank of America        $2.1 billion

Wells Fargo                 $1.9 billion

Citigroup                     $1.7 billion

These premiums are necessary to cover the costs for the FCIC’s losses on bank failures earlier in 2023.   FDIC’s reported  loss expense through the first three quarters of 2023 was $19.7 billion.

The FDIC is collecting approximately $16.3 billion in this fourth quarter assessment. The four largest banks will pay the $8.6 billion shown above  or 53% of the total.

Premiums comprised more than 81% of the FDIC ‘s total revenue through the first three quarters of 2023.  Interest income from the FDIC’s investments, the other revenue source, would cover FDIC ‘s operating expenses.  But the $600 million excess would not even begin to cover the almost $20 billion in estimated  insurance losses.  (all data is through September 30, 2023).

FDIC Premiums and Insured Deposits Not Connected

There is no relationship between premiums and FDIC’s insurance coverage of $250,00 per account.  Instead premiums are calculated on  a bank’s net assets which is called its “assessment base.”  At September 2023 this was $20.7 trillion versus just $10.7 trillion of insured shares.

FDIC’s revenue is no longer based on its stated goal to protect depositors’ savings but rather the FDIC’s  role in stabilizing  the entire industry’s balance sheet.   When banks succeed, shareholders win.  When banks fail, everybody pays.

FDIC’s Complex Pricing Structure

The FDIC may set the premium at whatever level it deems necessary to achieve its minimum ratio goal of 1.35%.  The fund recorded an approximately $10 billion operating loss through the September quarter putting the ratio  at just 1.13%.    The $17 billion new assessment is needed cover this shortfall and grow the fund’s ratio target.

Moreover premium rates can vary from 2.5 to 42 basis points  depending on bank size, that is whether an institution is more or less than $10 billion in assets. The final rate is based on each bank’s CAMELS rating plus, for larger firms, a scorecard which measures  “complexity.”

The assessment rates are so complicated  that the FDIC  posts three different calculators for banks to determine what amount they must pay.

This premium system provides virtually no check and balance on pricing, except the rule making process.  It is frequently “updated” and always open- ended in amount. There is no incentive or check and balance on FDIC effectiveness in its oversight or problem solving roles.  Banks must bear the costs not only from institutional failures but also from FDIC’s supervisory effectiveness, good and bad.

The Cooperative Alternative in the NCUSIF

By comparison the NCUSIF is simple to understand, administer and monitor.  Statements are posted monthly.  Public board  updates on investment returns and overall financial trends are presented at least quarterly so credit unions can track their cooperatively designed fund.

The 1% deposit underwriting means premiums are extremely rare, assessed only four times in 40 years since the 1984 redesign went in effect.   Dividends have been paid out over a dozen times.

When the 1% deposits totals are added to the retained earnings, the investment portfolio remains relative in size to the insured risk at all times.  Investment income has proven adequate to  meet all of the fund’s operating expenses and sustain a stable operating level between 1.2 and 1.3% of insured savings.  Based on the latest November NCUSIF financial report the fund’s equity should be at or above the long-time upper cap of  1.3% at yearend 2023.

With NCUSIF equity at the high end of the .2-.3 range, it means there is over $1.7 billion in additional  reserve for any contingency.  In the October NCUSIF update the CFO reported the five-year loss average since 2017 was only .1 of 1 basis point.  The net actual cash loss so far in 2023  was just $1.0 million in the same update.

With over 40 years of data from all economic cycles, financial crisis and evolving credit union business models, there are decades of real data to validate the NCUSIF’s financial design.  This record shows that to maintain a stable NOL a yield  on investments of 2.5-3.0% would sustain the fund through virtually any growth or economic cycle and any operating contingency.

This historical 1.3 % cap is due for Board review in February based on 2023 yearend earnings.   This decision is an important commitment  of  NCUA  to the credit unions who  underwrite the fund.   Unlike the FDIC’s premium dependency, the NCUSIF’s investment portfolio return has proven to be a reliable,  predictable and sufficient model-in all environments.

Therefore, when net income exceeds the NOL cap, the credit unions are paid a dividend on the excess income recognizing their overall sound performance.  This return is a critical element of the cooperative design.

The FDIC’s premium model is unpredictable, subjective and arbitrary,  and most importantly unrelated to the actual insurance coverage per account.

Why the NCUSIF Design Works

The credit union model is based on the historical operational and cooperative  values on which credit unions are founded.  All participants are treated equally.  Risk and expenses are shared alike for all.  It is democratic and accountable in its structure.

The redesign was accomplished with industry-wide  collaboration and participation.  It required congressional approval. It was based on the oldest of cooperative concepts: self-help.  No government assistance or funding was sought or necessary.

Instead the credit unions put themselves in the law as the underwriters of the fund’s resilience, no matter the circumstance.  This is how they intend to maintain their independence as a separate financial system.  For example the S&L’s were merged with the banks and the FDIC when their system collapsed.   Unlike the for-profit, stockholder owned banking system, the moral hazard examples of excessive risk taking by management are extremely rare in the cooperative model.

Understanding NCUSIF’s unique history and design and why it fits credit unions so well is especially important whenever a new board member comes to NCUA.  It will be especially critical Tanya Otsuka be informed of NCUSIF’s special character and long term performance, as much of her professional background is within the FDIC.

The February NOL setting will be the first of many opportunities she will have to show her understanding of the differences between bank and credit union regulation.  Credit unions should be communicating that distinction now.

 

 

 

 

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The Person of the Year-One View

Scott Galloway is professor of marketing at NYU’s Stern School of Business.  He is a prolific writer, commentator and provocative analyst  of America’s economic successes and failures.

The following is an excerpt from a much longer December essay on current trends titled Prof G Person of the Year:

The real Person of the Year in 2023? A:  Money. 

I’ve experienced this firsthand, watching as faculty who can’t teach or pen relevant research create a weapon of mass distraction from their mediocrity: DEI. But that’s not what this post is about.

America is becoming more like itself every day: Money is the arbiter of … everything.

There’s a view that the rise of money is a good thing. Or at least not all bad. Human society has never been fair, and as long as people are status-seeking, competitive animals in a world of scarce resources, it won’t ever be. Historically, many of the lines that divided society traced innate characteristics like race or sex, were based on inheritance, or were determined by the exertion of physical strength.

Money doesn’t care about any of these things, and it has washed away barriers in ways that potentially make institutions more accessible. There are now nine Black American billionaires. Good news — and their rise is correlated to an increase in civil rights.

What stops this from being a Hallmark channel version of capitalism is that money, when not reinvested/redistributed (pick your word) quickly pools and concentrates, and innovation and competition decline. “Competition is for losers,” is how Peter Thiel puts it. And he’s following through, buying Senate seats (his protégé, J.D. Vance, is leading the charge to defund Ukraine) to secure the influence of his money.

We aren’t going to end the power of money any time soon. In an economy increasingly run on financialization, with so much wealth in circulation, our objective should be to ensure that it keeps circulating. Money = power, and power should be distributed as widely as possible. . .

My Comment

Galloway’s critique is one of the reasons for cooperatives such as credit unions in a capitalist economy.   That is until the alternative begins to act like capitalists.

I believe the greatest challenge for credit unions is not external–competition, economic uncertainty or technology disruption–but rather internal.   That is, the loss of confidence in who we are and how we try to counter the inevitable goals of more and more money and power, not for  members, but for our personal and institutional ambition.

The greatest challenge is how do credit unions re-engage with members, not as mere customers, but as real owners in the “distribution of power” as Galloway describes it.

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The New Year & “Auld Acquaintance”

The headline at the end of 2023 summarized the prior year outlooks:   “Market Forecasts Missed Mark in 2023.”   (WSJ December 31, 2023)

Most observers in 2023 thought a recession was inevitable.  The Fed’s rapid rise in rates to counter inflations was intended to slow consumer demand.  That reliable indicator, an inverted yield curve, had indicated negative growth was inevitable for almost six months entering the year.  The economy would slow, unemployment rise and the stock market falter as a result.

Yet two of the three major market indices hit all-time highs and the S&P 500 fell just basis points short of its peak. The economy recorded a higher than normal average GDP growth. The consumer is still spending.

This macro-forecast miss should be a cautionary note as we enter 2024.   Future forecasts, no matter the model used, are not facts.  They are guesses often  based on assumptions reflecting the users’ biases or their institution’s role in the economy.

What is Money for?

To justify an investment decision today by forecasting a hypothetical future can lead to poor outcomes.  A current  example is what will be the role of major head office complexes in an era of hybrid or remote work forces?  Or, what is the value of assets acquired in a low interest rate environment versus the rate reset now occurring in the economy?

For credit unions, the preliminary numbers indicate that 2023will record the lowest share growth in decades.  This balance sheet slowdown will influence many decisions about how and where to invest in the coming year.

Those investment decisions will reflect the values, not just priorities, of each credit union’s leadership team.  Will the institution spend to buy growth from external sources?   Will it invest in enhanced delivery capacity?  Staff skills?   Member education and well-being?

Each credit union has a different context and history in making this fundamental decision about how they will spend to enhance their role in the economy.   As in the case of individual choices, that spend will reflect how leadership understands the institution’s purpose.

The slow growth in 2023 may motivate us to find something new to get back on a normal expansion. But it may be just as wise to  identify what got the credit union to this point.  Are those values still the ones to guide investment priorities for this year?  That is, “don’t let be forgot the “auld acquaintance” of who you are and where you come from.”

 

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Credit Unions and Popular Culture

Yesterday’s post on The Bank of Dave was a tru-ish movie about an actual effort to organize a local financial institution focused on the needs of the town of Burnley.  Dave Fishwick, a real person, was the hero.  The antagonists were regulatory bureaucrats, lawyers and of course entrenched financial institutions.

As in It’s a Wonderful Life, the founder Dave  is portrayed as someone serving the common good versus personal profit.  The movie’s message is that this person’s purpose is one that present day  society should honor and support.

How are credit unions portrayed in popular American culture?  Are there any movies, books, plays or other artistic recognition of their special history?

Last night I attended a performance of The Seafarer, a play about Irish life by Conor McPherson. The scene is Christmas eve. The four personal friends drink for camaraderie and to cover the darkness in their lives.

A fifth character (Lockhart), the devil in disguise, enters to participate in a poker game, the main action (after drinking) of the second act.

This inebriated poker rounds are a metaphor for Lockhart’s stated intention of capturing the soul of Sharky, a character trying to give up drinking.

During the final betting round, the stakes go higher, and all raise with the last money they have on hand. At that moment the lead character challenges one of the other players, “Where are you going to get your stake?  From the credit union?”

In the midst of this realistic-surrealistic tale is a direct reference to a financial  reality an Irish audience would understand.  The play was written in 2006 as credit unions were becoming more widely available in Ireland, a generation-long process.

Similarly, The Bank of Dave is set in the post 2008/9 financial crisis in Great Britain when consumer lending was unavailable.  Current day  viewers would be familiar with the real circumstances motivating Dave’s initiative.

American Culture and Credit Unions

Where and how are credit unions referenced currently or in past American literature?  Is there a Norman Rockwell painting that illustrates this financial opportunity for a  common person? Or a story of a local entrepreneur lifting up the community with a cooperative charter?

Is the credit union story so prosaic that the occasional coverage in the business section of the paper or on CNN/MSNBC captures our public reputation and contributions?

Have the many remarkable achievements of local credit unions been so taken for granted, that they are now just another ready option in the financial marketplace?

Have credit unions so lost their unique cooperative character that American culture and ordinary citizens, no longer see them as doing something special?

 

 

 

 

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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.