Category: Cooperative Design

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The Strategic Advantage of Being Local

The Institute for Local Self Reliance (ILSR) has turned 50 years old.  Its mission is to build local power and fight large corporate control through research, advocacy, and community assistance to advance vibrant, sustainable, and equitable cities and towns.

This 11-minute video below provides its history from founding in 1974 in D.C. to its present multi-faceted efforts.   The organization became national in the early 1980’s when it  opened its head office in Minneapolis.

(https://www.youtube.com/watch?v=Wp_DNUXVDt8&t=108s)

In the 90’s It was an outlier in the world of “bigger is better” and the pull of the global economy on large corporate growth ambitions.  However, its focus on local self-reliance regained momentum and focus as the power of monopolies became increasingly questioned, especially its impact on local economic communities.

The Institute’s  approach is decentralization emphasizing local control and resisting corporate displacement of independent options. The goal is enhancing freedom and democracy with self-reliant economic projects  and political control.  Today it has four areas of focus:  community broadband efforts, composting, energy democracy and promoting independent locally owned businesses.

While the advocacy and research efforts would seem to make the ILSR a natural ally of credit unions, there appears to be no overt participation in this cooperative financial sector.

Why Local Matters

In an era in which many tout scale as the most important competitive necessity, the real sustainable advantage for most credit unions is their “local” character, identity and related service advantages.

At September 2024, the industry’s call report data suggests that over 87% of credit unions offer some form of on online transaction access.  The Internet advantage, no matter how sophisticated, is rarely a sustainable or unique delivery channel or even special user experience. However, being local is.

An Example of a Large, Local Advantage

Recently Jim Blaine has posted several articles on the founding of the country’s second largest credit union, State Employees of North Carolina (SECU).  The post below details the founding character and common bond of the credit union.

Almost every state in the country had at least one or multiple credit unions with state employees as their core FOM.  But only SECU made the breakout to record this growth achievement versus many states with much larger potential in their employee base.

How was this breakout accomplished?  As the credit union’s operations expanded to locations and counties throughout the state, the critical advantage was keeping local input, oversight and responsibility at the branch level.  Loans were made and collected by each branch; local advisory boards and committees were formed; employees were local; and the various aspects of community involvement were locally determined.  Out of this local self-reliance, the second largest credit union in America was constructed.

Here is SECU’s brief founding story from a post on November 19, 2024 SECU Credit Unions as An Employee Benefit:

“No one questions that credit unions were created in the U.S. to provide access to credit for working men and women – particularly those of “modest means”. Why? Because “back then” many payroll offices were confronted with regular, recurring employee requests for “a short-term advance” prior to payday. Money is always in short supply for most folks – both “back then” and now.

“Not helping an excellent employee in a time of need was “bad for business” and employee relations. Sending them to a loan shark was worse. “Payday lending” at rates usually exceeding 100+% – both “back then” and now – creates a death spiral of financial dependency for a consumer. Shackles not made of iron, but shackles just the same.

.

. …” I owe my soul”... that can be a problem, … beware.

“Employers embraced “company credit unions” as an added benefit which could be used to assist and retain employees. Employers liked having an independent, employee-owned and led lender making the decisions on which employees qualified for loans – choices the employer did not want to make. Employers didn’t want to be in the lending business, nor have to “advance” company funds. To help out, employers frequently provided back office support, payroll deduction, office space and assisted employee-member volunteer leadership of the credit union.

“SECU, although a separate, independent organization, was “the company credit union” for North Carolina state government and the North Carolina school systems. The idea of a credit union as an important employee benefit caught on! 

“Other N.C. companies also formed credit unions – R.J. Reynolds, AT&T, IBM, Champion Paper for their employees – as did many municipalities, local post offices, our military, and churches. At its peak, there were 360+ different credit unions in North Carolina, today just 60 remain. 

“Is SECU still “the company credit union” for North Carolina state workers? What has changed?  In order to know where you’re going, it often helps to know where you have been.”

(End Quote)

SECU’s Relevance for Today

Some of the companies and many of the 360 credit unions referenced in Jim’s blog no longer exist.  However, the local communities and their residents are still present—even if now in separate lines of work.  Local does not go away.

Local does not mean an effort must remain small.  No, local wins because it is built on the ultimate credit union advantage of relationships and self-reliance.

A billion dollar credit union’s car loan, savings account or even mortgage are often a commodity, no different from similar products offered by a ten million dollar institution.  The difference is personal, being able to talk with a real person who is familiar with your community and circumstance.

The ILSR has continued to present the power of local solutions and control in its newsletter.  A recent article was on grocery prices:  High prices are a problem. Here’s how to solve it.  Perhaps its opportune for credit unions to align and participate with the work of the ILSR.  For it appears to capture the ultimate advantage of a member-owned cooperative-its local identity. control and focus.

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The Connection Beetween Politics and Co-op Democratic Governance

Trump’s election victory has reawakened concerns about whether the checks and balance essential to America’s  democratic institutions will hold.

I believe that credit union’s unique design for member-onwer governance offers a helpful example of the fragility of democratic oversight.

As the chasm between credit union’s original destiny and today’s  performance and compliance shortcomings grows, purpose and practice may appear further and further apart in the public’s eyes.

Nowhere is this chasm greater than the failure to encourage member-owner participation in the formal annual meeting elections. Additionally, in daily communications rare are appeals to the special role of being owners versus messages common in all financial customer appeals.

Here are two recent  observations on the delicate nature of democratic processes. And why credit union’s example might influence our perception of how political democracy functions.

America-An Experiment

A personal story. When I was in grammar school, our history book was titled, “The United States of America, An Experiment in Democracy.”

I froze. I got goose bumps. I was 8 years old.  An experiment? I knew enough that some experiments worked, and others didn’t.

It felt like the bottom fell out. All sense of permanence left.

That day was life-changing. I have never seen this country the same since. (source: unknown)

The Transfer of Power

“The genius of democracy is its self-correcting nature. But the problem, of course, is if the person (or persons) being elected into office is (are) the kind of threat that intends to disrupt this happy self-correcting logic of democracy.” ( Daniel Ziblatt, co-author of  How Democracies Die)

How  do these observations about national political concerns apply to credit union’s democratic model?

Richard Rohr comments:  We quickly and humbly learn this lesson in contemplation: How we do anything is probably how we do everything. 

 

 

 

 

 

 

 

 

 

 

 

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What Impact Might the Trump Administration Have on Credit Union Oversight

Writing about the future is easy. Rarely do readers look back when events have unfolded.  Moreover such forecasts often reflect, not insight or wisdom, but rather one’s own efforts to protect vested interests.

However there are some reference points which can help us think about what a credit union might do going forward into a possible disrupted regulatory future.

Today I will review what Project 2025 says about federal regulation.  I could find no direct reference to credit unions although I did not review all 900 pages.

Published in 2023, President-elect Trump has denied association with the ideas presented in the document.  More than 100 conservative organizations were involved in its creation.  I found the brief section I cite below had over four pages of extensive reference notes.

IMPROVED FINANCIAL REGULATION

From page 705: One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency. 

Merging Functions. The new Administration should establish a more streamlined bank and supervision by supporting legislation to merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory functions.

U.S. banking law remains stuck in the 1930s regarding which functions financial companies should perform. It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits. Doing so makes markets less stable. All financial intermediaries function by pooling the financial resources of those who want to save and funneling them to others that are willing and able to pay for additional funds. This underlying principle should guide U.S. financial laws.

Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth.

From page 706: Direct government ownership has worsened the risks that government-sponsored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles:  

  • Fannie Mae and Freddie Mac (both GSEs) must he wound down in an orderly manner.
  • The Common Securitization Platform57 should be privatized and broadly available.
  • Barriers to private investment must be removed to pave the way for a robust private market.
  • The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission.

(End Quote)

The text also states that Congress should repeal titles of the Dodd-Frank Act that created the Financial Stability Oversight Council (FSOC), a federal government organization which identifies risks, promotes market discipline and responds to emerging threats. Project 2025 defines the FSOC as a “super-regulator tasked with identifying so-called systemically important financial institutions and singling them out for especially stringent regulation.”

A Learning Event: The S&L Dissolution

In the late 1970’s the S&L industry held the largest deposit market share in California, much larger than banking competitors.  This was before deregulation.  Most depository firms were limited to operating in a single state or in some cases, a single location (Illinois).

Today S&L’s no longer exist as a separate industry even though 555 savings institutions with $1.2 trillion in assets still operated at June 2024.  All deposits are FDIC insured.  Of the total institutions, 241 are supervised by the OCC, 276 by the FDIC and 37 by the Federal Reserve.   While state and federal chartered institutions still function, the system is under federal direction.

While there are many reasons for the loss of the S&L’s as a separate, independent financial segment, the dominant factor was that many of the causes were self-inflicted.  These included a loss of special purpose, rapid multistate expansion through acquisitions, and balance sheets weighed down with fixed rate mortgages in a deregulated deposit funding environment after 1981.

After the mid 1990’s, there was no separate FSLIC insurance fund, no Federal Home Loan Bank Board to oversee the industry, and the FHLB liquidity system survived by serving all real estate lenders including credit unions.  In most states the mutual charter exists as an anachronism, with no new charters being issued.  At the  state level supervision is provided by a single banking/financial institutions department.

While external financial events did contribute to the industry’s collapse, competitors did survive and thrive, especially credit unions.  At the February 1982 GAC in D.C., CUNA President Jim Williams told new NCUA Chairman Callahan there was only one topic on credit union’s minds: survival.

Together credit unions and NCUA embraced deregulation and the changes in structure and oversight the new environment would require.  Hunkering down , protecting existing ways and asking for more funding to address problems was not the approach.

Whether the new administration will be as disruptive of federal regulators as indicated in campaign rhetoric, remains to be seen.  The lessons from an earlier era can be helpful:  remember  who you are and build on what brought success to this point in time.

Many of the factors in the S&L demise were self-initiated with leadership failures.  Cooperative success in navigating external changes was accomplished though enhanced collaborative efforts between credit unions and their regulators. not each trying to go their own separate ways.

 

 

 

 

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Post Election Back to Work:  The Change in Employment Patterns in Communities

As consumer focused financial providers, changes in local employment patterns can have a profound impact on members’ and their credit union’s financial outlook.

Credit unions have always walked toward members and communities in difficulty, not away.  The importance of a local credit union option is especially critical for those living in areas of slower growth and/or  lower paying job opportunities.  Now a study has tried to identify those cities whose economies trail national averages.

In the FDIC’s Second Quarter report, there is an article U.S. Industrial Transition and Its Effect on Metro Areas and Community Banks (pgs 45-74).

The study covers fifty years from 1970-2019 in the shifting employment patterns from higher paying industrial occupations,  such as manufacturing, to an economy based on service industry and technology.

The study uses Metropolitan Statistical areas (MSA’s) and developed a “transition score” for ranking the areas showing those most impacted by the decline in higher-paying to lower-paying employment.

Of the country’s 387 MSA’s (cities over 50,000) those with higher transition scores had slower economic growth, were mostly smaller in population, and located in the Northeast and Upper Midwest.  The two study tables below show the MSA’s with the highest employment transition scores along with the change in total employment over the past fifty years.

Of the 54 MSA’s in states with the highest number transition scores, Pennsylvania led the states with ten.

(note:  for highlighted MSA’s above the study presents analysis of each showing why they reported high population growth)

Additional tables and graphs illustrate both the distribution of the highest scores and the lower impact scores among the largest MSA’s which tend to have a more diversified industrial employment base (table 3 page 55).

As one would surmise, MSA’s with high employment transition scores had slower income growth than the nation as a whole.  (chart  4, pg 57)

In the four metro areas with the highest scores above, there were a number of other negative economic factors in addition to the erosion of manufacturing.   These included total employment and population declines, slower per capital and GDP growth versus national averages, natural disasters and a lack of amenities such as universities and favorable weather.

Impact on Community Bank Performance

The report’s final pages analyze the performance of banks whose headquarters were in one of the 54 MSA’s with the highest transition scores, that is communities impacted by the greatest change in employment patterns.  Following are some of their conclusions.

While overall performance is generally lower, these banks performed better than other community institutions in periods of high economic stress.  In terms of structure, consolidation occurred as in the industry at large, such that only 31% of high transition communities were left with a local institution by 2019.  New charters were less frequent in these MSA’s.  But bank failure rates were lower.

In the highest transition scored MSA’s, banks had weaker branch and deposit growth, slower overall financial activity including pretax ROA.

The reason for these banks better performance during the two periods of economic crisis, was that their balance sheets contained more single family residential loans and lower exposure to commercial and industrial loans than institutions located in a less impacted MSA’s.

The Takeaways for Credit Unions

Credit unions are no strangers to changing employment patterns in their market areas.  Many were originally chartered with employer based FOM’s.  The deregulation of the early 1980’s allowed both state and federal charters to diversify their member base and seek other growth options.

The banks that were most resilient during these employment transitions focused more on first mortgage lending and less on commercial. Credit unions are almost exclusively consumer and real estate focused lenders.  Even when an industry or local employer closes, the members tend to stay local. And need their credit union more than ever.

The study shows the external context matters in overall performance.  It shows the obvious–that slower economic growth tends to correlate with lower financial performance.   It also reinforces the critical and crucial role locally-focused financial firms have in these community transitions.

There is a cyclical pattern in much economic change.  A high growth area becomes crowded, expensive, and loses appeal versus communities with lower home prices and more stable institutions.  The role of credit unions as local economic actors is vital in both communities.

Many commentators suggest the latest election outcomes were driven by voters’ dissatisfaction with their economic situation, especially inflation.

Credit unions have the chance to take the lead in giving these members a hand up.

As other firms may rush to the high growth market attractions, the study shows that sustainability in times of deep transition is not only possible, but critical to the bringing the time closer when good fortunes return.

 

 

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Post Election Back to Work:  Members’ Affordable Housing Needs

In addition to consumer inflation concerns as in the price of groceries, another economic topic on voters’ minds was affordable housing.   High interest rates have brought the home purchase market to almost  a standstill except for the well-to-do.

The average home price in the United States in 2024 is around $420,400, a 25% increase from 2020. Home prices vary widely by location. For example, the average home price in Iowa in 2024 is $205,988, while the average in Alabama is $217,75.  Even with candidate Harris’ $25,000 down payment assistance for first time buyers, many would still see the aspiration as very difficult.

Today an update on the median home price for every state as of August 2024 was published by the Visual Capitalist website.  The overall median (not average) for the US was $385,000.

Credit unions have been innovators in assisting members first home purchase efforts. These changes often go outside the standard secondary market underwriting requirements as many credit unions hold non conforming loans on their balance sheet.  Product initiatives include low or sometimes no down payment,  waiving transaction closing costs,  and structuring variable rate loans with initial lower short term fixed rates followed by variable price reviews to ease the first years of payments.

This video is an example of how Community First (WI) structured their home lending to meet a family’s unique circumstances.

(https://www.youtube.com/watch?v=d6AQbDYSmpg&t=15s)

FHLB grants and other forms of community assistance are sometimes available.  But given the continual rise in home prices even in the current slow markets, the prospect of a higher normal level  interest rates, and the lack of affordable supply in many markets, is another approach required?  Housing is also a market where technology would seem to have limited potential to change the cost side of the problem.

New approaches rethink the structure of home ownership by separating the cost of land from the house built on the property.  Here are two examples of this approach.  The descriptions are largely from the linked websites.

Neighborhood Housing Trusts

The first example is the Community Housing Trust (CHT) based in Ithaca, NY.   CHT helps people with modest incomes buy their first homes. Since 2009, all of Ithaca Neighborhood Housing Service’s (INHS) home sales have been part of the Community Housing Trust. By using a special ownership structure, It is able to keep CHT homes affordable for the first buyer, and all future buyers as well.

INHS got its start by trying a new way to reverse the decline of downtown Ithaca: fixing homes up rather than tearing them down. In the 1960s and 1970s, Ithaca faced the problems challenging urban areas across the nation: a depressed economy, deteriorating housing, and the flight of homeowners to the suburbs.

Most of the homes in Ithaca’s downtown neighborhoods were more than 100 years old and owners could not get bank loans to buy new ones or didn’t have the skills or financial resources to make repairs.

In late 1976, inspired by an urban renewal program created in Pittsburgh which relied on a partnership between residents, businesses, and local government, Ithaca joined a network of successful Neighborhood Housing Services (NHS). Recognized by Congress in 1978 and known today as NeighborWorks® America, the national network of NHSs continues to recognize and nurture local solutions to local community development.

The Program’s Structure

The CHT is a “shared equity” program: the homebuyer purchases only the house and the Trust owns the land. The homeowner has a 99-year lease on the land, with a small monthly land rent. This arrangement greatly lowers the purchase price of the home.  Because most CHT homes receive a special tax assessment, the property taxes can be much lower than a market rate house. INHS ensures that all CHT homes are built or renovated to be energy efficient and environmentally sustainable, another way that operating costs are kept low.

In exchange for these financial benefits, CHT homeowners agree to limit the amount of profit they can take from their homes when they are sold. CHT homes have a resale value that is capped at 2% increase per year. This allows the homeowner to build wealth in their properties, while ensuring that the home remains affordable for future owners.

The Funding

CHT homes cost on average more than $400,000 each to develop.  The homes are sold for only about half that amount—between $150,000 and $210,000. INHS receives grant funds from a variety of sources to help fill the gap between development cost and selling price.

The permanent affordability of CHT homes means that the grant funds utilized to build them will benefit many lower-income households for generations to come!

The Durham Community Land Trustees

The timeline of this second example begins in 1987. The development of this  North Carolina affordable housing initiative can be found here.  This video, from 2017, shows a before and after  look for one neighborhood built with members’ self-help.

How It Works

Similar to to Ithaca, a community land trust nonprofit organization retains land ownership, ensuring future housing affordability.  Purchasers buy DCLT homes and lease the land these houses sit on for a low monthly fee for 99 years.

  • Owners can improve and maintain their homes.
  • They can leave their home to their children.

If a homeowner decides to sell, DCLT retains an option to repurchase the home to sell or rent to a future low-income resident or to assist the homeowner in identifying a new income-eligible purchaser.

The key feature: Homeowners share the equity they earn on their homes with future buyers, thus fostering long-term affordability even as surrounding neighborhood property values grow.

Credit Union’s Enhanced Role

Cooperatives are critical mortgage lenders in their local communities versus the nationwide all-comers model such as Rocket Mortgage.  Many credit unions also sponsor foundations for local grants.   Partnering with local housing agencies can  facilitate  oversight of land trusts or gain zoning support for both building and then managing the subsequent turnover with foundation land ownership.

Credit unions creative lending with on balance sheet solutions are a start to home ownership for some situations.  But the broader challenge of affordability requires a collaborative effort that brings multiple resources and a different ownership design to the economics of single home ownership.  A design that is partly cooperative but also combines with individual ownership responsibility.

If you are aware of credit unions participating in efforts to develop new ways of organizing home ownership and address affordability, I would welcome examples.

If one looks at the amounts of foreclosed property reported on the quarterly 5300 call reports, this suggests credit unions are already vested in home ownership turnarounds.   Why not go the next step and create CUSO’s or other organizations that will restore neighborhoods and members’ ability to build financial well-being from home ownership?

 

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On the 2024 Election Results

November 5th’s outcome  is not the end but just the next stage in our country’s political life. Regardless of the final party balance in Congress, for credit unions our work is cut out for us.  We will find more ways to help members in need thus beginning to heal political divides in our communities and country.

While credit unions are rarely overtly partisan,  their  purpose is inherently political.  The collective resources managed on our members’ behalf are intended to address member circumstances  in ways for-profit market forces may overlook.

The role for the cooperative spirit has never been greater.  Our mostly local focus is a critical advantage. Credit unions can again be leaders bringing light and hope to those who feel left out, or left behind, by economic events.   Let’s get to work.

 

 

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A Credit Union CEO’s and a Kellogg Professor on the Perfect Mission Statement

In former AT&T CEO Anne Chow’s best-selling book, Lead Bigger, she describes how to inspire an actionable purpose statement.  Chow is now  a senior fellow and adjunct professor of executive education at Northwestern’s  Kellogg Management School.

Here are brief excerpts from the book’s chapter on purpose: 

What purpose will sustain you and your people through a commute in bad weather, or after your baby kept you up half the night? 

I’ve found it helpful to go beyond the focus on what you’re doing. Ask yourself and each other: Why? Why you? What makes your how the optimal choice and different from current or future competitors in the market?

No matter the size of your team or the work you’re doing, you’re on a mission to reach a destination. . .. If you’re still struggling to express what you do differently, ask yourself, What if we didn’t exist? Who would care? And why?

This chapter provides several examples from large firms such as Ikea, Nike and Apple along with advice to use words that ensure actionability.  

 A CEO’s  One Minute “Lecture”

If you don’t have time to read the book or take a course at Kellogg, here are virtually the same ideas from a credit union CEO.  Now retired, this leader’s brief explanation is noteworthy because of the results the credit union achieved during his tenure.

Moreover his statement predates the professor’s work by 15 years.  An example of wisdom in action, not in hindsight.

(https://www.youtube.com/watch?v=tE_3-ipOiPE)

 

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An Example of Resilience from Bethesda’s Tastee Diner

What lesson does the oldest continually operating restaurant in Bethesda have for credit unions?  Especially those who believe they need size and scale to succeed?

In 1935 in the middle of the Depression,  the Tastee Diner began operations serving twenty-four hours a day.  (Note: the Federal Credit Union Act was passed the year before) The diner would close only  42 hours  a year from noon on Christmas eve until 6:00 AM the day after Christmas. However,  it reduced its hours from 5:00 AM to 10:00 PM after reopening from the covid epidemic.

Its long narrow layout is just like the typical  diner:  wooden booths or single seats at the counter where you can watch as the cooks prepare your meal at the open grill.

The menu specializes in “comfort food” such as a full  breakfast anytime.  Daily specials are offered– spaghetti or fish on Fridays, meatloaf and mashed potatoes , with two sides; and every familiar  sandwich option including grilled cheese and  hot dogs.  The menu has daily specials and senior selections at reduced prices.  Its real milkshakes are served in the metal mixer can which contains at least two full soda glasses of my favorite food.

The owner sits on a counter stool opposite the cash register to welcome you.  Sit anywhere.  Waitresses welcome you back.  You know their names.  Montgomery County  police on duty stop by for takeouts. High school students gather after football games. Families have birthday celebrations with young kids and floating balloons;.  “Seniors” like my wife and I, go to have an outing in a familiar setting.   The tunes on the jukebox at each table still cost just a quarter to hear Johnny Cash Walk the Line or other 1960’s Rock and Roll favorites.

A New Neighbor

In September 2022 a new neighbor opened its doors.   Marriott International cut the ribbon on its new headquarters, a 21 story building built using all the vacant land around the diner.

Screenshot

The chairman of this Fortune 500 firm (ranking at # 173) is David Marriott.  In the September 21, 2022 Washington Post article celebrating the opening, he presented the company’s history and how it chose DC as the base for this Utah raised family.

In short, David’s grandfather opened a root beer business in Washington after completing his two year Mormon mission assignment on the East Coast.  Ice ooid root beer from his first stand was not in great demand in winter cold, so the business expanded to hot food such as  the Teen Twist Ham Sandwiches, Mighty Mo  Burgers.  The business’ new name: Hot Shoppes.

Today, there are no Hot Shoppes. Marriott long ago diversified  into the airline catering and then lodging businesses. Now it operates 8,100 hotels with brands from Aloft to the Ritz -Carlton.

The New Building’s Notch

But what does this international food  and  hospitality conglomerate have to do with   Bethesda’s Tastee Diner?

In the 2022 interview with Chairman David Marriott the oldest, longest operating Bethesda restaurant came up this way:

The views are great from atop the glassy new headquarters, designed by the firm Glensler.  David pointed out the Sugarloaf Mountain in the distance. We were standing near a notch in the Building.  Twenty floors below was the reason for the notch:  the Tastee Diner building ,whose owners had declined to sell.

“When my parents were away, the woman who watched used take me there” he said. 

Not to Hot Shoppes?   “She liked “Tastee Diner,” David said.

The Priceless Moral of the Story

Want to know how to counter the threat and buyout temptations of even the most aggressive credit unions?

Have loyal customers who seek your product, especially those who care for the children of the founder of a restaurant chain or even a credit union executive.  Such loyalty is a variation of SECU’s mission statement: Send us your Moma! And also, keep local ownership of the business.

Following the Post story, the next time we went to Tastee I asked the owner sitting at the counter why he didn’t just sell out.   He said he owned the land and they “wouldn’t offer me what I though it was worth.”

In the recent decade all of the chains and restaurants our family visited growing up have closed:  Roy Rogers, McDonalds, Dominos and Pizza Hut plus other locally managed eateries.  Today I know of no restaurant in Bethesda that has been in business for over ten years. Most new entrants create new concepts to appeal to a well to do clientele.  These primary locations seem to change business brands about every 3-5 years. Their “newness” gets old fast.

Local matters, especially when you “own the land.”   So the next time some glib acquisition broker or salesman comes calling to buy your credit union, just remember a child’s babysitter who brought the future leader of Marriott International to the Tastee Diner because  “She liked the place.”

A loyalty so special that the “child” recalls  the experience four decades later.  Local loyalty is priceless.

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The Power of Community

The strategic advantage that is the foundation of every credit union is its local roots.   Local does is not just a geographic focus.   It includes connections,  relationships, reputation and knowledge that extends back years, or even generations.

This advantage allows members to see the coop as part of their community.  It is a financial and physical presence that helps define the character and economic opportunities for their neighbors.

Unfortunately some actions can compromise this long standing presence, especially mergers which often eliminate any vestiges of a credit union’s roots.  No more local employment, direction, or participation in community life and leadership remains.   Only a virtual connection is left, which may serve some well, but others not at all.

An Example of Why Community Matters

Sometimes it is easier to see this critical role from another industry’s perspective.  The following is the story of both the demise and the resilience of local newspapers.   This editorial is from the October 23, 2024 Falls Church News Press.

This week is an especially sad one in the hometown of our editor.   Following the termination last year of the publication of the Santa Barbara News Press, after over 100 years, this week its remains were being sold off in an online auction, bit by bit, pennies for the dollar.

Meanwhile, the old Spanish Days-styled News-Press building downtown is gutted, like mugged stabbed and left for dead behind a dumpster where so much activity and discourse on the direction of the community took place daily for so many years.

A supporter of this News-Press for which this Falls Church one was named, and where our editor began writing while in high school, made the point last week talking about the importance of community newspapers:

It’s not just about news, per se, but about the dialogue on the interests and future of the community that is a local newspaper’s essential component. It isn’t about whether or not a newspaper’s slant or editorial content is agreed to or not, but it is the way in which the newspaper enters the homes of residents, by way of being gathered off the roof or out of a rose bush as tossed by a wayward delivery boy, and read and discussed for its contents in the  midst of the daily life  of the community which makes it so essential. 

It is the entry point for a community-wide dialogue involving everyone. It is a proxy for the community itself, as it were, its agora, or public meeting space as per the ancient Greek city-states, delivered ito every home where matters are fleshed out and elevated to everyone’s common interest and concern. 

This is what a newspaper is, and to be its best, it has to be in print form in full physical, sensual and tactile presence, to function most adequately and widely where no element of an entire community can be neglected or dismissed.  Also, at best it is the product of a member of that wider community, a citizen exercising a calling to provide the service in question according to the highest of principles, and not the government, to most effectively trigger that community engagement.

The Credit Union Parallels “When At Their Best”

While the functions of a local newspaper and financial institution are very different their contribution to a sense of community is similar.

The daily role and public need for local community financial institutions mirror many of the same contributions of a local newspaper.   The credit union’s presence is seen, it is locally directed by those who view their roles as volunteers or employees as a “calling.”  It is the collective for borrowing and savings by individuals and organizations to better their futures. Finance, like news, is an essential service.

Decisions made locally for the welfare of all give cooperatives a special function alongside the many other institutions vital for living and working together in common purpose.  By design they pay their success forward to benefit future generations.

(Note:  For a current example see press release, 717 Credit Union Launches “Forever Youngstown” Initiative)

These coop business virtues sustain both large and small credit unions.  They contribute to a sense of shared identity that is more than just geographic boundaries.  Financial services is a critical part of the fabric of any  community in which individuals choose to establish their identify and live their lives.

When credit unions make this contribution they are showing their”best selves.” Unfortunately other motivations and temptations can come along that  negate these cooperative advantages. That situation will be the subject of a future case study.

 

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A CEO and Former Marine Communicates with His Members

This brief message is an example of a CEO using a personal story to teach the importance of a critical  consumer discipline: personal savings.  It should resonate with his core members at Camp Pendleton.

“Whether tackling debt, building savings, or thinking about retirement, financial fears can freeze us in our tracks. It’s easy to feel stuck, not knowing where to start.

“Here’s the thing: even the best budgeters and investors have stumbled. I know I have, and I bet you have, too. What matters isn’t our mistakes—it’s how we recover and move forward.

A Lesson from the Marines

“In the Marines, I learned that no obstacle is too big to overcome. The key is staying focused, learning from experience, and taking that next step. The toughest situations often teach the most valuable lessons.

“I’ll never forget when I was a young Marine at Kaneohe Bay, Hawaii. Shortly after arriving, I competed for and earned a spot in the Reconnaissance Company. I could share countless examples of challenges I faced as a Recon Marine, but the one that stuck with me most wasn’t from the battlefield.

“After a week of tough training, the Company Gunnery Sergeant asked us one simple question: “What are you doing with your money?” With free housing, meals and healthcare, our expenses were minimal. His point was clear—were we making the most of it?

“My answer didn’t sit well with him—and it wouldn’t be the last time. Turns out, I had a knack for getting the Gunny fired up. I proceeded to receive a 10-minute tongue-lashing on saving. He ordered me to set up an allotment to buy a Savings Bond every month—and I did because you don’t argue with a Marine Gunnery Sergeant!

“His advice didn’t stop there. He told me to increase my bond purchases with every promotion or pay raise. His final lesson? Live within your means and know the difference between needs and wants. While I admit to blurring that line at times, his advice stuck.

“Years later, as a Gunnery Sergeant myself, I cashed in those bonds to open an investment account and was amazed at how much I’d saved, bit by bit. Those lessons in saving and budgeting helped my wife and me buy our first home and start our family—something I owe, in large part, to that Gunnery Sergeant’s wisdom.

“As we close out the year, now is the perfect time to make those small moves that can set you up for success in 2025 and beyond. Start a savings habit, set achievable financial goals or fine-tune your budget. You don’t need to wait for New Year’s resolutions—starting now takes that weight off your shoulders. It’s not about being perfect. It’s about making progress.”

(Source:  Frontwave’s President Bill Birnie, October 22, 2014, Notes from the CEO)