Category: Co-ops in Capitalism

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Buffett’s Wisdom For Credit Unions: The Casino in the Cathedral

On Saturday CEO Warren Buffett’s four-hour, open-ended Q&A with Berkshire shareholders was a lesson in leadership.  In life’s wisdom. And in human values.   It was his last time as CEO.

If you read one of many excerpts or listen to a recording, you will be rewarded with a superb public discourse.

One observation is especially relevant to an issue confronting today’s credit union system leaders. That is the radically different approaches to assure future cooperative resilience.

The Casino within the Cathedral

Buffett stated in one response:  “Capitalism in the United States has succeeded like nothing you’ve ever seen, but it has what it is, a combination of this magnificent cathedral, which is produced on the economy like nothing… the world’s ever seen. And then it’s got this massive casino attached.”

The casino describes the speculative, short-term, and potentially risky side of capitalism, where quick gains and money changing hands are the primary focus. The allure and rapid growth of the “casino” can lead to the neglect or overshadowing of the “cathedral.”

Responding to a question about hedge funds entering the insurance business, Buffett pointed out that these firms, which specialize in buying and selling businesses, follow different “fiduciary  feelings” than Berkshire.  Berkshire’s goal is to acquire a business for the long term (forever), not turn around and resell for short term gain.  He believes his approach is the best way to create long term value for his owners whom he wants to retain as well.

The Credit Union Analogy

Today there are two broad business approaches followed by credit union CEO’s. Driving these are two different “fiduciary feelings” about where one’s duty is directed.

On the one hand are those who believe the CEO’s primary goal is to maximize institutional growth quickly.  In some instances, this is through mergers or purchasing external assets or even whole firms (banks).

The primary motivation is maximizing the rewards of leadership.  Sometimes this is while employed; or if not then, cashing out by handing the firm over to another credit union for the right personal compensation from a merger.

A growing current example is the increase in “mega-mergers.”  These multi-billion combinations offer the owners nothing that the individual firms cannot deliver.  Sometimes they are an effort to eliminate a local competitor; in others, it is to gain a larger space and personal reward in the credit union Cathedral.

This Casino approach to leadership is described by writer David Simon in the composition Privilege.  It ends with the words, I’ll play by  those rules:

It’s almost like a casino

You’re looking at the guy winning

You’re looking at the guy who pulled the lever

And all the bells go off

And all the coins are coming

Out of the one-armed bandit

And you’re thinking that could be me.

I’ll play by those rules.

A Composition for the “Cathedral”

The purpose which built the credit union Cathedral is captured in this 1850’s folk song by Stephen Foster,  Hard Times Come Again No More.

The first verse sets the scene:

Let us pause in life’s pleasures and count its many tears
While we all sup sorrow with the poor:
There’s a song that will linger forever in our ears;
Oh! Hard Times, come again no more.

Followed immediately by the rending chorus:

Tis the song the sigh of the weary; Hard Times, Hard Times, come again no more; Many days you have lingered around my cabin door, Oh! Hard Times, come again no more.

“It’s a song about poverty–financial poverty first and foremost, but it also hints at a poverty of spirit, of general misery.

“What’s refreshing about it, what makes it stick in our craw, is its honesty. It doesn’t flinch or pull back from showing real human suffering, bringing it to the very entrance to the drawing room: “Let us pause in life’s pleasures.”  (Source)

This 2010 recording is one of numerous current arrangements.  It uses pictures of the Depression to reinforce this 170-year old challenge for the American economy.  It could be a National Anthem for the credit union movement.

This second arrangement is how a credit union leader like  Doug Fecher (former CEO of Wright-Patt CU) might have recorded with his group when presenting his vision.

How credit union CEO’s make this business choice  will determine whether the movement can maintain its Cathedral.  Or become just another group playing in the casinos of capitalism.

 

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An Annual Meeting that Owners Stand in LIne to Attend

Would your members take time to attend your annual meeting?  Is it an occasion the owners look forward to?  Will they learn something new?  Have a chance to meet board and senior staff?  What would the local newspaper or the credit union press write about the event?

Every  credit union that has issued news releases or been in the press this past year knows the value of public coverage.  The annual meeting is an opportunity to celebrate results, profile the leadership and show respect for the owners who make it all happen.

The “Woodstock for Capitalists”

This weekend in Omaha, NE Warren Buffet will lead Berkshire’s annual meeting.  It is a multi-day event for shareholders who travel from across the country and even foreign countries to attend. The excitement and preparations are described in the WSJ article from April 29.  The company has sent tickets to over 138,000 shareholders and another 6,000 to non-owners who want to attend the event and pay $5.

The actual meeting is so popular that CNBC will broadcast the event live-in Mandarin and English.  The high point will be the initial open-ended Q&A with Buffet and deputies answering questions from viewers and attendees—for hours on end.

This public dialogue always makes headlines as the annual report has been released months earlier.  Not just owners, but the general public is interestedd in Buffett’s observations on tariff’s impact, economic uncertainty, the role of America in the world. Viewers will want to know what the company might have in mind with its $350 billion in cash.

Buffett’s annual conclave for individual owners is a long standing show of respect to those millions of small shareholders versus the billions owned by investment companies such as Vanguard or Fidelity.  He rewards their loyalty by being with them, talking openly and sharing his leadership approach including succession.

The spirit is that “we are all in this together” and “I work for you.”  His approach is an example of a leader accountable to owners and creating a community of shared purpose.

A Buffet without Buffett

What credit union wouldn’t want this same spirited outcome?  But few even try even though the cooperative model presumes this same common interest among member-owners.

One credit union that has attempted to create is own sense of shared accomplishment and celebration is the $160 million Affinity CU in Omaha, NE.

At the annual meeting I attended two years ago there were talks by the state regulator, the President of the Iowa Foodbank as well as the required  CEO and Chair reports.  Scholarship winners were recognized, there was a free buffet dinner for entire families, prize giveaways and even video of one of the members telling his story.

The meeting included the election.  After which all board members, new and old, took their oath of office, in front of the owners.

This was an occasion combining all the elements that make Berkshire’s effort a national news event. It is not an organization’s size and resources that creates owner excitement for this required  meeting.  Rather it is the measure of leadership’s respect for the owners for whom they work.

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Fired NCUA Board Member Harper to Speak at Brookings

The Brookings Institution, a Washington DC think tank, has announced the following event this Thursday:

“Credit union regulation at a crossroads: A conversation with former NCUA Board Member Todd M. Harper.” 

Event Details:

Date: Thursday, May 1, 2025

Time: 11:00 a.m. – 12:00 p.m. EDT

Location: The Brookings Institution, Saul Auditorium, 1775 Massachusetts Ave. NW, Washington, D.C. 20036

This is the link to the online broadcast.

Two NCUA Board Members File Suit to Regain their Positions

On Monday, as reported in CU Today, Otsuka and Harper filed suit in federal court to regain their NCUA board seats.

The full 12-page suit can be found here.  One paragraph is especially important right now.  This is a statement about the quorum needed to conduct Board business.  It reads:

  1. The President’s removal of Mr. Harper and Ms. Otsuka has left the NCUA Board without a quorum, rendering it unable to implement Congress’s mandate in full. Only one Board Member, Defendant Kyle S. Hauptman, remains as both the agency’s sole Board Member and its Chairman.

But the Federal Credit Union Act vests the powers of the agency in “the Board,” not in any one individual, with a quorum requiring a majority of the Board. 12 U.S.C. § 1752a(d). And the “agreement of at least two of the three Board members is required for any action by the Board.” 12 C.F.R. § 791.2.

With only a single Member purporting to exercise authority, the NCUA cannot Case 1:25-cv-01294 Document 1 Filed 04/28/25 Page 7 of 12 7 continue carrying out the supervisory, regulatory, and institutional functions that Congress intended to be exercised by a Board composed of at least a majority of its Members.

Despite some agency and other comments, the lawyers assert that a single board member is not a legal quorum to conduct board meetings or other official business.

Questions for Harper’s Conversation at Brookings

The lawsuit is clear in its arguments that Trump’s actions are unlawful.  But it will take time to see how this legal process plays out, and lots can happen in the meantime.

Here are several areas  I hope Harper will address in this week’s public conversation:

  1. Circumstances at NCUA prior to the removals. The action was just prior to a scheduled board meeting in which the downsizing was on the agenda.  What was the proposed action?  Was there consensus among the board?  What internal work did DOGE representatives do?  Why are Hauptman and Fasio included in the suit?  What was their role in this action?  Did you ask NCUA legal staff for their position or to challenge this action?  What is your current understanding of the state of the agency’s staffing-how many are leaving and what critical areas do you see uncovered?
  2. In addition to following the lawsuit and Brookings conversation, what other public actions might credit unions or their representatives undertake to support this lawsuit? Amicus briefs?  How are your legal expenses being covered?
  3. Your role as Chairman at NCUA. Several significant trends emerged during your NCUA tenure in the cooperative system.  Two major ones were the accelerating pace of credit union whole bank purchases for cash.  The second was mergers of strong, long serving and increasingly large credit unions in which  the departing CEO’s and staffs gained significant personal compensation for setting up the merger.  In one case the CEO and Chair transferred $12 million in member equity to their personal control.  You did not address these topics while on the board.  What is your position on events like this?
  4. Your position on potential future regulatory changes. During your tenure as an NCUA board member you frequently cited the FDIC model to recommend multiple changes in the legislation governing the NCUSIF, the cooperative credit union insurance fund.  Would you support merging the NCUSIF and FDIC if that were to be proposed?  A second issue is potential federal taxation of credit unions in some format.  What is your position on such an initiative?

Finally, how might credit unions and the public get in touch with your and Otsuka now that your official emails and contacts have ended?

I intend is to attend the event in person this Thursday.

 

 

 

 

 

 

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An Annual Meeting Experience

The formal invitation came by mail and read as follows:

TowneBank

Cordially invites you to attend the:

Annual Meeting of Shareholders

Wednesday May 14, 2025  at 9:30 AM

The address for the meeting was the Richmond Convention Center. The invite closed:

Lunch will be served immediately after the meeting

Kindly reply by returning the enclosed card only if you plan to attend

The reply card asked if the attendees would stay for the luncheon.   The only required information was first and last name of those attending.  There was an addressed stamped envelope to mail the response.

TowneBank is $17 billion in assets with  2,800 employees in 51 branches throughout the greater Richmond, VA area.   TowneBank  converted from a mutual charter several decades earlier.  In that process depositors could buy  newly issued shares if interested.   My wife converted her  savings to stock.

TowneBank’s mission is:

Serving Our Community

Throughout our growth, we’ve never lost sight of our true mission: to continue to be a community asset by serving others and enriching lives.

Respect for the Owners

As a shareholder-owned financial institution, their board’s  goal is to provide its owners an acceptable return and ensure trust and confidence in the firm’s leadership.   Its invitation is gracious, formal in style and intended to encourage owner participation.  It feels welcoming.

A Credit Union’s Annual Meeting

The annual meeting of many credit unions conveys just the opposite impression.  Member-owners must register in advance to attend the meeting.  The event is often virtual only, with no member attendance permitted. The agenda may state as mine did: 

Matters requiring a vote

Please note that there is no new business to discuss. The only matter requiring a vote of the members in attendance is approval of the 2024 Annual Meeting minutes.

There is no voting for directors as the board nominated candidates equal the vacancies. No new items or old business will be permitted. There will be a Q & A for questions submitted in advance, and sometimes those added during the meeting.

This was the setup for Patelco’s 2025 virtual annual meeting last Friday.  There was much material a member-owner might download at this site.   The State of the Credit Union included 46 slides with much information both financial and operational efforts. The 2024 Annual Report is 18 pages of high level summaries, a financial statement (unaudited) and pictures of staff and board.

Patelco’s annual report and CEO meeting update met the letter of the law, but the Friday event lacked any hint of spirit. No celebration, no thank yous to members and carefully scripted to create an impression of a required exercise versus a shared experience with member-owners.

The Q&A Portion

The only section not prepared and sent in advance were member questions. Some were submitted prior and some during the meeting.

The cyber ransom attack was a major disruption in 2024.  It was discussed in the CEO’s summary and in the Q & A.  New information included an estimated total cost of $64 million of which  $37 million was fraud losses caused by some 6,000  members during the outage.  Their accounts were subsequently closed.  The sale of Visa shares in January resulted in a $35 million gain which helped offset part of the cyber attack expense.

The Annual Meeting’s Intent

Is the Annual meeting a mere administrative formality to be closely controlled by the organizers?  Or, is it an opportunity to enhance member confidence and support for their cooperative?

The meeting ritual can be much more than publishing required data and information. It  communicates leadership’s attitude toward their member-owners. Patelco’s approach signals control not mutual responsibility.  There were two examples that illustrate this approach.

Democratic Governance

When asked about the closed election process Chairman Rivera read the formal steps. He said there were no limits to board terms. Two board members’ service began in 1996. As of the next meeting, five more will have served for over two decades. Longevity is certainly an attraction for those in power.

The Chairman carefully avoided addressing the issue of democratic governance for topics such as: When was the last meeting in which there was a contested vote?  Ever? Why does the board encourage members submit proxies, thus surrendering their right to vote in board elections?  Why are no members allowed to attend in person?  How meaningful is the member’s meeting  in which all business is conducted with only employees present?

At a time when every segment of the country’s democratic processes seem to be under direct or implied threat, why is Patelco shutting down the democratic practice meant to be the hallmark of cooperative design?

This was a missed opportunity to highlight  fundamental cooperative governance.

Questions About Threats from Without

The second reason for engaging members is that this is the source of the movement’s political power.  Credit unions cannot out spend political funds or have enough lobbyists to rely on traditional forms of political influence. It is members voting their self interest that will secure credit union success in DC.

Three questions touched on  national topics. One was whether Patelco was safe and sound at this moment, referring to bank problems. A second asked about possible threats from a government agency. The CEO’s response interpreted the question as referring to credit unions’ tax exemption.

And the last question of the evening: After President Trump fired two of the three NCUA board members—does this threaten our deposit insurance?  CEO’s answer paraphrased: Your deposit insurance is not threatened, the NCUA board is reduced from three to one member but can continue to take the actions it needs to;  your insurance is federally backed. 

These questions referencing the external environment (taxation, NCUA board firings, bank uncertainties) were an opportunity to educate and prepare members for their critical role in countering these threats.  It was the moment to rally the members with straight talk.  Instead general assurances that everything is OK were given.

To suggest taxation is a just another banker’s campaign is to overlook the entire current context.  True as always, but that is not what is going on that makes this a potential opening now. The response that the firing of two NCUA board members means “business as usual” at NCUA and the NCUSIF, is ill informed or naïve.

Both questions were an opportunity to remind members about credit union uniqueness and why there is a federal tax exemption—the purpose and role of cooperatives in a capitalistic market place.   More vital, this purpose is regulated by a unique dual chartering framework. That system includes insurance fund options that require 1 cent of every member’s savings dollar be sent to capitalize their special cooperative fund.

To blithely assure members their fund and NCUA  function like “business as usual” is to misstate the whole intent behind the board’s two removals.  Moreover, the question of NCUA’s single member board authority is anything but settled.

If this is indeed the view of Patelco’s leadership about DC events, they need to do some homework.  More importantly, their power to address these topics will rely on member awareness and the ability to rally their engagement when needed.

The Bottom Line

Credit unions are different by design until those who lead them cease to believe in that difference.

TowneBank believes in courting and encouraging shareholder engagement. They talk the same language as credit unions about community and customer support.  But they back that community spirit up with invitations and hospitality.

Patelco’s actions speak much louder than the many pages of charts, numbers and operational activity in prepared reports. The annual meeting is not a member’s final exam for the prior year. It should be a celebration of mutual progress.

There has never been a time when acting to support democratic values and practice has been more vital.  Credit unions should be leaders in this affirmation of member-ownership and governance.  Without this effort, credit unions will increasingly be perceived as just another example of self-perpetuating oligarchy at work.

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“Take Action Now”

That was the request of O Bee Credit Union President Andrew Downin’s recent letter to his members.

Dated April 18, two days after the Trump administration fired the two democratic board members at NCUA, I thought this was fast action.

The immediacy of the situation was different however:

We need your help. 

A proposed change in Olympia (WA) could directly impact O Bee Credit Union and the services we provide to you and our community. A last-minute amendment was added to Senate Bill 5794 that would impose a new tax on not-for-profit, Member-owned credit unions like O Bee. This amendment was introduced without any public input and ignores the real value credit unions provide. 

This new tax would reduce our ability to offer affordable loans, low fees, and financial support to our Members. It’s not just a tax on O Bee – it’s a tax on you, our Member-owners.

The email closes with this request:

TAKE ACTION NOW*
* This link takes you to a trusted website from our partners at GoWest Credit Union Association.

The letter ends with: Thank you for being a part of O Bee Credit Union. Together, let’s stand up for what makes credit unions special.

What Makes Credit Unions Special?

In this event, the credit union threat is from a change in the state’s tax exempt status. There is direct parallel at the federal level.

But threats to credit unions are more than taxation. Last week the Trump administration took over NCUA.  With a single board member whose term expires in four months, the agency will either bow to Caesar or navigate to keep member-owners’ interest first.

If the latter course is followed, it will need the support and engagement of the members. This existential threat may be harder to rally for member action versus opposing taxation,  No one is for taxes.

But it is critical to point out the NCUSIF logo on the credit union’s marketing materials represents a uniquely credit union designed and dedicated cooperative fund.  Even this email includes the words:  Federally Insured by NCUA.

During the Silver State banking crisis in 2023, the credit union community promoted their separate insurance fund as well as the differences in institutional structure and risk versus banks.

Many factors make credit unions special.   For me the most important takeaway from this communication is not the issue of a tax change or  the current Agency takeover in DC, but rather the request for members to act.

It is member involvement that will separate the credit union issues from the transactional lobbying circus in Washington.   O Bee does an excellent job communicating their credit union’s uniqueness in their monthly messages.

This corporate discipline to stay connected with members is a potent power.  This was the first but not the last time members will be asked to take action in the months ahead.

 

 

 

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What Trump’s Removal of NCUA board Members Means and  Actions Now Needed

The decision yesterday to remove two of the three board members of NCUA without cause puts the future of the credit union system at grave risk.

Why an Independent Agency in 1978?

Credit unions were critical to passage of federal legislation in 1978   (12 U.S.C. 226) to convert NCUA’s single administrator status to an independent federal agency.  This new design was implemented in 1979 with a three-person board confirmed by the Senate.

A major reason for the change was that credit unions were increasingly concerned about the concentration of power and oversight by a single administrator.   They sought a  check and balance of policy priorities with a board where only two members could be from the same party.

The Credit Union System’s Future is At Stake

It was credit union experience and action that brought about this new structure. Credit unions and their members are the immediate losers in the abrupt removal leaving a single person in place. The authority of this remaining NCUA board member is at best uncertain and at worst entirely without agency to undertake regulatory actions.

An NCUA board of two can and has carried out its normal oversight and policy making decisions.   Without a legal quorum for board action the topic of whether NCUA can make any routine or extraordinary decisions is an open question. Can a one-person board issue a new charter, approve a merger, challenge a bank purchase or even hear an appeal of an exam finding?

Undermines Safety and Soundness

This uncertainty will cause both routine and extraordinary NCUA responsibilities to be doubted or mistrusted.  It will erode confidence in the agency’s ability to respond to credit union problems or crises whether singularly or systemic.

Once the public confidence in NCUA’s capacity to perform is questioned, that trust will be difficult to regain.

These firings occurred yesterday, the day before a scheduled NCUA board meeting, subsequently canceled, to present a plan to reduce the agency’s headcount and budget.  Was this action initiated by DOGE inserting itself into the agency’s operations?  What authority if any does the Chairman as a lone board member have?

An Immediate Credit Union Response

This is the third time Trump has removed democratic appointees to an independent federal agency.  In both the NLRB and FTC removals, the persons fired have filed legal challenges.  The outcome in the courts could take months, or even longer to reach a final resolution.  There appears neither a quick nor clear outcome.

However, in the credit union system there is an important option not available in these other agencies.   Credit unions have a dual chartering system.  In ten states, state charters are eligible to leave the federal system entirely and choose a cooperatively designed insurance fund for their members, namely  American Share Insurance (ASI).

An immediate priority for all system components is to expand this option.  In some states the approval can be by the state regulator, authorizing this choice.  In other states such as Michigan it would require legislation.

The time to act is now to establish more options in more states and to educate credit unions that choice is a critical.  This is one means of saving the system from a fate entirely dependent on whatever occurs at the federal level.

The Urgency is Now

Expanding options now is critical because there is a high likelihood other federal shoes will fall. The discussion of federal regulatory consolidation under Treasury is public.  OCC is now a bureau within Treasury run by a single administrator. Another effort to coordinate federal financial regulatory policy would be to have one deposit insurer, not two.

The removal of NCUA’s board members is the beginning, not the ending step in the makeover of federal credit union oversight.   DOGE’s NCUA staff cuts and budget reductions were just a prelude to force consolidation.

Speak UP and Show Up

More details about the state of board deliberations and other changes DOGE may have required would be useful.  It is important that persons seeing these events share what is the state of the agency.  What is the role of Hauptman, the lone board member?  What is the state of the agency’s exam and supervisory capability?  Have outsiders been brought in and what role are they taking?

Silence is the ally of authoritarian behavior.  Every NCUA employee took an oath of office to defend the Constitution as explained in this post, The Oath:

One purpose of the Oath of Office is to remind federal workers that they do not swear allegiance to a supervisor, an agency, a political appointee, or even to the President. The oath is to support and defend the U.S. Constitution and faithfully execute your duties. The intent is to protect the public from a government that might fall victim to political whims. 

Now is the moment  for NCUA employees who believe in the purpose of credit unions to share the facts about what is going on within the agency.  The two former board members should also speak up about recent internal events.

These firings are a direct threat to credit unions’ future. It is an immediate undermining of the safety and soundness architecture of the cooperative system.

CEO’s need to lead the charge, state the problem and mobilize members to protect their system.  This is a moment for direct action.  A time for leaders to make their views known publicly and not attempt to hand over their role to middlemen or fixers who claim connections. It is time for the people in power to see the power of the people.

Credit unions must join the “hands off” demonstrations around the country.  Show up outside NCUA’s office.   Do this often and show the media what is at stake and the willingness of people to protect their member-owned coops.

This is a fight for the future of credit unions.  The industry did not seek it, but must confront this threat. The time for action is now, not waiting to see how this might play out or for some hypothetical political solution.

Credit unions are the latest in a series of efforts by the administration to control law firms, universities, trading partners, etc.   What we’ve learned is that Trump’s first bite of the apple is never the last.

 

 

 

 

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A Statement of Belief from 1935 by Credit Union Founders

Daryl Empen. CEO of Gas and Electric Credit Union, sent me the first Annual Report of his credit union.  The three pages describe the results for members after just six months of operations in 1935.

His comment: While we are offering services today that could not have  been dreamed of in 1935, in many ways, our mission remains the same – improving the financial well-being of our members.  We are still granting loans today for these same reasons and are still focused on improving their lives. 

Sometimes, I think we make this job too complicated instead of focusing on that purpose.  Reading this brought that back into focus for me.  

I share most the typed Report because the context and accomplisments in just six months are remarkable.  The Report discusses the state of the industry in 1935,  presents multiple member benefit examples and projects an unlimited future-in the middle of the Depression. (I added subheads.)

Annual Report of the Secretary of Peoples Power Employees* CreditUnion  as of December 31, 1935  (January 13, 1936)
To the members of the Union:

On the night of May 9, 1935, a meeting was held in this auditorium  for the purpose of discussing what has already provided progressive and far-reaching steps ever taken by the employees of this company- the voluntary banding together of a group of men and women with a common interest for cooperative saving, service and profit; in other words, a credit union. . .

From that day on, your directors have worked untiringly to make this Union an outstanding success. Much credit is due to the President, Vice President and Treasurer  who have met to transact routine Union affairs and emergency business and consider old and new problems.

CUNA, League Membership and Tax Exempt

Among the more notable accomplishments of the year are the acceptance of the Union into the Credit Union National Association and Illinois State League, the exemption from Capital stock and Federal income taxes, the election of President Weise, a director of the Mississippi Valley Chapter of Credit Unions, Treasurer Dau as executive  chairman of the same organization and reduction of borrower’s insurance from 8% to 5% retroactive to October 1st.

Employees Are Benefitting

Already several employees have been released from the clutches of loan sharks, placed on a definite schedule and are fast getting back on their feet.

Others have settled long standing hospital and doctor bills at substantial savings.

Still others are saving for vacations, Xmas savings, insurance, furniture, automobiles and other wants too long to be listed, all of which, can be accomplished at considerable reduction due to elimination of installment buying.

Page 2

. . . today, there are over 3,200 Unions in operation and new ones being formed at the rate of 150 per month. The statutes of 42 states contain Credit Union laws. In Illinois alone, there are 250, Cook County leading with 126. The Tri-City area, with only a recent start already has 14.  (Ed Note: there is no reference to federal charters in these totals.)

The basic soundness of the organization is evidenced by the fact that with banks closing in large numbers, not one failure of an industrial Union mas recorded during the depression.

The movement is only now seriously getting under way and is rapidly spreading to every state in America.

The Depression

The Credit Union has definitely arrived. The question is: Has it arrived in time?

During the past 5 years, the American people have been suffering thru a depression unknown in history. We have machinery in abundance capable of providing a plentiful living for every family in America, but because this machinery is being operated under out-moded financial theories, the result is poverty in the midst of plenty.

And the result of this is a series of mass movements on the part of millions of sufferers. It is useless to point out the futility of most of these movements  such as, “share the wealth” and “soak the rich” or that they are economically unsound.

These people want positive constructive action which will result as soon as possible in definite benefits. And that, it seems to us, is the responsibility of the Credit Union.

You members now have some idea of the relation of money and credit, and our problem is to effect the distribution, not of our present small and dwindling supply of wealth, but of the plenty which we now have the capacity to produce by means of credit.

The credit Unionist can lend his influence to discourage unsound and destructive political legislation which can only result in making conditions worse.

Frankly, your directors have been somewhat puzzled at the continued refusal of some employees to join. Our work is not seasonal and with very few exceptions, there are none of us that are unable to save at least a small sum each month.

Let us look at some of the benefits that accrue to the Union member.

The most difficult step is the first, to resolve that I will have some of my salary laid away for me each month before I can spend it. Deduction is made from your paycheck, this procedure making it even easier than bank deposits.

Once formed, this habit becomes a powerful force as all habits do and before long, the small sums that formerly trickled away, mount up and, before long, the member has a balance that will really be of some benefit to him.

Safe and Sound Operations

Next, the safety of your capital. Your treasurer is bonded. An employee applies for a loan. He must furnish two cosigners, satisfactory to the committee, or collateral, At least one of the directors is personally acquainted with the applicant, we know his reputation, financial status, responsibility and habits. In fact, we know him and his circumstances far better than any bank or loan company can ever know their customers.

In addition, he makes a wage assignment, and his life is insured. The loan is repaid by pay roll deductions, a definite amount each month. And finally, the application is carefully scrutinized and must satisfy the Credit Committee that the purpose of the loan is what we term provident.  That is, the loan will be used for some purpose that will benefit the borrower.

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Already several employees have been released from the clutches of loan sharks, placed on a definite schedule and are fast getting back on their feet.

Others have settled long standing hospital and doctor bills at substantial savings

Still others are saving for vacations, Xmas savings, insurance, furniture, automobiles and other wants too long to be listed, all of which, can be accomplished at considerable reduction due to elimination of installment buying.

An Unlimited Future

The future of Credit Union functions are unlimited. Some are writing automobile insurance, organized collective buying agencies, and deal in certain types of mortgages. Legislation is now pending in Washington for the establishment of Credit Union banks scattered over the various states to act as clearing houses and care for the details and business of adjacent Unions.

Your directors feel that the Union has accomplished a real service in this company. The employee whose mind is free of financial worry is a better workman, and that which benefits the employee, benefits the company.

In a like manner, the things that benefit the company, benefit the employee. For the first time an employee can turn to his director assured of friendly considerate help in his financial problems, instead of appealing to an outside loan company who can and do, charge him as high as 42% per year.

And let me assure you that no director will ever betray a confidence. You can discuss your needs to him with the full assurance that it will never be violated.

A loan case study in the 1935 Annual Report

Consider two options. An employee decides to buy a certain article for $200.00. He can buy it on the installment plan, paying $5.00 per week 40 weeks, or he can buy it through the Credit Union.

He can buy the same article for cash and get approximately 20% off the installment price for $160.00.  He borrows $160.00 at 1% per month on balances for 40 weeks or ten months. The cost of the loan is $8.80, so this desirable article has cost him $168.80.

Buying at the rate of $4.00 per week, he pays $200.00, plus 6% for a year, so that the installment price is $212.00. The Credit Union member pays $168.80 and the non-union member pays for the same commodity from the same company $212.00. The difference is $43.20 or a total of over 20%.

The Savings Advantage

Or, place $200.in a bank. At the end of a year, they will pay you $5.03. Placed in the Union, the same amount at our present earning capacity would produce $10.00

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What Does Your Banner Say?

I took this picture in Bethesda yesterday.  Where do you think this banner is hanging?  The local primary school, our town hall, outside a car dealership, a grocery store, a CVS drug store, or maybe a bank?

It is in the front yard of St. John’s Norwood Episcopal church.  You probably guessed this from the picture.

St. John’s has an active community presence.  My wife has volunteered at their Opportunity Shop for two decades.  A group within the congregation holds regular fund raising efforts for Ukraine in partnership with nearby St. Andrew Ukrainian  Orthodox Cathedral.

Last week the two churches held an Easter bake sale that raised $8,600.  The week before there was an appeal for 200 civilian tourniquets at $100 each.  In three days they collected over $4,000.

Welcoming the stranger,  you might say, is what churches are supposed to do. Right?

A Shared Value

That welcome is also one of the foundations of America as a land of hope and opportunity.  For at one time in our family histories, we were all strangers to this land.

Americans by and large take pride in their roots elsewhere.  In our family the kids trace their heritage back to the Scots-Irish, China, Africa and Missouri.  Why Missouri?  That’s where my Mom and Dad went to get married after Pearl Harbor because there was no required waiting period as in Illinois.

American businesses, such as Ancestry.com and 23 and Me, were created to help us trace our many heritages.  Families sometimes refer to their Mayflower or Daughters of the American Revolution relatives.   We are all immigrants for one reason or another.

However national daily events  are undermining this core American ideal and strength.

Transactions Versus Values

Would your credit union put the above sign outside your main office? Some have sought to serve recent arrivals even using alternative identification numbers.

But credit unions compete in a capitalist society in which dominance and control are sought and celebrated.  The deal maker is now as honored or more so than the entrepreneur.

Credit unions were designed as an alternative to this drive for power.  The industry’s top public policy priority at the moment is to protect their tax exempt status.  This was granted to reflect the non-profit purpose of serving those whose needs were unmet or taken advantage of by profit driven firms.

Values were core to this purpose.  Individuals could find personal economic opportunity through a cooperative structure they owned and directed.

But market realities and personal ambitions have a siren allure that is hard to ignore.  Here is the latest press release of this cooperative drive for market dominance headlined with the words:  A Powerful Partnership

San Diego, Calif., (April 11, 2025) – In a move that would change the financial landscape of Southern California, California Coast Credit Union (Cal Coast) and San Diego County Credit Union (SDCCU) have announced plans to merge, pending regulatory approval and a Cal Coast membership vote.

Upon approval, the combined credit union will boast a powerhouse organization with assets totaling nearly $13.5 billion, 65 branch locations, and more than 1,400 employees serving members in Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, and Ventura counties. The organization will remain the fourth largest credit union in the state and become the 16th largest in the nation.  (emphasis added)

Size, power,  dominance, strength, resilience are all elements of a transaction versus a value motivation.

Both institutions are financially strong, viable, creative and successful.   However the cooperative merger math is that 1 + 1= 1.   No longer are their two boards, two management teams and business strategies seeking to better serve their longtime member-owners.   Not a single benefit is listed that is not already available for a person choosing to join either credit union.  The industry has in fact reduced not expanded its reach.

The Stones Will Cry Out

One would hope that the long standing service of these credit union directors would have given them some insight into what makes credit unions different and successful.  It is not size, ranking within their state or nation, or even the number of branches or ATM’s.

Values inform purpose.  Together they can make credit unions a force to serve where for-profits will not.  Without these integrated in the institution, the cooperative difference is lost.

Values are talked about at funerals.  I attended performances of Brahms German Requiem this weekend.

Two English translations summarize the realities we all face:

“All flesh is as the grass, and all the glory of mankind is as the flower of grass.  For the grass withereth and the flower thereof is fallen.”

And in case we miss the point, “Verily mankind walketh in a vain show, even his best state is vanity.”

The sign above has a little noticed two words in the lawer left hand corner.   It says “Faithful America.”

The Brahms Requiem and two words on the banner remind us of our transient and transcendent opportunities. If we are silent in these moments of responsibility, one  prophecy  says the “rocks will cry out” the truth of our behavior.  What sign will you put outside your credit union?

 

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Our Moral Moments

When Jim Blaine was CEO of SECU(NC) he was sceptical of his peer’s elaborate strategic plans.   Instead he offered his mimalist version as follows:

Vision:  Send us your Moma.

Mission: Do the right thing.

These were guiding principles for how to serve members as well as evaluate tactical business options.

I was reminded of this simple guidance when reading the following “bettter deal” story from a CEO’s update for the staff and board:

Another member, Jessie, was set on purchasing a vehicle from Carvana for $19,880, even though its actual value was $15,300. While he was still willing to proceed, I wanted to ensure he got the best deal.

After a quick search, I found the same vehicle, in the same color and trim, but two years newer at a local franchise dealer for the same price. The vehicle was priced at its actual value, making it a far better investment. Jessie ended up purchasing the newer vehicle and closing through CUDL, securing a much smarter deal.

These are Not Normal Times

Yesterday another administration error was corrected by the Supreme Court which ordered that a migrant mistakenly sent to El Salvador be returned to the US.  The administration denied it had the power to do so.

Senator Cory Booker recently spoke:

“These are not normal times in America, and they should not be treated as such. This is our moral moment. This is when the most precious ideas of our country are being tested….”

As DOGE has now moved into NCUA, it is important to remember Booker’s assertion that,  “In this democracy the power of people is greater than the people in power.”

The Wrong Part

While resignations on principle, the dismissal of career federal employess and wholesale demolition of federal government departments may  seem remote or even necessary to some, the continued destruction of government services will ultimately negatively affect every American.

But we need look no further than credit unions to see how hard it is to follow Jim Blaine’s simple maxim to do the right thing.

CUDaily founder Frank Diekmann recently wrote an opinion piece Lots of Questions About Mergers. He .summarizing the multiple motives given members including examples of questionable accuracy:

The vague claims about “more products and services” and “better rates.” The big payouts for some management teams and nothing for the members. Whopping amounts of net worth just being transferred to the acquiring CU. And relatedly, a question that is never answered: if you’re lamenting you just couldn’t offer certain products and services, why didn’t you tap into some of your deep pile of capital? 

Also related, and a question I wish I could ask of many CUs: where in the world has the board been over the last few years or decade?

Our Moral Moments

What we are seeing in our public and professional lives show the inevitable challenge every person encounters at some point.  Perhaps more than once as we grow through stages of increased responsibility and accountability.

We all believe in our hearts we will do the right thing when necessary.  Unfortunately many others rely on a reality that “everyone has a price” with which they can be induced to go along.

Author and spiritual leader Richard Rohr described this human circumstance as follows:

It may not be in our power to determine how things will unfold, but it is in our power to decide how we respond. It is in our power to hold on to the practices that nourish us, inform us, and give us courage. It is in our power to remain in integrity, to choose nonviolence and noncooperation in the face of all the wrongs we are seeing. 

The beginning of a way out is to honestly see what we are doing. The price we’ll pay is that we will no longer comfortably fit in the dominant group!

Doing the Right Thing may not put you in the dominant group.  Remember that your ability to resist is because others gave you the personal wherewithal to both see and chose another way forward.  That is the individual foundation which all institutions require to survive.   We call that personal responsibility democracy.  It is how we achieved the freedom we share today.

 

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With Whom Do You Share Your Brand?

One of the truisms about branding is that grreat companies create great brands.  Brands do not build great companies.

Tim Calkins is a markeing professor at The Kellogg School of Northwestern University.  He publishes a monthly newsletter, Strong Brands,  providing contemporary  examples from his classroom.

The latest edition includes an update on Tesla, a brand he has written about before.

Tesla
In my last post I wrote about Tesla’s brand repositioning. Things seem to only be getting worse and sales were sharply down in the first quarter. News that the Proud Boys are now showing up at Tesla dealers to show their support will only further polarize the brand.

Driving a Tesla has always been about making a statement. I suspect supporting the Proud Boys wasn’t the statement most Tesla buyers were trying to make. 

Credit unions have both individual identities as well as the generic reputation of being a different kind of financial institution.   What one credit union does well or becomes a front page story,  affects the cooperative system’s brand.

Just as important the individuals and organizations a credit union decides to work with or to support affects their reputation with their members and the communities they serve.

As credit unions decide their NIL relationships, the business partners they seek to serve, and the community events they support, they are creating a reputation much greater than a financial service option.

As boards consider whether to facilitate digital currency options, the sale of marijuana or vape products, or finance options such as interval vacation  ownership, consider the impact on the “brand” the credit union is presenting  members.

When a credit union offers  a special financial product or specific business loans, it endorses that activity.

For example is now the moment to promote a special financing option for the purchase of Teslas?

As in life, what credit unions do with members; money always speak louder than the latest PR or messaging  campaign.