Category: Co-ops in Capitalism

Posted on

Credit Unions & America’s 250th Celebration-History’s Lessons

Today credit union  momentum for the 250th birthday of America was interrupted by a Supreme Court decision. The 6  – 3 conservative majority ruled  the President had authority to fire members of independent agency boards established by Congress to be partially shielded from total Presidential direction.

The decision overturned almost 100 years of precedent. It means Trump’s firing of NCUA board mebers Harper and Otsuka will  be upheld by lower courts where the case is on hold.   Trump  may then choose to select two new board members to join his recently nominated Chair John Crews, a republican working in the Treasury Department.  Or he could leave the positions vacant.

This event and its conseqences will be greeted with mixed reactions by credit union supporters.

But history can also provide us perspective to the current moment.  And more importantly, point the way forward.

Not the First Time for President’s Firing NCUA Leadership

On March 10, 1976, Administrator Herman Nickerson, Jr. of the National Credit Union Administration testified before the Senate Banking Subcommittee on Financial Institutions (chaired by Senator Thomas McIntyre) regarding S. 1475. The hearing focused on proposals to restructure the NCUA from a single-administrator agency to a multi-member board.
Nickerson testified that a single-administrator structure left the agency highly vulnerable to political pressure, stating that under his “day-to-day” tenure “you don’t know whether you’re going to take a position that would be your last day in office or not”. He argued that a three-person board would provide better long-term stability and continuity for regulating federal credit unions. 
In the hearing Administrator Herman Nickerson, Jr. was asked about his vulnerability to being fired, and Senator Thomas McIntyre confidently responded by assuring Nickerson that “it would never happen”.
Merely two hours after the hearing concluded, President Gerald Ford summoned Nickerson to the White House and fired him without cause.
March 19, 1976 Office of the White House Press Secretary

————————————————————

NOTICE TO THE PRESS

The President has accepted the resign.,tion of Herman Nickerson, Jr., as Administrator of the National Credit Union effective upon the appoint ment and quaJification of a succes sor. He was appointed on September 15, 1970. There is no successor to announce at this time.

The Three Person NCUA Board Legislation Approved

Senator McIntyre was reportedly shocked by the firing. He used the incident as a stark, real-time example on the Senate floor to successfully argue that the NCUA must be restructured into a multi-member independent board to protect its leadership from sudden political retaliation. 
This hearing served as a major catalyst in the legislative shift that eventually established a multi-member, bipartisan board to govern the agency. 
(Sources:  Rosemary Hardiman, then a reporter for  CUIS, Gerald Ford Library, AI search for hearing summary)

Today’s Response and the Future of Credit Unions

The three person, independent NCUA board was intended to moderate the extreme policy fluctuations if every President could choose to appoint new regulators who would then implement whatever policy  priorities he wanted.
In contrast,  the theory supporting independent agency status was to ensure experienced, knowledgeable board members  would be appointed to protect and promote the public interest not  partisan political agendas.
Only two NCUA board members could be from the same party.  In theory this assured some public debate or even opposition in policy and agency oversight.
The theory worked for NCUA’s first two chairs, Larry Connell and Ed Callahan. Both were experienced state regulators with direct knowledge of credit unions.   While other board appointments would appear more like political sinecures, agency leadership was in expert hands.
The assumptions of industry expertise and apolitical Chairs ended with the appointment of Senator Roger Jepsen (defeated in a re-election effort) to succeed Callahan in 1985.  Rarely have future Chairs had regulatory or credit union experience with the exception of JoAnn Johnson from Iowa.
She had been Superintendent of credit unions for the state and joined the NCUA board in 2002, becoming chair from 2004-2008.  After returning to Iowa she was again Superintendent of Iowa’s credit unions until her retirement in May 2017.
The vast majority of NCUA board appointments have had little to no credit union affiliation.  NCUA’s board appointments have been filled with former congressional or agency staff members seeking continued federal employment. Some have had strong professional credentials (McWatters) but virtually none had prior credit union associations or knowledge.
Credit unions have long abandoned efforts, individually and as a system,  to identify and promote knowledgeable individuals for NCUA positions.
 Both democratic and republican administrations have used NCUA board seats to reward political loyalists versus those with credit union credentials.
In pactice the theory of the independent agency with expert leadership acting in the best interests of credit union members has rarely happened  Instead  NCUA board appointments have become a backwater for those seeking the prestige, or sometimes the spoils, pf a political appointment.

The  Future of Federal Credit Union Regulation

Just as in 1976, there will be a reaction to the current political excesses and  NCUA’s increasing impotence  shaping the future of the cooperative system.
The Agency may become a department with a single administrator within Treasury, like the OCC.  The NCUSIF merged with the FDIC.
The future may be a more cooperative and innovative state support system.
NCUA may be caught up in a sweeping federal government reform post election or post Trump.
Following yesterday’s precedent in this week leading America’s 250th ,  it is useful to express our future hopes for the country and cooperatives in music.  While this was not my original choice for today, it seems to be one approach to future events when  asking  Who shall wear the starry crown?.
(https://www.youtube.com/watch?v=d2LjgalcsVI)

 

Posted on

Credit Unions Learning from America’s 250 Celebration

This week ends with the 250th July 4th national birthday celebration.

It is a moment of community consequence for a country founded on ideals and a vision begun  with the words all men are created. .  .

Our implementation of this founding declaration has been uneven. Even with ever increasing economic prosperity that leads the world.

So this milestone celebration creates ambivalent feelings for many who believe our vision is falling short in critical areas of our national life together.  For example, those whose families came to America from far away and many who believe immigration has been a source of America’s international standing and internal strength.

The Credit Union Parallels

Likewise there are strong parallels in today’s credit union story which spans  less than half the country’s.

The movement was founded on an ideal that cooperatives could be an alternative to the for-profit capitalist motivation which viewed  consumers as profit centers.

Credit unions’ financial success is impressive.  These institutions are now the second largest depository system in the country with  $2.5 trillion in assets and generations of members numbering in the tens of millions.

However, as financial success is achieved, some ask if the system has lived up to its aspirations.

For in America today, as Jim Blaine stated decades ago, “those who have the least or know the least, pay the most for financial services.”

There have been significant contributions by the movement’s founding  mothers and fathers that have given credit unions a legacy to be proud of and a system that can do great things for individual members and  their home communities.

But as in the country’s celebrations, there are concerns that the founding ideals are being lost.  There is increasing evidence that in some credit unions, and as common practice in many, the impact  is to actually widen the gap between those who are well off and those  who live on each pay period’s income.

Reasserting the Things that Make Us Special

To address any ambivalence you may feel  about either our country’s or our movement’s histories, or current challenges, I want to select music that honors our aspirational goals as a nation and as individuals.

When words are sung, their meaning is amplified and transformative.

Visions never die.  They lie dormant until leaders arise to challenge our ambitions, to call us to our higher selves and  to ignite hopes that spark everyone’s individual pursuits–of life, liberty and happiness.

A Credit Union Anthem

Here is an anthem for the credit union movement’s collective purpose: Hard Times Come Again No More.  Written by Stephen Foster in the 1850’s, it addresses the cycles of economic reality and the collective willingness to help each other when these circumstances occur.

(https://www.youtube.com/watch?v=5Fddr0CTflQ)

 

Posted on

Do Plants Have Feelings?

At a recent reunion a colleague told a story of his granddaughter’s college interview.  The panel was professors and tutors from the college.   Her area of study was liberal arts not science.

How might you or your grandchild have answered?

She paused  for a time, then said: ” I don’t know the answer. But here is how I would  test to determine what might be the situation.”

She was admitted to the college.

Many personal decisions and  business options do not have factually provable answers.  Such as 1 + 1 = 2.  Experts, analysis, prior examples and other  learning can suggest possible options.  But ultimately many outcomes are unknowable and require  reflective judgment.

A Credit Union Example

Last week a credit union professional asked,  do credit unions have too much capital.?  He provided no background, just the question.

I asked several credit union leaders how they would respond. Their universal answer:  “it depends.”  They said each credit union’s circumstances are different–the member base, the area’s economy and multiple other factors. .  This is something each credit union must determine for itself.

This may be procedurally correct. However, is there a conflict as the persons  making the  decision  benefit most from overcapitalization?  One former CEO of a large credit union publicly stated that a net worth ratio over 7% is “stealing from the members.”

Higher net worth  takes some of the performance pressures off management and boards.  Unlike public companies, there are no market comparisons forcing them to meet a minimum level of return on equity, or ROE.  This is the primary measure of effective capital management.

Is a more objective standard required? The distribution of capital ratios suggest the question of overcapitalization is widespread.

The Capital Distribution of Credit Unions Today

This is the distribution of net worth ratios for all credit unions at yearend 2025.  NCUA’s rule states that  7% equity ratio is considered well-capitalized.

Net Worth Ratio
      # of CUs at
      12/31/2025
                  Total Assets
13+
                 1,982
$408,743,666,638
12-13%
                    422
$246,934,302,564
11-12%
                    457
$520,062,897,151
10-11%
                    514
$523,027,212,223
9-10%
                    499
$428,895,471,832
8-9%
                    304
$264,042,605,226
7-8%
                    136
$57,902,263,277
<7%
                      61
$7,407,376,727
TOALS
                 4,375
$2,457,015,795,638

At the highest ratio level, 45% of credit unions hold 17% of assets or almost double the well-capitalized rule. A number of these are smaller credit unions,   but there is at least one top ten credit union in this tier.

Most credit unions report annual  increases in net worth, no matter the level, as a success indicator. The common expectation as to how much capital is enough is one word: more.

Because leaders may not know a precise answer, this does not excuse the need for objective processes and relevant comparisons for setting a maximum level and for returning excess net income to members.  Effective capital management begins with ROE.  Pubic markets generally expect outcomes in the 10-12% range as the minimum standard.

Answering Questions of Judgment

Do plants have feelings?  The too much capital question can be answered by every credit union.  The analysis should be transparent for members. It is an example of management’s  accountability to members of their stewardship of the collective savings.

Public presentation of a capital cap is a sign of thoughtful management.  “More” is not a capital plan. Nor is an ever increasing net worth ratio a success.

A cap may even be more important in an era of market exuberance with  bank buys, fintech investing and crypto partnerships announced almost daily. A capital maximum could  bring some much needed discipline in situations where overcapitalization seems to be “burning a hole in management’s pockets.”

 

 

Posted on

The Temptations of Excess Capital

 

When capital exceeds the well-capitalized level (7% for credit unions) organic growth is sometimes never enough to satisfy ambition.  Acquisitions come next.  A current example.

From Jamie Dimon , CEO JP Morgn on organic growth and acquisitions:

 

“If you sit around a lot of management meetings, the first thing they do when they’re not doing well in organic growth is they start to bulls—t about M&A.”
— JPMorgan Chase CEO Jamie Dimon, explaining that he warns his team not to get lost in pipe-dream deal talks instead of improving their own operations.

And yet, Dimon today announced that the bank could consider an acquisition worth up to $20 billion in the next few years now that it has greater flexibility from regulators to spend capital.  WSJ May 27, 2026

Tomorrow’s followup:  with credit unions’ average net worth over 11.3% at March 31, 2026,  do individual coops have excess capital? Are these billions of equity above required amounts fueling bank acquisition efforts? Or fintech investments?

Posted on

Stable Coins, Crypto and Human’s Gambling Urge

A number of economic and business leceaders in this era of stock market exuberance note that many of their peers have never managed through an  economic downturn.  Not just an nterest rate cycle as initiated by the Federal Reserve in 2022 to fight inflaiion.  But an actual recession.

A second potential bubble indicator beyond the stock market’s seemingly unending upward trajectory, is the multiple schemes to get rich-quickly.  These opportunities are based on some virtual digital  innovation with an intriguing but  unknowable future value. Hence crypto, stable coins and other forms of new financial transaction-payment business offerings.

The new CEO of Wells Fargo was asked whether the bank would be offering stable coins for consumers.  His reply was pragmatic.  A stable coin is just putting a wrapper around the US$.  “For countries with higher inflation than the US,it might make some sense.  But the use-case in the US is not clear.  Every time you use it you incur transaction costs.”

The Urge for Crypto

Retired Warren Buffet of Berkshire was outspoken inhis views on crypto and virtual currencies..

“Cryptocurrencies basically have no value and they don’t produce anything… In terms of value: zero.” (CNBC, 2020)

In this 2023 CNBC interview   Buffett explains the consumer and market fascination with digital options as another example of the human desire to gamble,.  Humans have an impulse to to take a chance on winning big even when all odds are that will not happen.

(https://www.youtube.com/watch?v=vGVt8Y2ZdWI)

Everybody Wants Your Money

This is a trailer for a recent movie on the crypto environment:  Everybody is Lying to You for Money:   

(https://www.youtube.com/watch?v=DZR7LncSmEE)

McKENZIE-the film’s creator:  Crypto is only good for two things: gambling—is the price going to go up or down?—and crime. The amount of crime that crypto facilitates is staggering. There’s a crypto company, Chainanalysis, that estimated $154 billion of criminal activity was facilitated via crypto last year alone. There’s the bubble idea that the price could, over time, keep going up, as new people flock to crypto as the story continues to spread. And then crime gives it a use case, a reason to be valuable.

The Appeal of Change

The future will be different than today.  Many physical aspects of our world will undergo makeovers and upgrades.

As stewards of member resources and community investments, the challenge for coop leaders is what changes are based on long understood core values; and what new enterprises rely or prey on human shortcomings.

Are crypto and stable coin “assets” adding to a community’s future or merely facilitating member participation in a gigantic, universal digital game?  Is this an area where your credit union should educate versus coordinate member experimentation?

Posted on

Which Priority Matters Now?

The 2026 irst quarter TrendWatch update from Callahans was a very positive description of a financially sound cooperative system.   Here are two slides summarizing key macro trnds. The full slide deck is here. 

 The  balance sheet is strong and gowing.

The income statement shows strong net margins and rising ROA.

Two of the five takeaways by Callahan’s staff were:

Consumers Need Support Now More Than Ever

The commentators  referenced the economic stress citizens feel with a 3.8% CPI increase; the majority who feel their financial circumstances are getting worse; and the K-shaped economy in which stock market’s gains are going primarly to those already well off, not those liiving on their weekly paycheck.

 Now Is The Time To Build Capital And Invest Strategically

With net worth at 11.3%, or over 400 basis points above the 7% well capitalized level, should credit unions continue to add more to retained earnings?

With multiple options, how  should credit union leaders allocate their success between these two priorities?  How would members view this decision?

 

Posted on

Three Comments on the State of Credit Unions

From a retired long-serving CEO observing mergers and governance issues:
We need an S in CAMEL to put the member back in first place among the things the credit union is rated on and that justify the tax exemption. 
We need to allow the state in which a credit union operates to regulate how it operates rather than allow an out of state regulator to make the rules. 
We need to limit compensation for directors, we need to mandate elections, we need to reduce the number of signatures to run for the board and do all we can to make nomination easier and to ventilate board elections, we need to have minimum quorum of members at an annual meeting, either in person or virtual to be some percentage of members.

The Cooperative Advantage

I am motivated by customer-owned models that will always respond to the lifetime needs of my community whether it be culture or tactics FIT to the evolving now of the ownership’s bond.
How are coop financial models more resilient than for-profit private ownership?

For-profit firms always have one foot in the grave via maximizing their liquidation values via the speculation of being compensated for a change of ownership.

At its core,  cooperatives assume a life cycle vision of an infinite marriage with the consumer’s need for a voice in the ownership of their communities’ focus and evolution.  My voice in my community.  (from a cooperative entrepreneur)

A Question for  Credit Union CEO’s from a CEO

If a credit union improves its capital ratio while its members’ average credit score drops, did it have a good year?

We don’t have a standard way to answer that and I think that’s a problem.

Financial health metrics for institutions are mature, required, and reported quarterly. Member financial health metrics are voluntary, inconsistent, and often absent.

To my credit union colleagues:

If you were building a Cooperative Health Index what would you put in it? Or if you already measure whether members are better off, what data do you look at?
NOTE: I’m looking for outcomes produced, like debt reduced. Not programs offered, like free financial coaching.
(from Sarah McNeil, CEO, United Trades FCU)
Posted on

Confessions of a Retired CEO-Favoring Expertise over Common Sense

From a recent exchange on credit union leadership:

In the specific case of the Supervisory Committee I made the mistake of thinking that the lack of expertise was a problem that justified  change. . . the ancient Greeks selected their leaders by lottery and governed that way.  They proved that expertise is not the essential but more critical is widespread participation and representation. 

In my many years as CEO I found that common sense, proximity to the issue at hand, were as important as expertise.  And If expertise was needed it could be hired.  Our Supervisory Committee always had a high-quality CPA firm, a high-quality CFO on staff and a high-quality internal auditor on staff.  When we ended the Supervisory Committee, we lost one more element of member participation.  I did not see the extent then that members would be distanced from their credit union.

I see that distance today.  Credit Union executives are paid far more than most of the members and live a life unlike that of the members, in particular those members and potential members who need credit the most, need financial literacy, need housing, and need a community-based member controlled source of credit.

The Challenge of Distance

This issue of distance is critical to how cooperatives function and the difference they claim to make in members’ lives.

How representative is the board of the membership?  By income levels?  By employment experience?  By proximity? By age?

Are directors appointed for  “expertise” and “community roles” versus lived experience?

How are new board candidates identified and by whom?  Does the existing board reach out to friends first or seek member input and advise?

Inbred Leadership Selection

As in many other areas of life and leadership, an inbred pattern of leadership selection without opportunities for new points of view, is not a problem, until critical choices arise. Should we merge?  Invest in this CUSO venture or in that digital shiny new service?  Even changing to a new supplier trying to enter the market?  Support  a new coop campaign or  assist  another credit union in our area?

When a board opts for friends and experts for leadership, and member voices are not wanted, the critical decisions may reflect a very different  perspectives and criteria far removed from members’ lives.

Effective leadership, especially at crucial turning points, is always a judgment not a technical choice between  competing experts or data projections.  When was the last time your board sought member input on any issue?

Posted on

A Graceful Transition Announcement

Few people recall the circumstances when a leader first assumed the role.  But everyone will know how the person left.  What were the motivations, the timing and most importantly, what happens to the legacy created.

CEO transitions can be moments of honor, but also introduce risks and uncertainty for staff and institutional momentum.

Recently I read the following CEO announcement of impending retirement.  It is gracious, reassuring and most importantly, carefully planned.

The words are well-chosen, a tribute to the confidence staff and CEO share with each other.  It should come as no surprise that this is one of the most successful leadership tenures by any measure, from net promoter scores, community-member  impact and financial soundness.

Most significantly, this CEO is ensuring the achievements are paid forward for the well-being of staff and future members’ children.   The transition continues  local control so that savings and loans are reinvested  into the community that supports it. Although more than doubling in size, the credit union  is still way under $1 billion.

Would all such cooperative  CEO leadership transitions have this  thoughtfulness or, in the words of the CEO, “It’s just business as usual.”

Upcoming Retirement

 

After thoughtful consideration and with both gratitude and confidence in our future, I’d like to share that I will retire from my role as Chief Executive Officer effective December 31, 2026.

 Serving this organization and working alongside each of you has been the greatest professional honor of my career. Together we have navigated change, strengthened our culture, delivered meaningful impact and value to our members and communities, and have posted our Best Year Ever for many consecutive years. I’m proud of what we have accomplished – and even more proud of the people who make this organization what it is.

 A detailed CEO succession plan was adopted by the Board of Directors last year, so know that this transition has been carefully and deliberately planned. The Board’s CEO succession plan prioritizes leadership continuity, strategic alignment, and organizational stability.

 This comprehensive plan has been developed over time, is now being executed and positions the organization for sustained success well beyond my tenure.

 The Board will communicate additional details regarding timing and leadership transitions as appropriate.

 Until then, it is very much business as usual, and I remain fully committed to my responsibilities through the end of 2026.

  I am confident in the strength of this organization, the clarity of its strategy, and the depth of its leadership. Thank you for your professionalism, dedication, trust and friendship. I look forward to continuing to work together over the coming months in our never-ending quest to provide members their  Best  Banking Experience Ever.

 

Posted on

Self-Awareness and Leadership

I heard several graduation speeches at the University of Michigan a week ago.  While the words were directed at the graduating classes, their wisdom went beyond the seniors.

One dean noted that.the four-year journey isn’t  only discovering what area of learning most interests you, but more importantly, who you want to become? What do you want to create? What are you good at? What are your values?   And his charge to the class, stay curious and become more self-aware about your life’s role, whatever that becomes.

I thought how this learning curve applies in most job responsibilities but especially leaders of organizations such as credit union CEO’s.   How many achieve this position of final organizational accountability and then stop learning?  The ascendency is itself was the goal, the payoff.

The CEO Short Timers

An example is a CEO transition failure at Cornerstone FCU which resulted in a merger in just over a year after the Chairman stepped down to become CEO.  This $110 million, community-based operation in Carlisle, PA had become a difference maker in all areas of community life under the long-term leadership of CEO David Keffer.   A transition plan and internal succession in place.  But the Chair decided he wanted the job only to discover he couldn’t handle it.  Within in a year he was reaching out to merge.

CEO’s who achieve the leadership role and stop learning about their own strengths and weaknesses will sooner or later seek a way out.  In credit unions, mergers are a preferred escape route.  Review the Vermont State Employees merger for a case in point.

What Can Be Done?

Personal ambition that overreaches a person’s abilities is not a new leadership issue. But among the many possible antidotes, I believe one idea might help open eyes as these leadership transitions occur. For ultimately these transition failures are examples of character shortcomings.

In American life, the guardians of our values are coaches, teachers, parents, religious and community leaders.  In this arena of moral examples are cooperative volunteers. Their decisions and actions set the circumstances in which leaders are selected and overseen.

If these carriers of our culture’s values fail whether it be in school, civic leadership or volunteer roles, can the organizations  succeed in their public purpose?

While the press and other sources of accountability can call out shortcomings for action, the leaders must still respond.

Living in a moment when “public service” is a grift not a calling, leadership will require an extra effort of courage and conduct,  if the best of our intentions and society’s possibilities are to be realized.   It is sometimes a lonely role, but an example never forgotten.