Category: Co-ops in Capitalism

Posted on

A Memorial Day Question

For two decades as a member of the National Men’s Chorus I participated in the final concert of the season on Memorial Day weekend.

The annual program might be modified to recognize an anniversary such as VE day or a Civil War commemoration.  However, most of the repertoire was arranged from popular melodies from the Revolutionary War era through the Vietnam conflict.

These songs, from Columbia Gem of the Ocean to The Ballad of the Green Berets, inspired and reminded listeners of the precious heritage that military conflicts have gained for all Americans.

This respect is especially evident during The Service Medley, as members of each military branch stand and honored as their song is sung.

One of the most uplifting moments in the program is  The Battle Hymn of the Republic.  Written by Julia Ward Howe in 1861, it is sometimes called America’s second national anthem.

One writer described it as “a warrior’s cry and a call to arms. Its vivid portrait of sacred violence captures how Americans fight wars, from the minié balls of the Civil War to the shock and awe of Iraq.  America’s song of itself-how the country feels about war.”

As a call to duty, it has inspired suffragists and labor organizers, civil rights leaders, and novelists—like John Steinbeck in The Grapes of Wrath.

A  New Meaning with Another Word

Her poem’s first verse certainly evokes the fury and righteousness of war: (original spelling)

Mine eyes have seen the glory of the coming of the Lord
He is trapling out the vintage where the grapes of wrath are stored
He haved loosed the faiteful lightening of his terrible swift sword
His truth is marching on

The final verse call all to sacrifice in this sacred duty:

In the beauty of the lilies Christ was born across the sea
With a glory in his bosom that transfigures you and me
As he died to make men holy let us die to make men free
His truth is marching on

But Is Sacrifice the Intent?

My first wife. Mary Ann, died in 1984.  In a Memorial Day church service earlier that decade, this Hymn was included.  Except the line in the final verse was changed to, As he died to make men holy, let us live to make men free. For her that was the meaning of Memorial Day. We honor those who die by how we serve the living.

 Which word best fits America today?  What is our call to duty?  Are we to remember just the increasingly small percentage of American families that serve and die in the military?  Or might there be a more all-encompassing obligation to “truth marching on?”

A Contemporary Interpretation

After the Civil War, Juliet Ward Howe became active in the women’s suffrage movement. In 1868, she founded the New England Women’s Club and was one of the founders of the New England Women’s Suffrage Association. Her sense of duty was not limited to sacrifices in war.  She was motivated by a broader view of “civic virtue.”

Would she approve replacing the word die with live?   And what would that communicate to today’s listeners and singers?

The Battle Hymn of the Republic reminds us of the sacred (hymn) call (battle) that sustains our country (the republic).   Its spirit, I believe, calls forth the responsibility of every citizen to sustain the country’s evolving experience of freedom, which we call democracy.

Relevance for Credit Unions

But what does this have to do with how we carry out our roles in the credit union system?

The Friday before this Memorial Day weekend I received an email from a colleague which said simply:  “This is wild” and included a link to an article in CUToday:

The story summarized the intent of fifteen credit unions operating for generations to merge.  In some cases, the arrangers of these transactions would receive increased compensation from the event.

What did the sender mean by This is Wild?  While I do not know what the words intended, I suspect they reflect a deep concern with this wholesale abandonment of legacies of efforts and resources created by previous members and their leaders.

Those credit union ancestors paid forward the fruits of their labor so the current generation might prosper and build on their efforts.  Instead, these leaders chose to hand over their members and inheritance to another, unrelated organization.

Howe’s third verse describes judgment:

He has sounded forth the trumpet
That shall never call retreat;
He is sifting out the hearts of men
Before His judgement seat;
Oh, be swift, my soul, to answer Him;
Be jubilant, my feet                                                                 His truth is marching on

I believe the writer’s email reaction is raising this ultimate question of values: Can a democratic credit union financial system survive when leaders so easily lose the will and inspiration to continue?  In the future, will any cooperative “truth be marching on”?

Version 2.0

Here is Mary Ann’s preferred wording of The Battle Hymn of the Republic.

Posted on

A Case Study of an Industry Collaborative Initiative

 Earlier this year I described a trifecta opportunity for credit unions.   The three challenges were:

  • Tapping the entrepreneurial interest of the current college generation;
  • Supporting new credit union charters to plant  seeds for future relevance and growth;
  • Providing leadership to prioritize opportunities for those left behind (DEI) due to historical inequalities.

An example combining all three elements was Gary Perez’s efforts as CEO of USC Credit Union to create a project to charter student led credit unions at the 107 historically black colleges and universities across the country.

Recently I found the following program that would seem to be an ideal way to meet all three opportunities.   And maybe jump start Gary’s efforts.  It reads as follows:

 Student Internship Program 

The OCDCU 2000 College Student Summer Internship Program was the most successful to date. The program creates partnerships between low-income designated and other credit unions (large or small) and college juniors and seniors to train and develop a pool of potential future credit union managers. The students selected are business, finance, or marketing majors. 

 With technical assistance grant stipends, the 2000 summer intern program matched 29 college student interns with 58 different credit unions. Stipends provided the interns totaled $72,500 in 2000 compared with $67,500 in 1999 for 27 students. 

Source:  pg. 16 NCUA 2000 Annual Report

 Wouldn’t a relaunch of this joint initiative now be a powerful signal of the credit union system’s responsiveness to today’s special challenges? Especially in an increasingly tight labor market?

 

 

 

 

Posted on

Should NCUA Be Helping with the Country’s Immigration Surge?

The unprecedented flow of persons seeking to enter the US in the Southwest is at very high levels. This is a situation  that concerns many people of goodwill.

Should NCUA leadership be seeking full time staff to go on temporary assignment to help out?

If confirmed that this volunteer recruitment effort is underway, the situation raises important questions. These include:

Who at NCUA approved this request and under what authority?

How does the effort assist the credit union system which funds all the agency’s activities?

If NCUA can spare these “volunteers” for months at a time, how critical is their role in the agency to begin with?

If this is a proper action, why is it being done with no transparency?

The Cooperative Way

Finally, if the situation is so urgent and just, why not ask credit unions to participate?

When Hurricane Katrina devastated New Orleans, the agency opened its office to volunteers and former employees to man telephone lines answering member calls and coordinate industry recovery efforts.

Few would turn away when asked to help one’s fellow human beings. But NCUA should follow the appropriate authority when asked to deploy its “independent” agency resources. More importantly, as a government agency such actions should be done with full public disclosure.

The Collaborative Advantage

On many occasions credit unions have  provided collaborative solutions to strengthen their system.  The resource sharing and mentoring programs as well as the credit union funded NCUSIF and CLF configurations are some examples of agency-industry joint efforts. Volunteer capital is a cooperative advantage and value.

Increasingly however, NCUA leaders have pursued unilateral actions without industry participation or, when asking for comments, do what was proposed despite substantial objections.

Individual volunteering is the American spirit at its finest, whether the Peace Corps, AmeriCorps, or thousands of non-profit and charitable endeavors.  It is an unfortunate precedent for leaders in an independent agency to privately promote an activity, apart from its mission.  And for senior leaders  to then solicit their employees to take part.

The agency must be transparent; this is not simply an internal matter.  For it deploys personnel hired and trained with credit union’s fund for activities unrelated to the agency’s purpose. NCUA is not a private business or organization, but a congressionally defined institution.

Moreover, should something go awry, NCUA employees should have the confidence their good intentions are known and supported by the industry they chose to serve.

There is a right way and a wrong way to request staff to volunteer no matter how worthy the cause. Doing so secretly impedes necessary, open discussion and could bring unintended consequences tarnishing positive intentions.

 

 

 

 

Posted on

America’s Most Responsible Credit Unions

A headline like that would certainly get lots of attention. That is exactly what got mine: only it actually read, America’s Most Responsible Companies.

The January 14, 2021 article was based on an analysis by Newsweek and Statista. Companies were ranked on the three criteria of the ESG corporate model, environmental, social, and governance. The process included a pre-screening of a large universe of firms, as well as in-depth corporate social responsibility (CSR) reviews, and a consumer survey.

Companies were given a score out of 100 and ranked accordingly. With a score of 93.2, HP placed first as America’s most responsible company. The top 20 included nine tech firms. General Motors received the top score for social as the only firm with women as CEO and CFO.

The full methodology used by Newsweek is described here. The initial pool of over 2,000 companies was narrowed down to 400 which were then evaluated in a four-phase process. One phase was a survey of 7,500 U.S. consumers plus a review of the companies’ published key ESG performance indicators.

Is a Credit Union Responsibility Analysis Needed? Possible?

The purpose of the ESG ranking is to provide another, vital perspective on corporate performance beyond the traditional financial and stock price benchmarks. This recent model has been a lens used increasingly by large investors such as pension and mutual fund managers. Many companies are now publishing these additional indicators to enhance investor and public confidence in their business plans.

The primary rankings published on credit unions today are by size (assets, members, branches, etc.) or financial ratio performance—ROA, growth, or net worth.

Recently, like the corporate world, there are efforts to publish DEI statistics-diversity, equity and inclusion–for the credit union’s staff and board. This data has become more important as all organizations respond to systemic inequalities increasingly called out by events. Yet this focus is not unique for coops.

As cooperatives, credit unions have positioned themselves as more socially aware and responsible than traditional financial providers. Rate comparisons and how much members save annually are examples of financial value. But should there be more than simple financial markers if this unique design is doing something significant versus competitors?

A Cooperative Scorecard

Almost a decade ago CU*Answers, a CUSO 100% owned by credit unions, developed a cooperative scorecard providing a self- assessment created using the seven cooperative principles. The complete template is available here. The CUSO offered $50 for credit unions to send in their scores to encourage participation.

The scorecard’s purpose was to “operationalize” and measure the seven principles and to assist credit unions who wanted to enhance their cooperative advantage.

The form even included a scoring summary ranking:

Your Score How You Did
More than 104 points Congratulations, you are a shining example of a true cooperative.
80-103 points Not bad, not bad at all. You are doing well.
58-79 points Need to work a little more on your core cooperative values.
Step 1: find someone who scored higher than you and ask how they did it.
Less than 58 points You are a cooperative, right?

Today some of the key performance questions under the seven cooperative criteria might need updating, for example in responding to Covid. Note that none of the measures are based on financial performance. Rather the scores are indicators of cooperative conduct.

The Need for Cooperative Measures

With credit union performance today graded almost solely by financial outcomes, the result is an erosion of differences with other financial options. The cooperative “brand” is blurred. Member purpose becomes just “a little better financial deal.”

Most importantly, the advantages of the cooperative charter are minimized, becoming just a 7-part marketing slogan on lobby posters. When in fact the customer-owner relationship has been pivotal in creating the competitive advantage credit unions enjoy today.

A scorecard, thoughtfully designed, is more than a form to create another set of rankings. It should revitalize leaders’ attention on what makes credit unions unique. These coop measures can then translate into key performance indicators in business plans.

NCUA’s CAMEL ratings focus almost exclusively on financial performance, even when rating M, or management. This lens does not include critical measures of cooperative success, which in turn underwrite most financial outcomes.

This measurement gap is an opportunity for the system’s leaders to really “open eyes” to the credit union difference. And as the corporate headline above suggests, demonstrate each credit union’s “responsible” cooperative role within the American economic system.

Posted on

Experts Predicting Doom–A Perennial Practice

The year 2007 was not a down year for credit unions. Slow sure, but there was no talk of an economic collapse on the horizon. And the housing market was booming.

Nonetheless the temptation is always present to burnish one’s reputation by forecasting doomsday. The issues and trends pointed to by these speakers are not false. Rather the straight line conclusion that everything is going to fall apart because these concerns will go unaddressed, is where the logic fails.

Regulators have a particular attraction for using this clarion call. They are supposed to monitor risk, but sometimes the futures they portray seem more to justify additional resources, not from  experienced insight.

Responding to challenges, seen and unforeseen, is what every manager tries to do. So listen, but then apply common sense.

Posted on

Jim Blaine’s “Inaugural” Address

As the CEO of America’s second largest credit union for 37 years, Jim Blaine had the unusual skill of translating simple cooperative concepts into profoundly valuable benefits for members.

Every member received the same rate for the same kind of loan.  Believing home ownership was vital to members’ financial security, he designed a 100%, non-conforming first real estate loan for any member with a simple explanation: “Why compete with the government?” (Fannie/Freddie conforming products)

He railed against FICO-determined lending decisions and risk-based loan pricing. This early use of “artificial intelligence” offended his belief in the uniqueness of each person.  Character and judgment, not computer algorithms, should be the basis for granting credit to members.

Words Matter

In addition to steering State Employees North Carolina Credit Union, Jim was a wordsmith.  His blog, and his talks, were audacious, controversial, fun to read and based on core principles.  “Sometimes wrong, but never in doubt” was his tagline. His writing style and graphics were intended so that a reader immediately got the message.

He understood that a leader’s influence was in direct proportion to one’s ability to communicate. To the entire crowd: fellow-believers, opponents, the uninterested and the unwashed, meaning those who corrupted cooperative values for self-interest.

Some of his most scathing and widely read observations were about NCUA, a government agency which believed that its core purpose was to tell credit unions what to do, or not do.  Examiners would constantly challenge Jim’s traditional implementation of credit union purpose.  He would use the agency’s own words and facts to demonstrate the lunacy of their demands.   When he dared to break the code of silence NCUA imposed on examiner ratings and publish his credit union’s score, the regulator wreaked vengeance on the entire North Carolina state-chartered system.

Jim’s most enduring gift to the “movement” may be his writings.  As Churchill stated: “Words are the only thing that lasts forever.”

The Course to Be Pursued

In an inaugural address more than 157 years ago, the speaker gave “a statement of a course to be pursued.” That course concluded with this purpose:  “with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds. . .to do all which may achieve and cherish a just and a lasting peace among ourselves. . .”

Lincoln used 722 words in 1864.  Jim’s 503 words address the legacy Lincoln hoped the civil war would resolve.

Jim speaks to the goal of a “lasting peace among ourselves” based on economic fairness and justice, core principles of the cooperative ideal. Diversity, equity, and inclusiveness are matters of the heart, much more than policy; something to practice in your life, rather than just preach.

Jim followed his own drummer when leading his credit union.  I believe these latest words will inspire all and even provoke some to answer his closing call for individual acts of rebellion!

Blaine’s “Inaugural” Address

(March 18, 2021)

“I am truly grateful to the African American Credit Union Coalition for this honor. The organization is remarkably successful and on the rise! I have known many of its leaders for a lifetime and have often sought, and even heeded, their advice! We shared a common bond – a belief in credit unions.

My life has been centered around my family, my wife Jean, and credit unions. Why credit unions? Because I could never accept that in America those who had the least and knew the least should pay the most for financial services. I believe that credit unions were created to correct that injustice. In the words of Thomas Paine – a true revolutionary in all respects – “I have always objected to wealth achieved through the misery and misfortune of others”.

That economic injustice continues to thrive in our financial system today. Credit unions remain the alternative, the best hope, the answer.

We all confront an uncertain future, and many folks would like to rewrite the past. You and I know we cannot change the past. But if we have credit union leaders with integrity, courage and character; we most certainly can reshape the future…but changing the future is very hard work. Arthur Ashe, the great American tennis player, described the credit union leaders we need. Ashe said: “True leadership is not the urge to surpass all others at whatever cost, true leadership is the urge to serve all others at whatever cost.”

One  word of caution as we look to the future and choose our new leaders; let’s make sure that diversity, equity, and inclusion is not a false guide, a false prophet. Can we really tell how diverse a credit union is by looking at the faces of our boards and leaders? Choosing our leaders by their race, their gender or their age is the old way – more of the same. We need a new way for credit unions.

And, the new way is to judge people not by how they look, but by how they think. As a famous preacher – I believe his name was King – said over fifty years ago: “Hopefully my children will be judged by the content of their character.”  Yes, let’s truly diversify and choose leaders based upon the content of their character. That is a more difficult, complex task, but our future depends upon it.

By the way, if you want to get a jump on reshaping the future, try starting a little personal revolution of your own. Next time you are filling out a form and come to the question of “Race?”, drop down to “Other” and write “Human”. When you reach the ethnicity question, drop down to “Other” and write “American”. And of course when you reach the question on “Sex”, drop down to “Other” and simply write in “Yes!”….and the world will begin to change!

Onward and upward – for all!… With the African American Credit Union Coalition leading the way!

Thank you again for this honor.”

 

 

Posted on

An Insightful Co-op History Lesson

This week I listened to a 55-minute lecture on Rochdale and the Early Cooperative Movement.  Presented by the National Farmers Union, the speaker, Erbin Crowell, is an expert in the history of cooperatives.

The Rochdale reference is a name familiar to persons working in credit unions.   But the reasons for its pivotal place in history are rarely told.  Moreover, it was only one example of decades-long efforts by social innovators to improve the lives and status of the English working class.

These multiple reform theories included socialism, capitalism, mutual aid societies and cooperatives as England transitioned to an industrial, post-agrarian economy. One very successful  capitalist Robert Owen promoted both factory reforms and utopian socialism.  He attempted to establish his vision of an experimental socialistic community at New Harmony, Indiana in 1824.

This lecture describes the context in which Rochdale became a lasting cooperative example.  He mentions the Cooperative Group’s role in Great Britain today.  One learns that cooperative principles were not an initial framework for Rochdale, but rather assembled  only in the 1930’s in the US.

Taking this 55-minute journey will provide more than a glimpse of the past.   It presents the  cooperative concept as an evolving one, not a static design limited to traditional segments of an economy.

 

 

Posted on

Voting: “The Most Hallowed Act in a Democracy”

A vital aspect of cooperative design is democratic member ownership.   Each member has one vote, regardless of share or borrowing relationships; proxies are not allowed for federal charters. This governance and accountability dynamic is both a moral and an organizational imperative.

Democracy is not merely a set of bylaws, or regulations or another organizing concept.  Rather it is the interactions developed between leaders and their constituents. Member involvement is more than a democratic cooperative value; it is the essential good will on which all credit unions rely replacing startup capital from the beginning.

Voting is the practice that enshrines and enables democratic organizations to legitimize leaders’ decisions.

Voting is Front Page Today

Voting is a front-page story across the country today. State legislatures have initiated changes to restrict voting access in response to the Big Lie of a stolen 2020 Presidential election.  Last week the spotlight turned to Georgia where the governor signed a law that would  prevent water being given to voters standing in line.

Public outrage has grown as evidence suggests that a purpose is to limit voting access in specific segments of the community.

The CEO’s  of Delta Airlines and Coca Cola, whose world headquarters are in Georgia, published strong statements opposing efforts to roll back voting opportunity.

Darren Walker the CEO of the Ford Foundation on NPR explained this change in the traditional low profile corporate leaders prefer on matters of public controversy.

“Voting is the most hallowed, important and sacred act in a democracy that its citizens exercise.”  He continued: “They (the two CEO’s) stood up when it mattered. We hope we can mobilize courageous CEO’s and companies across America willing to stand for American values.”

The State of Member Voting in Credit Unions

There are two occasions when members exercise their democratic role by voting:

  1. The election of directors at the required annual meeting of members;
  2. The voluntary merger of their credit union with another.

I think in both instances the vast majority of credit union practice is not “democratic” in any meaningful sense of the term. Some failures are the result of poor organizational habits, others by deliberate design.

The Members’ Annual Meeting

Recently I received the required Notice of the annual meeting from my credit union. It read in part:

Here’s the good news about our Annual meeting: There’s nothing you need to do. . .sharing this (Notice) is a legal requirement. . .Questions will not be taken during the meeting. . .there is no new business to discuss. . . only matter requiring a vote of members is approval of the 2020 Annual Meeting minutes. . .directors nominated (3)will be approved by acclamation of the Board. . .And this closing comment: We’re in this together. . .Our commitment to improving our members’ experience remains at the heart of what we do.   Signed:  President/CEO

This is not an invitation to participate, vote or become better informed about the cooperative the members allegedly own.  Instead, members should stand aside. Even the required meeting notice is portrayed as just a legal disclosure, like the rate on a loan or savings account.

The problem is deeper than this caricature of democratic governance.  The fundamental strength of credit unions is their member relationship. Member loyalty, initially via a common bond, and subsequently, lifelong patronage, created the credit union that exists today.

Sustaining these core relationships is essential for credit union success.

Members instinctively understand that the cooperative model is supposed to be different even if they cannot provide a precise legal distinction.  Treating members just like customers of a bank forfeits the most important advantage of credit unions in a market economy: the user and owner are one and the same.

Some credit unions use the annual meeting as a daylong opportunity to go beyond the legal formalities by providing workshops on member financial issues.  Sometimes the event is capped by a meal or with an outside speaker to celebrate the success of past year.

If credit union leaders fail to respect their member-owners’ role in this annual event, will members respond when leaders ask them to stand up for an issue needing their support?

Voting in Mergers: A Case Study

All voluntary mergers of sound credit unions require a majority of members voting to be approved.  This critical requirement is often treated as an administrative exercise with boards routinely encouraging members to sign off on the enclosed ballot.  Rarely do vote totals exceed single digits in this required member approval to give up a charter.

The merger Special Meeting Notice frequently lacks any specific data for members to compare their current situation with future promises. The reasons cited are general: “an expanded network of branches,” “improved operational efficiency,” “ the possibility of better rates on loans and shares,” and “we believe we should provide even better service due to additional investments in talent, technology and new products.”

The above are the verbatim explanations in a 2020 member merger Notice.  The vote in this merger, as certified by the Board Chair and Secretary, was 32,494 in favor and 0 opposed.  NCUA’s Director of Supervision for the Western Region acknowledged receipt of this certification and formally approved the combination effective June 1, 2020.

This merger of the $867 million Andigo Credit Union into Consumers Cooperative gave the members’ collective reserve of $107 million (12% net worth) to the continuing credit union.  No member dividend; only  vague promises.

However, Andigo’s senior managers were all given continued employment contracts from two to five years. Their compensation over and above what they were earning includes:

CEO: $226K in early payouts of deferred compensation plus $357K in higher bonus;CFO:  $150K higher; CLO: $165K higher; COO: $167K higher: VP Business Services: $74K higher.

This façade of members’ having voted approval is a perversion of democracy.  The members were provided no reasons supported by data.  No plan.  The process is ripe with conflict-of-interest.  It is an abdication by those with fiduciary responsibility covering up blatant self-dealing.  A scheme of enrichment and a moral swamp blessed by NCUA.

A Challenge to the Integrity of the Cooperative System

Every institution, every system, every country that follows a democratic model faces the challenge of constant renewal.  Democracy at any level of society is not self-perpetuating.  Leaders and circumstances change. Commitment to self-rule requires constant practice and vigilance.

The ever-present temptation for those in authority to exploit their current position for self-advantage is a facet of human character.  A credit union’s legacy bequeathed through generations of member loyalty is wiped out in an instant by self-serving leadership.

Two decades ago, the charlatans of Wall Street were proclaiming the need for credit unions to convert to mutual, and possibly, bank charters.  They asserted the credit union model was an anchor slowing growth and opportunity.  Almost three dozen credit unions took the bait.  Today, only one survives as a mutual.

Two outspoken credit union CEO’s led the fight against these false prophets of doom.  Bucky Sebastian and Jim Blaine did not win every fight; they were even sued for their cooperative gallantry.  But they had the courage to speak out and act when others were reluctant to challenge peer CEO’s.

Their efforts emboldened others who wanted to do the right thing.  However, the reality then is the same now. “The incentive today for corporate leaders in America discourages courage,” explained Darren Walker in his NPR interview on the reluctance of business CEO’s to speak out.

Next Steps

To address these patterns of democratic failure will require CEO’s, directors and leaders to assess their own practices of member governance.  Is the annual meeting just a perfunctory chore or is it a chance to renew and honor the member-owners’ role?

Mergers should be based on facts and logic with a documented plan, not rhetoric and vacuous future promises.  Every other area of credit union oversight needing regulatory approval (alternative capital, derivative authority, FOM changes, et al) requires more documentation than the decision to give up a sound charter via merger.

The century-long evolution of the cooperative credit union system in the midst of an economy driven by competition and private ownership is a remarkable accomplishment. To paraphrase Albert Einstein when asked about religious belief, “it is not that one thing is a miracle but that the whole thing is a miracle.”

To see this miracle of human and community enterprise crumble piece by piece through self-destruction is a tragedy.  One that only today’s leaders can reverse.

 

 

 

 

 

Posted on

Credit Unions and the PPP Loans: Who Tells What Story?

When looking at data that is quite general, it is hard find meaning. The SBA has just released total Payroll Protection Program loans disbursed as of the program’s end on August 8, 2020.

https://www.sba.gov/sites/default/files/2020-08/PPP_Report%20-%202020-08-10-508.pdf

SBA total PPP loan data as of August 8, 2020

Loan Count Net Dollars Lender Count Avg Loan
5,212,128 $525,012,201,124 5,460 $100.7K

What role did credit unions play? What are insights from this very summary data? Did the lending matter? Two observations come to mind.

  1. Small lenders were vital. These were categorized as firms with less than $10 billion in assets. They were 98% of total participants. They provided 45% of the total dollars disbursed.

As shown in the table, loans less than $50K were the majority of those granted (69%) but only 12% of the total dollars disbursed.

$50K and Under From SBA Loan Size table

Total Loans Total $ % Loans %Total $ Loans Avg Loan
3,574,110 $62.742B 68.6% 12.0% $17.6K

This is the primary category that includes credit union activity. Their average loan size was $46.7 K.

  1. If the public relied solely on the eight SBA data summaries, credit unions’ role would be significantly understated. The Lender Segment chart assigns 84% of the credit union participants to the under $1 billion asset group. That “credit union” segment’s loan total is only 35% of the actual disbursements credit unions reported in their September 30, 2020 call report.

From SBA’s Lender Segment Chart

# Lenders # Loans $ Total Loans Avg Loan
Credit Unions (<$1B): 719 67,846 $3,099,426,436 $45.7K
% cf. to Call Report 84% 35% 34.6% 97.8%

From NCUA September 30, 2020 Call Reports

# Lenders # Loans $ Total Loans Avg Loan
Call Report Totals: 859 191,856 $8,954,408,403 $46.7K

Credit unions comprised 17% of all lenders.  They disbursed 1.7% of all PPP loans.

Ohio’s Example

The SBA also presents macro totals by state. The following is for Ohio. The credit union data is from call reports.

Ohio Total All Loans from SBA

# Lenders # Loans $ Loans Avg Loan
N/A 149,144 $18,532,840,346 $124.3K

Ohio CU Totals from 9/30 NCUA Call Reports:

# Lenders # Loans $ Loans Avg Loan
38 4,792 (3.2%) $263.7M (0.4%) $55K

Wright Patt CU was the largest PPP coop lender in Ohio, and the 41st by loan count nationally. Their 952 loans totaled $67 million or an average of $70.4K.

What is the Story? Who Tells It?

Numbers are dry. They show activity, not impact. These loans are the means to an end—stabilizing small business and employee income caught up in a crisis not of their making.

The goal is not merely reporting credit union statistics: 192,000 loans totaling $8.9 billion. The message should be what these funds did to sustain local businesses and economic activity.

That outcome, improving members’ lives, is coop’s primary purpose. Now is the time to again tell how the “credit” in credit union makes a difference. Better yet, have some of the members who received these 192,000 payroll protection grants, tell their story from your platform.

Posted on

Seeking 25 Wisconsin Credit Union Faithful

On December 28th, the 85-year, $35 million Post Office Credit Union (POCU) in Madison, Wisconsin will cease to be an independent charter. After voting, the 3,196 members and their savings, loans and abundant reserves (22% net worth) will be transferred to the $26 billion PenFed Credit Union in Virginia.

Why care? After all UPS, Federal Express, DHL and even Amazon can fill the needs if the Post Office itself were to close. Same with financial options–aren’t there plenty?

Members Uninformed What Their Vote Enables

The members are not informed about what is happening by their required vote. The intent of the organizers of this action is to announce the deed as late as possible, limit the voting period to minimum required interval, and make the process appear as just another routine event in the life of the credit union—as the members are asked to drink the cooperative Kool Aid.

What POCU’s members are approving in surrendering their charter via merger is:

  • A new board of directors, whom they do not know and have never been told about.
  • A new senior management team who has not been identified or even presented.
  • A new business model (virtual), very different from their current one—PenFed is 742 times larger and serves over 2.1 million members.
  • Accepting a service profile with no specific information of any changes in prices, services and fees. The five examples given are all INCREASES in fees.
  • Loss of all control for any local service, employment, or business initiatives. All references to such are open-ended and subject to PenFed future review, including the $50,000 per year local contribution.

Joining a Harem

In summary, this is an arranged marriage, agreed in secret in April. The bride was informed in October. And still knows nothing about the groom and what will happen after the wedding. POCU will become just another junior member of PenFed’s credit union harem of 19 other charters.

Oh, and the broker of the deal, who had the authority to sign for the bride to protect her best interests, will then get to choose between a five-year $650,000 sinecure, or an immediate $437,500 payoff for his actions. PenFed is paid a dowry of $7 million to marry this unwitting bride. The family of bride will go away empty and the community will no longer recognize them as members.

Whose Responsibility?

The reaction to this situation in Wisconsin reminds me of a story that Dick Cavett once told. During a performance of Hamlet in Central Park, NY City, when they got to the part where he stabs Polonius, eight people got up and left because they didn’t want to get involved.

If those with the power, position or privilege fail to speak about this event, will these members ever trust credit unions again? Or as another American leader once said, “In the end, we will remember not the words of our enemies, but the silence of our friends.”

No matter our intentions or inattention, we are all stained. We watch an anti-democratic process fueled by self-interest not member well-being. Statutory terms such as “good faith,” “specific plans,” “best interests of the members” and the legally required “consent” of regulators is devoid of meaning. As the precedents of these calculated takeovers expand, credit union leaders shrug their shoulders accepting this as just the way of the world.

By our inaction we endorse the preying upon our industry by our own.

This acquisitive behavior is an assault on everything cooperatives stand for. It brings the capitalist model’s full range of animal spirits with none of the market’s checks and balances.

The Wisconsin statute requires a petition by 25 residents to require a public hearing on this event, should the DFI not do so on its authority. That hearing would give all those interested in the future of cooperatives to give the Board of POCU and PenFed to make their case publicly not behind closed doors.

Are there 25 credit union believers who are willing to ask that this activity be done in the full light of public debate and request the DFI hold a hearing?