In response to last week’s bog about the gaps in financial education courses for high school students, I received an example of a credit union effort from five decades ago.
In the 1970’s and early 1980’s Rhode Island credit unions were a source of system innovation. The state had a strong dual chartering option. State credit unions were authorized NOW accounts (negotiable orders of withdrawal) a forerunner of share drafts and checking.
There was a private share insurance option which was initiated because NCUA would not insure the credit union NOW accounts. That insurance option was also provided to Rhode Island’s mutual savings banks. That dual coverage became an Achilles heal during the S&L troubles in the mid- 1980’s.
The state field of membership options included the traditional employer, community, and associational common bonds. The community charter included anyone who lived or working in the state.
Rhode Island’s influence extended to the national leadership where Joe Cugini, President of Westerly Community Credit Union, was serving as Chair of CUNA when Ed Callahan, Bucky and I arrived at NCUA in 1981.
But an even more unusual leadership role was that of the league President, Bob Bianchini. While League President, he was also elected and served as a state representative in the Rhode Island legislature.
Here is his account of his focus on consumer financial legislation while in the legislature.
“I was elected in 1978, at the same time I was serving as President / CEO of the Rhode Island Credit Union League. Serving in the legislature was a part time endeavor (legislators were paid $300 dollars a year) so most everyone who served also had other employment or other sources of income.
“Credit union issues were not often paramount during the time I served. When legislative efforts regarding consumer financial services were proposed, credit unions were almost always included in any proposed legislation.
“I avoided sponsoring any legislation that affected financial institutions, but to be completely candid, when such legislation was proposed, my colleagues often would ask me for an explanation and my opinion. I would often do the same when bills were proposed that impacted other industries. I would frequently seek an explanation or points of view of my colleagues who labored in those particular industries, such as education, legal, automotive, medical etc.
“When I proposed the consumer education, the first legislators from whom I sought support were the teachers who served with me in the House. My explanation of what I hoped would happen would be that kids would receive information about basic consumer education. For example, how to balance a checkbook, what types of savings and loan products were available to consumers, the importance of balancing income and expenses. I’m sure there were other topics included as well.
“The opposition to my original bill from the Department of Education was based more on a standing concern by the Department. They opposed any specific topics inserted in school curriculum through legislative efforts, rather than opposing the idea that kids should be exposed to basic consumer education.
“The compromise we reached was that consumer education would be included as part of all social studies classes. I can’t recall if it was 8th or other grade levels.
“It’s now 43 years later and I don’t know whether that practice still exists. If it does, I would think it might impact the grade level assigned to the state’s commitment to taking financial courses.
“At that time, I informed our league board and legislative committee of my efforts. Although I can’t recall other legislative and regulatory issues that the league was following then, I’m sure it was a full agenda.”
Learning from others is how many inform their own leadership approach. Each month Weokie FCU’s CEO Jeff Carpenter sends a briefing to staff about the important events.
The brief excerpts below are from his April update. Used with permission.
The complete report includes pictures, member testimonials, project priorities and performance numbers.
Open communication contributes to shared efforts with common purpose. Both are vital for effective organizational performance.
Living Our Vision & Mission
WEOKIE adopted a new vision in 2022 and has been working hard to make the vision, not just words on a paper, but a reality. I wanted to pause a minute each month to share some of the “stories” of how we are “making a difference, one person at a time”
Calculating the Coop’s Value
Why Cooperation Matters
“Cornerstone IMPACT 2022: I attended my first “in-person” meeting of the Cornerstone Credit Union League’s Annual Meeting and Convention entitled IMPACT.
“WEOKIE is stronger when we cooperate with other credit unions and the Cornerstone League is a great facilitator and cause agent for credit union collaboration.
“The meeting had excellent educational content and numerous opportunities for R&D (Research & Development, aka Rip-off & Duplicate) great ideas that other credit unions are pursuing.”
America loves innovation. Especially in technology. We celebrate, honor, and enrich those entrepreneurs who bring efficiency and ease to our life and work with their inventions.
Technology underwrites greater productivity, reach and speed in credit union services. It enables 24 by 7 interactions. Manual processes from loan underwriting and live teller interactions are replaced by AI decisioning and intelligent teller machines (ITM’s).
Even phone responses and “live” chat are now automated to the point where one must opt out to “speak” with a real person.
What society prizes, is what the people will create. One writer contrasts our modern view of success with the culture in ancient Greece.
The ancient Greeks gauged progress differently from us. “What is honored in a country will be cultivated there,” Plato said. The Greeks, imperfect as they were, honored beauty and justice and moral excellence, and so they cultivated these values. We honor speed and connectivity and portability, and so that is what we get.
The author asserts our current focus leads to: “cognitive dissonance from our misplaced faith in technology, and an attendant disregard for other forms of human progress.”
The Introduction of “Slow”
I was reminded of this contrast between ancient and modern values after reading about a new approach in retail services in Europe, called Slow Checkout.
Jon Horvat describes this approach in retail and service industries: With so much buying happening online or through self-service kiosks, the art of shopping has lost much of its attraction. Some market-savvy executives have noticed this shortcoming and have recently introduced slow checkouts, which turn the routine chore into a meaningful experience.
Many retail experiences, that is personal shopping, are no longer personal. Human contact, especially the kind of interactions characterized by local farmer’s markets have been eliminated in the race for self-service and cashless checkout innovations.
The pressure to automate customer interactions will only accelerate as labor shortages occur in many retail service sectors.
Executives at several retail grocery chains in Europe noticed something was missing in their retail experiences. Some customers wanted human interaction. Jumbo a Dutch supermarket chain and Carrefour, the French grocery leader, both introduced “slow checkout” lanes after discovering that people wanted to chat when then paid for their groceries.
Harvat describes this approach as follows:
These small-talk cashier lanes are gaining popularity. They are called “chitchat” checkouts. The French name, blablabla caisses, is a bit more expressive.
About 150 of Carrefour’s French stores have opened blablabla caisses, with plans to have at least one till in every location by the end of March. The lanes are marked for only those who want to talk with cashiers. There are no time limits for the customer, although most try to respect those waiting in line. The lanes come at no extra cost to the consumer.
Shoppers are encouraged to take their time on the slow checkouts; cashiers greet with bonjour and can ask about the family or the weather. No managers will be around to speed the process up. The aim is to slow it down.
Both customers and cashiers report greater satisfaction in their roles where interaction is encouraged. Shopping is a social experience, not just a purchase transaction. Small talk is an important experience for people living alone or feeling lonely. Cashiers enjoy the opportunity to communicate with people, giving them a sense of expanded agency in their interactive role.
Credit unions have traditionally been an area where these interactions have been a valued part of the member experience. Members get tired of talking to machines or referred to online applications or processes. They want to talk with real people.
People are social creatures. These chit-chat interactions show that economics, the best rate or the fast turnaround, is not the only, or even the most important, human need in every circumstance.
Every person has needs that surpass material economic sustenance. Humankind does not live by bread alone.
The Boutique Credit Union
One person who has recognized this critical capacity for human interaction is Bo McDonald. He is a credit union consultant who has focused on the unique capabilities and experiences provided by smaller credit unions. While some may see credit unions with assets of under $100 million or below the credit union average size as a disadvantage, he sees these as “boutique businesses.”
When inspired by passion they provide member experiences long lost in some billion dollar institutions. Ultimately every credit union is founded on relationships, even if the only measures traditionally used are the number or size of transactions.
These boutiques may not have the growth patterns of their larger brethren; but they demonstrate the enduring power of cooperative design. For when we look under the technology covers increasingly deployed by credit unions, we learn that what members really value is someone to talk to when they have a need.
Boutique credit unions demonstrate that real progress can also be achieved by slowing down and giving members your undivided attention.
While reviewing an exam for a billion-dollar credit union of 25 pages, nowhere was the word cooperative used. There were no comments on any of the credit union’s responses to members during COVID, their PPE loans and multiple community involvements including expanded DEI. If the name were removed from the exam, it would be impossible to know it was a credit union, not a bank.
“While I am a fan of REI, I would like to mention (and this is probably not a surprise to you) that they too have a tendency towards oligarchic governance you have talked about in the context of credit unions. If I recall correctly, to be eligible for a candidacy in board elections you have to have leadership experience in a Fortune 500 company.
“We desperately need legislation that ensures fair electoral practices in co-ops. Glad you are advocating for this in credit unions. REI is a great company and credit unions are great – but they also need some tough love. “ (Leo Sammallahti)
“I’m sure REI is admirable in its promotion of important values. However, the current unionizing effort does not seem to put REI in a good light.
“My own experience in a nonprofit progressive worker-rights advocacy organization (prior to joining the credit union movement) was that the management vigorously fought our efforts to unionize. It’s not an uncommon story among “liberal” organizations. Our effort was ultimately successful, but it taught me a lingering lesson about progressive hypocrisy. The co-op world is not exempt.” (Cliff Rosenthal)
Here is a small sample of the number of job openings from Sunday’s CU Insight:
77 positions at Lake Michigan Credit Union
65 or 5.4 percent of NCUA’s authorized staff of 1,201. Fifteen were at Head Office and 50 in the regions (from NCUA Operating Fund report)
40 positions at Michigan State University FCU
37 positions at True Sky Credit Union
What do these Observations Mean?
Is our cooperative model struggling? Is our business merely subject to the same economic forces affecting every other firm? Are credit unions even addressing the multiple challenges of inequality existing in every community?
In some respects the cooperative model is not working well. On the surface we increasingly appear as just another financial option. In many cases, let’s be frank, credit unions are not much different from many other financial choices in their behavior and impact on their communities.
Instead of transforming financial opportunity, credit unions increasingly embrace the tactics of their competition including purchasing banks, mergers (sell outs) of sound long- serving coops, and measuring performance by strictly financial and growth goals.
Recapturing our Promise
Occasionally a story appears in the press about a find in a flea market or an opportunity shop. A person discovers an antique looking Roman bust selling for $34.99 in a Goodwill store. She later learns it is 2,000 years old and priceless.
Sometimes in life we do not understand the value of what we have.
But every credit union, not matter its size, has a founding story and purpose. Every board inherited a legacy of power, fortitude and energy to make life better for members.
But does senior management and the board know what they have? That is, an institution with the power to override the ever present push and pull of market forces of greed, domination and even exploitation?
The credit union charter is intended to enrich its members versus building institutional glory. Every charter comes with that hope and potential.
So what is lacking today for why this transformative promise seems to be missing?
In One Word: Imagination
One of the examples of creative capability was Ed Callahan’s way of presenting the potential for the credit union movement, both as Chairman of NCUA and as CEO at Patelco Credit Union.
He believed the credit unions were “a sleeping giant,” or America’s “best kept secret.” They should be an option for all Americans. Whether retired, between jobs or even for college and high school students. The field of membership was an inclusive, not an exclusive concept.
In practice he did not let current reality limit what the future could be. The NCUA exam cycle was over two years for federal charters when he arrived. He held a “fire drill” that resulted in every federal credit union filing, for the first time ever, the yearend call report. Working with regional directors, every federal credit union had an exam contact in 1982, and each year thereafter.
To celebrate the 50th anniversary of the passage of the Federal Credit Union Act, he announced a movement goal of 50 million members by 1984. He inspired the largest credit union conference attendance ever in December of that year when state and federal examiners and credit union leaders came together in Las Vegas to debate their future.
Working with credit unions, the NCUA’s share insurance fund and CLF were redesigned following cooperative principles to create a three-part regulatory framework for the cooperative system.
These transformative events were inspired by the promise of what credit unions could be. He recognized that in the new era of deregulation not all would perform with the same capability. But working together, the system could position every credit union to be a competitive and valued experience for members.
Imagination was fueled by belief in what the pioneers had envisioned. While the three current observations above may seem like challenges, they are opportunities to create a better coop system.
Let’s be honest. Credit unions have always been understood, even trusted, as more than another financial choice. They represent a member-centric focus dedicated to improving members’ lives and community options.
They are more than a financial institution. Credit unions at their best represent the common hopes of young and old for a better life and a meaningful role in their chosen community.
The tools for transformative change have been a part of the cooperative model from the beginning. What is needed is imagination tempered with vision and compassion.
Then indeed, the “sleeping giant” will be truly awakened.
Credit unions are strong proponents of democratic values. Until they have to practice them.
I was reminded of this reluctance in a press story of a recent merger approval. When asked about the vote tally, the credit union did not answer how many of its 9,870 members supported their charter cancellation:
Members of the $137 million Embark Federal Credit Union in Great Falls, Mont., voted to approve a merger with the $1.7 billion Horizon Credit Union, the Spokane Valley, Wash.-based financial cooperative said in a prepared statement Tuesday.
Horizon did not disclose the final vote tally. The credit union did not respond by deadline on Tuesday afternoon to CU Times‘ request for the member vote count.
Reporting the vote outcome, but not the actual numbers, suggests the credit union does not want the totals known. The credit union provides the veneer of democracy but not the facts of how many member-owners actually participated in this required step to give up their charter.
To paraphrase a term from writer Jared Brock, credit unions have become “cooperative oligarchies.” The word comes from the Greek oligarkhía, meaning “rule by the few.”
Merriam-Webster ‘s definition: “a government in which a small group exercises control especially for corrupt and selfish purposes.”
Democracy has rarely been tried by capitalists. Can credit unions really go against the incessant drive for corporate dominance and consolidation of power sought by firms in “free” market economies?
Many CEO’s and credit union boards don’t want democratic governance. They want silent customers who will passively accept the leaders who achieved their roles years, or sometimes decades, earlier.
What they ignore is that members are the political constituency to whom fidelity is owed. Boards and CEO’s are nothing without members. Members deposit the funds, borrow for loans, pay the fees and generate transactions that keep the credit union revenue flowing.
Member-owners are the reason credit unions exist.
Members keep the lights on.
Members create 100% of the wealth for their cooperative.
One would think it required practice to tell members the vote tally in this management initiated effort to give up their independent credit union charter. Especially as the CEO was awarded a $100,000 bonus and continued employment at an increased salary with the continuing credit union.
Horizon Credit Union assumes Embarks FCU’s member capital of $14 million, (approximately $1,500 per member). The members get rhetorical promises about the future.
Is this the democratic model that will sustain members’ belief in credit unions?
Since the NCUA updated its rule for mergers in 2017, almost 1,000 voluntary mergers have been completed. In the first quarter of 2022, 41 mergers involving 366,000 members and $5.5 billion in assets were announced.
These were overwhelming strong, long-serving successful credit unions whose boards and CEO’s decided to turn their loyal members’ futures over to another firm.
The 2017 rule was intended to correct self-dealing transactions that were prompted by payouts to senior managers and staff to incent sound credit unions to give up their charters.
The rule required disclosure of all compensation related benefits that would not have occurred if the merger had not taken place. The result has been some, but not all disclosures of promised payments.
The rule has not prevented enrichment, but ironically validated them. The amounts and creativity of merged CEO payouts are growing. Financial Center CU’s CEO and Chair transferred $10 million of the credit union’s capital to their private firm incorporated just prior to merger.-all with NCUA pre-approval. In the merger of Xceed CU the CEO negotiated a $1.0 million dollar merger bonus while promising members to look after their interest as President of Kinecta FCU for three years-only to leave within six months.
The CEO of Global negotiated a “change of control” clause in his contract that will pay him $875,000 upon merger with Alaska USA. Change of control is used in stock corporations for managers who might lose their positions in a sale of the firm. In this case the CEO negotiates the employment clause, seeks out a merger, retains employment post merger as President, Pacific and International Markets, and pockets the money for the deal whose terms he set up.
The Banking Industry Is Looking at Merger Practices
In a May 9, 2022 speech at Brookings, the Comptroller of the Currency announced a review of bank merger approvals:
From my perspective, the frameworks for analyzing bank mergers need updating. Without enhancements, there is an increased risk of approving mergers that diminish competition, hurt communities, or present systemic risks.
Bank mergers should serve communities, support financial stability and industry resilience, enhance competition, and enable diversity and dynamism of the banking industry. Revisions to the bank merger framework would help to realize this goal.
NCUA’s rule 2017 merger rule was off target. It did disclose self-enrichment, incentives which were common place. But it did not prohibit them.. The rule entirely missed the Agency’s primary job which to protect members’ interests.
The evidence before and since the rule indicates that managers and boards act without consulting members, negotiate terms privately, and then present the events as final only needing the members’ perfunctory ratification.
Formal member approval is a foregone conclusion. All of the resources, information and control was in the hands of those who set up the deal. Members are unable to challenge let alone question the actions.
As members are shut out of the process, the concept of member owned financial institutions becomes a fiction. Boards and management control the fate of a charter, its resources and relationships. Members’ interests, loyalty and accumulated wealth are just pawns in management’s efforts to enhance their well-being.
As demonstrated yesterday, the majority of mergers are sound, long-serving and certainly capable of operating on their own.
How does one bring balance, objectivity and most importantly, member interests, to the fore in this increasingly wild west of uninhibited sellouts of cooperatives.
One writer, Denise Wymore, has urged a greater commitment to purpose by credit union leaders.
Decisions, not conditions, determine your credit union’s future.
Do we look for the why behind a tough situation or do we just complain about it? Increased regulation, cost of technology, economies of scale, expanded products and services, lack of succession planning. Struggling to achieve a goal is normal and natural. Is it possible to work together to address the challenges facing “at risk” credit unions?
You have to find meaning, a purpose, something bigger than yourself. Reflect and think about your credit union’s purpose, passion, meaning…
The Comptroller outlined enhanced regulatory reviews such as:
“Community feedback on the impact of a proposed merger also is important. . . .For example, for mergers involving larger banks, , the OCC is considering adopting a presumption in favor of holding public meetings.” and,
“The OCC takes into account an acquiring bank’s CRA rating and performance. Banks with unsatisfactory CRA ratings are highly unlikely to receive merger approval.” and,
Financial Stability in “too-big-to-manage is a risk with mergers, especially for banks engaged in serial acquisitions.”
Whether NCUA can reassess its role in mergers is questionable. Unless political pressure from the Congress is exerted, NCUA seems oblivious to the reputational and safety and soundness implications of the wheeling and dealing now occurring, and the harm done to the communities who are losing their local institutions.
Putting Market Forces Back In transactions
I believe two changes in merger policy are required. The first is make members’ interest the paramount criteria in any proposed charter cancellation via merger. Secondly members should have the benefit of market forces to inform their decision.
Market choice would entail that all credit unions who decide to explore mergers would announce that intent publicly, invite all parties to express interest (both credit unions and non-credit unions) and then select the option the board believes meets the test of members’ best interest. The full process would then be presented to the members for their approval or turn down.
The options for future employment, products and services, return of member capital would all be part of the public record and members would have the information needed to make an informed choice. If a firm that is not selected wants to make a better offer, it would be able to do so and ask the members to turn down the board’s recommendation.
Putting Members Back in Charge
This change would place members in charge of the future of their credit union; not management and its personal preferences for future employment.
Mergers when sought should be a means to the end of enhancing member options and value. Today mergers alone have become the goal. They are about self-dealing, power and control by a few. It is time that members are given the choice about who they want in charge of their shares and loans.
This score is not the opening of an NBA playoff game. It is the number of credit union charters given up versus new charters issued in the first three months of 2022.
What does the score mean? Why is it so lopsided? More importantly, are any members winning in these charter closures?
365,700 Members Lose their Credit Union
The 41 credit unions’ CEO’s and boards are transferring their 365,700 members to another credit union’s control. These members did not choose this fate. In fact they showed continued loyalty: total members increased by 2% and share grew by almost 11% for the year ended 2021.
These members have $3.3 billion in loans and have placed over $4.7 billion in savings to benefit their fellow members. Collectively they have created over $540 million in common wealth, none of which will be distributed to them. Their average ownership is $1,500 each.
There is no information that any of the members were consulted before the boards and CEO’s made these decisions.
Check the Box Explanations
The Credit Union Times article categorized the 41 by the explanation NCUA provided when approving the mergers as follows:
“34 credit unions that received the NCUA’s nod to consolidate for expanded services, two credit unions got the OK to merge because of poor financial condition, two for inability to obtain officials, two for lack of sponsor support, and one for loss or decline of field of membership.”
The continued growth in shares, membership and most importantly, the 47% increase in loan originations in 2021 suggest this group was more than competitive based on the latest performance data. They ended the year with 9.9% net worth, delinquency of .55% and a collective ROA of 1.25%.
These 41 credit unions are sound performers which the members are loyally supporting.
The Largest Three
The three largest charter cancellations are the $2.5 billion Capital Communications FCU, the $612 million Global CU and $524 million People’s Trust FCU. What they have in common is they are turning over the keys to their operations to credit unions already operating in their communities.
This means these six-decades old institutions are combining with other local credit union competitors. The effect will be to reduce member choice, end opportunities for local leadership, close career options for employees, and extinguish the generations of earned loyalty and goodwill with members and local constituencies.
These credit union’s hundreds of millions of collective capital will be under the control of directors the members did not elect and who will have broader corporate goals then just serving the newly acquired members and their transferred wealth.
These combinations eliminate local options and the diversity of models and service approaches that make credit unions successful. Consolidation and concentration which reduces local competition may make life easier for managers. It does not enhance member choice.
The most important math in credit union mergers is the 1 + 1 = 1. There is no expansion of credit union coverage; the system did not grow market share; the members gained no immediate benefits. But they will pay all the costs of merger including the cancelations of vendor contracts, employee benefits, and of course the help of professions who facilitate the deal making.
A Game without Rules or Umpires
Mergers of sound, well run credit unions are not benefitting members. Rather they have become a sop for managers to game the system for self-benefit and boards who have lost any sense of fiduciary responsibility.
Competition depends on rules, and rules depend on umpires. We should fight to protect competition — not winners. Because winners subvert the process. In the name of competition, they demand that their anticompetitive acts go unpunished. In the name of freedom, they insist on their right to shout down the dissenter’s voice.
His thesis is simple in capitalist economies: No field sees winners try to retract the ladder behind them more aggressively than businessor I might add, the CEO’s of sound merging credit unions.
The primary advantage of the credit union model is the member relationship grounded in democratic ownership. Their unique advantage is their local knowledge and relationships that provide members a sense of agency over their lives and communities.
That goodwill, built up year by year over generations of members. is sacrificed in mergers.
NCUA requires new charters to survey potential members to demonstrate support, years of financial projections, vetting of proposed board members and employees with a process that takes hundreds of pages of documents and generally years to approve.
To give up a successful coop charter which took generations to succeed, is literally approved in weeks. The form is perfunctory, there is no effort to validate the reasons given nor the rhetorical promises made.
The credit union system is failing the members who created it by routinely approving consolidations that mimic the activities of institutions for which credit unions were supposed to be an alternative.
At a time when individuals and communities are confronted by forces, events, private and governmental institutions over which they have no say, the credit union is supposed to be an option they can count on. Mergers destroy this sense of influence over events in one’s life.
The score this quarter is 41 to 0. At the moment, the members are losing this game.
Tomorrow I will provide some thoughts of others on what might be done.
60 years ago seven employees of the Philip Morris Company formed a credit union to serve their employees. It cost 25 cents to join.
What is noteworthy is that the founder’s commitment, the human motivation required by any coop startup, still drives Call Federal today.
The mission statement is “passionately local banking.” The focus is building lasting relationships and giving back to the community. That commitment is stated as follows:
Call Federal has called the banks of the James River home for more than 60 years. Our employees live here, all decisions are made here. The money we make here stays here. We’re invested in this community, because it’s our community too.
The Members’ Voice
I learned about this “passion” for member service in a video celebrating their 60-year charter milestone. The three minutes is almost entirely member interviews. The culture of member service is described through real experiences. These are situations where the credit union has made a difference in members’ lives spanning generations.
The CEO John West recalls his predecessor, Roger Ball–CEO for 36 years–saying that service is not just the words used, but how you make members feel.
West’s current senior management team brings varied career backgrounds to the organization, not limited to financial services. “We want employees to span different schools of thought to continuously enhance our member relationships.”
West’s background illustrates this prior life and work experience. In November of 2021 he was appointed to the Board of Families Forward Virginia. The press release tells how this appointment aligns with the credit union’s mission:
Families Forward Virginia is the commonwealth’s leading nonprofit organization dedicated to disrupting cycles of child abuse, neglect, and poverty. . . Working with parents and their children, the statewide nonprofit provides Home Visiting Programs, Family Support, and Education, Professional Development, Child Sexual Abuse Prevention Programs, Advocacy, Public Awareness/Public Education.
Prior to joining Call Federal in 2012, West was a senior accountant with Mary Washington Healthcare. Before that he worked for the United Way of Fredericksburg. West is a graduate of Leadership Metro Richmond and served for one year with Lead Virginia.
West commented on his appointment: “Growing up in cooperative housing for steel mill workers, I know the value and importance of a strong community. Part of our mission at Call Federal is recognizing the stress that financial burdens can create.”
A Creative Financial Wellness Program
One example of how the credit union addresses this “stress” in members lives is its creative Financial Wellness Program. The program rests on three unusual principles to help members “be more confident in their financial decisions.” The three are:
Create Self-awareness. Discover your “money personality”: the habits and attitudes that influence your financial health, for better or worse.
Understand the fundamentals of money management.
Go Beyond by taking care of your physical and mental health and by giving back to your community and the world around you.
One example of this holistic approach to member financial well-being is a free resume review. Other services include coaching, financial workshops, even for kids, and articles to help members with both financial events and career planning.
Sustaining the Movement
Speaking with West about how the credit union sustained the founder’s original passion for serving members, he replied that the effort was not merely a credit union story. Rather it is the “human story,” that is, serving each other while living in community.
The credit union’s 2021 “State of the Union” video below describes the credit union’s response during COVID. It includes two members recounting their personal circumstances, an employee’s special efforts to help staff and a community agency discussing the credit union’s steadfastness. Each person speaks with passion about their credit union connection.
That passion is the difference that never grows old, no matter a credit union’s charter date.
(https://youtu.be/K4REjbxV68A)
60 years ago seven employees of the Philip Morris company formed a credit union to serve their employees. It cost 25 cents to join.
What is noteworthy is that the drive and commitment, the human capital required by any coop startup, still motivates Call Federal today.
The mission statement is “passionately local banking.” The focus is building lasting relationships and giving back to the community. That commitment reads as follows:
Call Federal has called the banks of the James River home for more than 60 years. Our employees live here, all decisions are made here. The money we make here stays here. We’re invested in this community, because it’s our community too.
The Members’ Voice
I learned about this “passion” for member service in a video celebrating this 60-year charter milestone. The three minutes is almost entirely member interviews. The culture of member service is described through real experiences. These are examples where the credit union has made a difference in relationships that span multiple generations.
The CEO John West recalls his predecessor, Roger Ball who was CEO for 36 years, saying that service is not the words used, but how you make members feel.
West’s current senior management team brings varied career backgrounds to the organization, not just financial services. “We want employees to span different schools of thought to continuously create value in our relationships.”
West’s background illustrates this prior life and work experience. In November of 2021 he was appointed to the Board of Families Forward Virginia. The press release tells how this appointment coincides with the credit union’s mission:
Families Forward Virginia is the commonwealth’s leading nonprofit organization dedicated to disrupting cycles of child abuse, neglect, and poverty. . . Working with parents and their children, the statewide nonprofit provides Home Visiting Programs, Family Support, and Education, Professional Development, Child Sexual Abuse Prevention Programs, Advocacy, Public Awareness/Public Education.
Prior to joining Call Federal in 2012, West was a senior accountant with Mary Washington Healthcare. Before that he worked for the United Way of Fredericksburg. West is a graduate of Leadership Metro Richmond and served for one year with Lead Virginia.
West commented on his appointment: “Growing up in cooperative housing for steel mill workers, I know the value and importance of a strong community. Part of our mission at Call Federal is recognizing the stress that financial burdens can create.”
A Creative Financial Wellness Program
One example of how the credit union addresses this “stress” in members lives is its creative Financial Wellness Program. The program rests on three unusual principles in their efforts to help members “be more confident in their financial decisions.” The three are:
Create Self-awareness. Discover your “money personality”: the habits and attitudes that influence your financial health, for better or worse.
Understand the fundamentals of money management.
Go Beyond by taking care of your physical and mental health and by giving back to your community and the world around you.
An example of this holistic approach to member financial well-being is a free resume review. Coaching, financial workshops, even for kids, and articles help members with both financial events and career planning.
Sustaining the Movement
Speaking with John about how the credit union sustained the founder’s original passion for serving members, he replied that the effort was not merely a credit union story. Rather it is the “human story” of providing service to each other living in community.
The credit union’s 2021 “state of the union” video shows how the credit union responded during COVID in this five minute video. It includes two members recounting their personal circumstances, an employee’s special help for staff and a community agency discussing the credit union’s steadfastness. Each speaker communicates passion about their credit union connection.
That is the difference that never grows old no matter a credit union’s charter date.
Reverse Robin Hood: Bank Purchases by credit unions
A response to my comments in a recent conference call: Your points that really resonated were lack of transparency and accountability inherent in the cooperative governance structure. Also the fact that the bank acquisitions are taking money from CU members to line the pockets of bank shareholders, truly a reverse Robin Hood situation.
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“If My Words Can Convince One Credit Union”
I think CEOs just get tired. I think boards can get tired, too. And they think if our current CEO can’t make this place grow, who can? They see the simple solution is to merge out.
I am telling small credit unions that is a mistake; at least look for someone. I have had conversations with a number of CEOs who are retiring from small credit unions and they’re not even considering looking for somebody. They aren’t doing anything. They are not telling their boards to look for somebody. In fact, they’re telling the board the opposite—nobody can do this job at my pay.”
That type of thinking, and an unwillingness to “fight,” is hurting the movement.
“If my words can convince one credit union…if one credit union decides not to give up and says at least I will look for a replacement for the retiring CEO, I will feel good. I hope more small credit unions will follow what we are doing here.” (source: David Sawin, CEO, MN Catholic Credit Union, interview in CU Today)
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What’s Missing?
“I am starting to think that credit unions are a waste of my time.
. . . as best I am able to ascertain, CUs are essentially just nonprofit banks – institutions that exist first and foremost to keep their employees employed and to keep the regulators happy. The trappings of cooperation – invocations of principles, mechanisms for elections of board members, etc. – are either ignored or treated as empty formalities.
The new CEO of the CU on whose supervisory committee I serve told me that members simply don’t give a damn about that stuff; they just want convenience.
From my perspective, if CUs are just going to do exactly what the local banks are do, then I might as well just move my accounts over to banks. What am I missing? (name withheld by request)
An uncomfortable change in the conversation (with regulators) will require incredible bravery. I’ve been kicking around CU’s all my life. My parents were members of a Teachers and a Manufacturing credit union. I have been on Boards and now a CEO.
I have studied the history of the movement and the credo’s doled out as battle cries. We were “choice”, we were “people helping people” – those goals were always color and socioeconomically blind as we emerged fighting against banking practices that were not–think redlining.
But we forgot one credo recently – “not for profit, not for charity, but for service.” Since this credo does not make a singular virtue of EQUITY, can we no longer espouse it?
The conversation change needs to be about DOI – Diversity, OPPORTUNITY, and Inclusion. We were born out of opportunity and we are still built on it. Will we be brave enough to say it? We don’t need to be admonished with a new recitation.
We just need to remember our founding principles – which are both relevant and powerful. (David. A. Jezewski, President/CEO, CommStar Credit Union)
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Dear readers do not despair. Tomorrow, Friday the 13th, is good news. I will tell the story of a credit union that believes in the power of cooperative design.
In America the press is often called the “Fourth Estate.” The term places the press’s role as critical as the three branches of government: legislative, executive and judicial. It signals the watchdog role of the press, so vital to a functioning democracy.
What is the state of press coverage of credit unions? Especially now that coops are the second largest depository system in the economy, serving over 100 million members and managing $2.2 trillion assets.
A Brief Credit Union Press History
Today’s independent coverage of the credit union system evolved from newsletters that emerged in the 1970’s and 1980’s as the credit union system become more coherent with national ambitions and organizations.
These startups included CUIS, Report on Credit Unions, NCUA Watch. These newsletters relied on subscriptions versus the free in-house updates from league and trade associations.
In 1986 ASI established the first printed newspaper format called Credit Union Week. Shortly thereafter Mike Welsh, former CUES President, launched Credit Union Times offering original reporting and commentary. In following years Credit Union News and Credit Union Journal were launched as competitors. All used a combination of advertising and subscriptions to support their free-spirited reporting.
Today the independent credit union news media is largely virtual, publishing daily online summaries relying extensively on press releases from the industry.
More than Aggregators
With small staffs, limited budgets and daily posts, opportunities for original reporting or even investigative efforts are limited.
But there are periodic examples of the traditional press role of speaking “truth to power.” Power refers both to the actions of NCUA and other government agencies, as well as events within credit unions and trade organizations.
Peter Strozniak of the Credit Union Times has a talent for tracking legal proceedings involving credit unions. His articles have provided valuable insight into NCUA’s regulatory shortcomings, as revealed in court records. A recent example is his story of a credit union’s suing NCUA for failure to prudently manage its interest in taxi loan participations. The opening paragraph:
The $390 million Nassau Financial Federal Credit Union is suing the NCUA for nearly $1 million for allegedly breaching an agreement to settle defaulted taxi medallion loans for a mere fraction of what they were worth.
Many observers questioned NCUA’s disposition of the taxi medallion loans sold to a hedge fund in February 2020. The agency refused multiple FOIA requests for details. This example further adds to the impression of an NCUA coverup in its actions in the $750 million sale of loan participations to a Wall Street hedge fund.
The Members’ Interests: Sunlight as a Disinfectant
CU Today has published a series of original articles about member’s efforts to participate more openly in their credit union’s governance.
One series discussed the efforts of four members of Virginia State Employees Credit Union to seek nomination for open board seats. Their efforts were totally ignored. The credit union elected the board’s self-selected candidates including the current chair with no outside nominees permitted.
More recently CU Today has followed the efforts of former directors and CEO to challenge the announcement of Vermont State Employees to merge their very successful credit union into the larger New England FCU.
CU today publisher Frank Diekmann editorialized about his goal of “pulling back the curtains.” He explained why reporting the merger information provided members when charters are ended and the payouts to management that sometimes accompany such efforts matters. It read in part:
We also got to see how many CUs opted to return net worth to the people who own it (in some cases, obviously, there was little to reserve from the reserves). We further got a peek into which were not offering any payout, with a few citing odd reasons such as the acquiring CU has more branches or, bafflingly, offers Apple Pay and Google Pay. Eh?
One CU did announce it would be paying out some of the excess capital, but in this case only to savers, with more than $2 million being distributed in all. I’m not suggesting the members of the board all had savings/CDs at the credit union and that few if any were borrowers. I’m just saying.
Sunlight may indeed be the best disinfectant, but not if no one never opens the curtains. CUToday.info has made a commitment to reporting on all the merger disclosure forms sent to NCUA, meaning we will continue to give the curtains a pull.
Needed: A Pulitzer for Credit Union Reporting
At last week the White House Correspondent’s dinner the comedian Trevor Noah’s public roast of many public figures ended with this close about the never-ending importance of a free press.
While the international press coverage of the war in Ukraine was top of mind that night, a domestic event happened the following day proving Noah’s thesis.
The national press released a draft of a Supreme Court decision that would reverse the Roe vs Wade fifty-year precedent giving women the right to an abortion. The coverage took the debate from behind the hermetically sealed Supreme Court process, to the public sphere.
If credit unions are to fulfill their purpose of bringing more economic democracy to their members and greater choice for all consumers, one of the most important ways to monitor this role is an independent press. One that reports its successes and exposes its failures.
In addition to Herb Wegner awards honoring credit unions leaders who exemplify the best in cooperative commitment, I believe an equally important moment would be to award “Coop Pulitzers” to press coverage of credit unions.
These would recognize the writers and stories from within and without the industry who take the risks and invest the time to hold those in positions of leadership to public scrutiny. Especially for those with public authority. For unlike the White House Press, in credit union land there is only one estate, the NCUA.
