Category: Cooperative Design

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Time to ask WHY?

On December 31, Credit Union Times reported the $1.8 billion Hanscom FCU’s (Littleton, MA) intent to  purchase the $306 million Peoples Bank of Chesterton, MD.

The Peoples Bank, founded in 1910, operates seven branches with 78 employees serving approximately 20,000 customers.

The Times article stated this was the 21st proposed bank purchase in 2024.  It seemed like just another example of a credit union buying bank customers to demonstrate the advantages of being part of a cooperative.

But then this announcement became the lead example in a Washington Post February  3, 2025 opinion piece written by Sheila Bair, the former Chair of the FDIC.  The title tells the article’s purpose:  Tax-free credit unions are thriving at public expense.

To illustrate her thesis that “many credit unions have been abusing their nonprofit and tax-exempt status to expand beyond their mandate,” Bair provides a personal example.  “I will soon become the customer of a Massachusetts credit union that is using some of its untaxed income to buy my Maryland community bank.”  Note the use of “my” turning the credit union ownership idea upside down.

She asks:  What does a credit union 20 miles outside Boston know about the needs of our small, rural Eastern Shore communities nearly 400 miles away? 

A Hit Piece 

Bair’s opinion article is a professionally written “attack piece”  using her prior FDIC role to give it a professional aura. It references multiple  credit union public shortcomings covered by the press in the past six months.   There is no analysis of the transaction.  Using her  FDIC credential and the  personal reference to  “my bank” she  adds a credible face to a bank lobbying position in DC.  She implies, without evidence, her community is losing an  important  local asset, when it is those owners themselves who must approve the sale.

In both size and example, credit unions are more and more in the public’s eye.  When coop  boards and CEOs believe their actions are merely private transactions, they miss the reputational impact on the entire system.   As one observer has said:  The “Bigger Picture”?… there is one even if you don’t understand it.

This Transaction’s Explanation

The parties’ joint press release was sparse on specifics and long on rhetoric:  

“Hanscom and Peoples Bank share similar values, placing our members, customers and people first,” said Peter Rice, CEO of Hanscom. “Through this combination, we expect to expand Peoples Bank’s ability to invest in its communities across Kent, Queen Anne’s and Talbot Counties. Additionally, with this enhanced geographic reach, and proximity to Washington D.C., we expect to further support our founding mission by bettering our ability to serve all individuals that serve our nation. We are proud to honor Peoples Bank’s legacy and look forward to welcoming its talented team and nearly 20,000 customers to Hanscom. Together, we will bring expanded financial opportunities to a region rich with potential.”

This explanation does not address Bair’s obvious question how a Massachusetts credit union located 20 miles outside Boston will better serve Maryland’s Eastern Shore counties.  The area is a peninsula that stretches from the Chesapeake Bay to the Atlantic Ocean.  The region’s economy is dominated by three industrial sectors: fishing along the coasts, especially for shellfish such as blue crab; farming, especially large-scale chicken farms; and tourism, centered on the Atlantic coast and beach resort of Ocean City.

Hanscom says nothing about  any connection to the area or how it will serve this very different, distant region. Peoples Bank chairman states: Hanscom is the ideal partner to carry forward our 114-year legacy. Its commitment to community investment, our nation’s service members and innovation matches the values that our employees and customers hold dear. This combination ensures our customers and business partners gain access to a broader range of resources and innovative solutions. . .which we expect will redefine banking in our region. 

What About the Financials?

The full 2024 results for both organizations are now available.  Each firm seems stable but neither has shown balance sheet growth for a number of years.  Hanscom’s total shares, loans and assets at yearend 2024 have declined from December 2022.  Delinquency has gone from .25% of loans to  1.56% in the same period.   Net income for 2024 was $2.3  million a steep decline from $23.2 million in 2023.  Net worth is 11.8% and it reports three fewer branches compared to a year earlier.

From 2020 through 2024, Peoples Bank deposits are virtually the same at $268 million. Loans have grown from $174 to $187 million while total assets are static at $305 million.  In these five years, total shareholder capital  has increased from $30.2 to $35.5 million. The bank’s 2024 net income was $3.3 million, or $1.0 million greater than Hanscom’s.

Both financial institutions’ balance sheets have flat lined.  Earnings are down from the prior year. Peoples Bank relies on its wholly owned insurance subsidiary for a significant portion of its non interest revenue which  flows through to the bottom line.

So why would Hanscom decide to purchase this financial institution distant in both miles and market environment from its home base?  The question becomes especially critical when no price is provided in the announcement.

At yesterday’s closing, Peoples Bank has a market capitalization of $37.9 million at a price of $52.11 and 728,918 shares outstanding.  This is just above the bank’s book value of $35.6 million at yearend 2024.   The price is also about 60% above the per share trading range of $31-$33 during 2024 prior to the December purchase offer.

If the purchase is similar to other transactions at 1.25-1.5 times book value, Hanscom’s total cash outlay would be approximately $50 million.  It is clear why Peoples Bank’s owners would be interested in this sale.  However the critical question  is how are Hanscom’s current members and traditional communities benefiting from this purchase?

The distance between the two markets means there are no traditional “network effects.”  The announcement says Hanscom intends to retain the branches, staff and name Peoples Bank and operate with a regional manager. Is this just a cash injection in a new area to revive a static franchise?   If there is to be a new brand at some point to combine operations, will both market legacies be lost?

Sheila Bair’s personal reference to this proposed transaction placed it in the public spotlight.  It raises a fundamental question: Why did Hanscom do this?   There is no business case presented.  Is this just a serendipitous response to a broker shopping a bank looking for a buyer with lots of cash?

The circumstances of this example are used to reinforce the intent of her article that credit unions are just another form of financial choice with no special purpose.  And their actions are no different from community banks, except they  pay no taxes.

Hanscom’s announced intent to purchase Peoples Bank may have a more studied plan. But at the moment, the only reason seems to be, because it has the money. If that is the case, it just proves Bair’s thesis and becomes part of the bigger picture, even if you don’t at first see it.

 

 

 

 

 

 

 

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The Vital Difference: Member Voting for Directors

Member-owner governance is primarily exercised through the annual election of directors to the Board.  One person, one vote.

The problem is this “democracy” by members is too infrequently practiced to have impact.  In most credit unions there is no election contest-just approval by acclamation.

Below is an excerpt from Frontwave Credit Union’s monthly newsletter about this year’s board election.  Six nominees for three seats.  A month long voting period.  Votes can be cast by ballot, on line or in person at any of the 13 branches in a special ten-day span.

The candidates’ biographies and statements of interest are linked to the voting information.

The process is transparent, widely communicated, and easy for members to exercise over the month long voting period.

A Center of Public Attention

What makes this very transparent contest even more remarkable is that Frontwave has been at the center of attacks for its courtesy pay (overdraft fees).

It began with a March 2024 KPBS investigative report: Frontwave Creit Union reaps millions in fees when young marines run out of money.  Senator Elizabeth Warren with senators on both sides continued the attacks.

Prior to these assaults, Frontwave was the object of a class action suit several years earlier for its overdraft practices.  The suit was settled in October 2024.

During this public criticism of Frontwave, the CEO Bill Birnie engaged in frequent conversations with the media and critics.  He responded to the issues with why the credit union believed this was an appropriate practice.

This year’s election is taking place against this background of debate over fees. The members have their say.  Incumbent directors and new nominees can put their views to the owners.  That is what member governance means.

Just as important, when the credit union seeks  member participation for supporting special needs or contacting a political representative, the leadership has  established the routine  of member participation.

Voting is the ultimate test of democracy. It creates an environment of trust and accountability.  It is an essential part of cooperative design, but much underutilized and unappreciated.

 

Shape the Future of Frontwave Credit Union

Member,

Your voice matters! Voting in the 2025 Board of Directors Election is your opportunity to help guide Frontwave’s future. With three open positions on the Board and six candidates running, it’s time to get involved.

We’ve partnered with Survey & Ballot Systems (SBS) to ensure a secure and efficient election. Ballots will be distributed to eligible members starting in February, and the election results will be announced at the Annual Meeting of the Membership on March 26.

To read the latest Candidate Statements, click below!

Election Dates: February 20 – March 20

Eligibility: Active members as of December 31, 2024 (primary membership with at least $50 on deposit or an active loan).*

How to Vote:

  • Electronic Ballot: Sent via email by February 20.
  • Mail-in Ballot: Request by February 24; return by March 15.
  • In-Person Voting: Available at all 13 branches from March 3–15.

We’ll share more details about the voting process soon. In the meantime, meet the 6 candidates running to represent you and get ready to make your voice heard!

Dream Big. We Got You.

Frontwave Credit Union
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Showing the Difference with Deeds

Each month several CEO’s send me their monthly  staff updates.  These discuss the latest financial results, status of key projects, employee information, milestones and external event engagements.

These provide valuable local examples in a movement often described by the latest financial numbers, the next big merger (or bank buy) or a grand new marketing partnership with a professional sports team.

Despite radically different asset sizes, these reports share one common opening, retelling a member service story or two.  The CEO’s use these to demonstrate the culture they want the credit union to uphold. Here is an event triggered by a rollover IRA request.

Demonstrating our Purpose

Recently, Carrie visited our member center seeking help to transfer an IRA from another bank. She appeared frazzled and unsure about the steps she needed to take. Through patience, empathy, and active listening, we began to uncover the deeper reasons behind her unease.

She shared that her husband had passed away unexpectedly in his sleep the day after Father’s Day. He had not been sick. His death had blindsided their family.

Left to navigate the aftermath, she was overwhelmed by the financial responsibilities suddenly resting on her shoulders. She needed to transfer her husband’s IRA, open a new rollover account to avoid penalties, and manage the yearend timelines and logistics — all while grappling with profound grief.

As she spoke, it was clear she was struggling. The holidays had been particularly painful for her children. With the new year just a few days away, she felt the weight of 2024 closing and the uncertainties of 2025 looming ahead.

Jackie and her colleague, Becky, guided Carrie through every step of the process.  They explained  the IRA transfer, the required paperwork, and  timing to ensure everything was completed smoothly.

But more than that, they gave her space to share her story, her fears, and her heartache. They listened as she reflected on her loss and the daunting responsibility of building a future for her family without her best friend and soulmate by her side.

Before she left, they gave her their contact information, assuring her that she could reach out anytime she felt overwhelmed.  Jackie committed to following up with her to confirm  everything was in place and to check on her progress.

When Carrie walked out of the member center, she carried herself differently—less burdened, more focused.  She deeply appreciated all the support, knowing she was not alone in navigating these challenges.  She felt she had a team behind her ready to help.

This experience is a reminder of the profound impact we can have when we combine our financial expertise with genuine care and compassion.  It is moments like these that underscore the importance of what we do: being there for our members as trusted partners during life’s most difficult transitions.   Thank you Jackie and Becky for this great effort demonstrating our purpose. 

My Takeaway

As future options of the credit unions system come under debate In DC with the new administration, how do we present the credit union difference?   I believe it is with stories about our member-owner mission.  It is the difference we make in members’ lives that make cooperatives special.

PS:  In case you assume this must be a smaller credit union, the CEO leads a $10 billion coop serving over 500,000 members.

 

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The Art of a Leadership Transition in Government

The country is going through the political throes and formal processes of a complete changeover  of executive and political leadership in DC.  This includes NCUA.

In late 1981 Ed Callahan had been confirmed as the next NCUA Chair. Before he had been formally sworn into the job, I asked what would be his toughest challenge would be.

Ed had been leading the Illinois Department of Financial Institutions for almost six years.  In the Department, the credit union division oversaw  1,200 state charters.  During this time the Illinois system had navigated multiple market and legislative changes implementing deregulation.

I assumed his response to my question would be about greater scale of responsibility, from one to 50 states and from 1,200 credit unions to 16,000; or, the increased size of the agency budget and staff; or, the more complex institutional and political environment in DC.  This involved Senate and House hearings and NCUA membership of interagency committees such as the FFIEC or DIDC.

Ed’s Number One Challenge

His answer mentioned  none of the above areas.   His biggest challenge he said would be  communication.   That is to explain the direction he believed the NCUA and credit unions should undertake and why.

Callahan’s track record and leadership of Illinois cooperatives  was described as deregulation.  At a dinner celebrating his appointment before  going to Wasington, the Illinois Credit Union League presented Ed with a framed sign  he then hung in the Chairman’s NCUA office.  It read:

 Leadership of a Transition

However, what would deregulation look like on a national scale and all at once?

The first effort communicating this approach was a videotaped panel discussion arranged by the Illinois Credit Union League on January 8th, 1982.  The title:  Deregulation, What Does it Mean?

 

(https://www.youtube.com/watch?v=S09QkeNYgBU&t=4s)

The video is 24 minutes. This  conversation was the beginning of a dialogue to change the entire direction of the prior 50 years of federal credit union regulatory practice.

Several factors in this video are noteworthy.  It was a joint NCUA-movement project. The Illinois League sponsored and produced the video.  The panel included Jim Barr, the head of CUNA’s Washington office as moderator, three credit union CEO’s, and Chairman Callahan and NCUA Executive Director Bucky Sebastian.

The format is Q&A.  Hard questions are asked. The dialogue is authentic due to the openness of the conversion.

The most important moment may be at  minute 16.  A CEO responds to Callahan’s deregulation approach  by asking how much influence will credit unions really have in deciding this policy?   Ed’s reply from the February 1982 NCUA Review, which printed a transcript of the video:

“Even though I think credit unions want deregulation, I am more committed to the fact that we have to respond to their needs. If they don’t want deregulation, we will see that it doesn’t happen.”

A second question by Jim Barr is simply.  Why now?  Go to minute 18 for the response.

This video was the first of 20 NCUA created during  Callahan’s three and one half year tenure. It was  one of many efforts to inform credit unions and the public about NCUA actions.  To succeed, this approach required a leader who was accessible, informed  and willing to listen to the industry.

The result was a tenure characterized by joint NCUA-industry efforts that repositioned the system for an entirely new era of market competition.

This video is one example of how the regulator and the industry collaborated so that the movement could thrive well into the future.

Communication went to all constituencies.  These included the public and credit union press, the members, credit union leaders and other agencies of federal and state government,  The outcome included some of the most consequential  cooperative system innovations since the first credit union charter in 1909.

Leadership is never easy, especially in public positions.  Developing and seeing through a successful  tenure begins with the very first communication.  In this transition. that began with a video that still provides meaningful lessons decades later.

 

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Who Tells the Credit Union Story?  What Story?

The changes set in motion by Trump’s presidential transition are putting credit union’s public reputation to the fore. The administration’s  executive appointments promise reviews of previous assumptions about many areas of public policy.

All interest groups are  jockeying for influence to either protect the status quo or gain a new advantage.

Credit unions lobbyists and ICBA are already fighting over whether credit union’s federal tax exemption should be examined.  The exemption is an important issue. But how is that topic framed for public understanding and the credit union story told?

Should the credit union legislative strategy be to defend the status quo or to propose an agenda to expand the singular mission of credit unions?

A Wonderful Life Story

During the holiday season the film It’s a Wonderful Life is replayed over and over.  It captures the spirit of a community when asked to support their local thrift.  As summarized in a Marketplace article, the movie’s setup is straight forward and familiar to anyone in 1947 who lived through the 1930’s depression era’s banking crises:

George and Mary Bailey are about to leave Bedford Falls for their honeymoon when the unthinkable happens. Their taxi driver points out an apparent “bank run” at the Bailey Bros. Building & Loan Association. Trouble is, the building and loan isn’t a bank. To keep it afloat, George has to convince his friends and neighbors to withdraw only what they need to get by — then pays them out of his own pocket. So much for that honeymoon. 

The rest of this Marketplace article is a succinct history of the S&L industry, how it differed from banks, and its demise as a separate financial segment in the 1980’s.

The article then asks what institutions today are filling the role of the Bailey Bothers for their  communities.  I expected to find a credit union example or two in this follow on “encore.”  Instead Marketplace host David Branchicco  reprints a podcast interview introduced as follows:

While buildings and loans are all but gone nowadays, the concept of community-driven finance is not. In New York City, one such institution is Carver Federal Savings Bank, which is designated as a Community Development Financial Institution and a Minority Depository Institution by the federal government. The bank, formed in the 1940s by members of some of the city’s predominantly Black neighborhoods, is headquartered in Harlem and says it seeks to help develop traditionally underserved communities. 

The interview with Carver Federal Savings Bank CEO Michael Pugh discusses his focus.  He states  80 cents of every deposit dollar is reinvested in the community.   Other points Pugh makes in the interview include:

I think the unique proposition for us is that because we are for-profit, but we have this mission component, it allows us to continue thinking on both sides of our brain, being mentally ambidextrous, if you will, and considering the fact of mission and margin in every decision that we make.

Because we’re hyperlocal, our colleagues live in the communities that we serve. We believe that those personal relationships and the access to us really helps to significantly reduce the risks. 

Customers within our core market that choose to bank with us really understand the mission and what we’re trying to do. . . 

Where are the Credit Union Examples? 

This Marketplace interview  positions this for-profit CDFI designated bank as today’s successor of the  community spirited leadership portrayed in the Wonderful Life movie.

Yet there is nothing Carver FSB  is doing that hundreds if not thousands of credit unions do as well or better.  Yet that was not the example profiled.

Credit unions will define their public reputation or let others do it for them.   Coops are in a moment when major credit unions advertise during national TV sporting events, rename stadiums with their brands and invest members’ capital to buy out bank shareholders. These business initiatives are helping propel the issue of whether credit union’s regulatory advantages should appear on Congress’ agenda.

It is not sufficient to just oppose and defend the status quo, letting opponents framie the topic. Rather the response must be a compelling message about the  uniquely valuable contribution credit unions make for their members day in and out.

When credit unions present their public personas like most other financial providers, the mission component is omitted.  Without this message, the member-owned model can be presented as just another consumer option.

It is the mission that warranted the tax exemption from day one.  Isn’t that the reason to sustain the cooperative difference now?

Here is a long-30 minute example of the story credit unions should be telling. It is about economic warriors for their community,  The Barber of Little Rock  is a  video by New Yorker magazine.  This community CDFI lender received a credit union charter two years ago.

(https://www.youtube.com/watch?v=1amOPUn49aM&t=14s)

Or this example from credit unions.com. A Helping Hand for the Homeless.

 

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Getting After It-The Art of Leadership in Transition

Authority attracts followers.   The power of a position is a reality whether that role is CEO of a credit union, a company, a regulatory agency or an elected official including the President of the United States.

People and the public have an instinctive respect for those in authority.  But the process of validating one’s leadership is different for those in elected versus appointed positions.  For appointed roles, there is a presumption of industry expertise or other skill that warrants the responsibility.   The first steps matter.

Getting After It

Whichever path to leadership most will  act quickly to affirm their new authority, sometimes dramatically. It both enhances the role and the perception of being in charge.

President Trump claims an electoral mandate “landslide.” In just one week he has issued dozens of executive orders, traveled widely across country, spoken to an international conference all in a very deliberate campaign to show there is new Sheriff in town.  Getting after his agenda in a very public and energetic way, enhances Trump’s claims and intent to exercise his vision for the country.

NCUA Board Leadership

This impulse to demonstrate  newly awarded executive power is also practiced by incoming NCUA board chairmen. This is especially the case when board appointees have little or no previous relationships with credit unions.

In February 2021 shortly after appointed chair by President Biden, Todd Harper announced his promotion in a Commander’s Call address to the Defense Credit Union Council.

As the COVID-19 pandemic rages on, we must smartly, pragmatically, and expeditiously address the economic fallout within the credit union system. To that end, when I first became Chairman, I issued my Commander’s Call to the agency.” 

Time and again Harper used the imminent  threat of “economic fallout” during his leadership independent of the industry’s performance and or critical mission issues.

In this same tradition, several days after being appointed Chairman Kyle Hauptman published his eight priorities in a press release.  Many read like summaries from prior board meeting statements.  Like Harper, he wanted to put his views out immediately.

These initial pronouncements were an assumed first step in asserting the authority of an appointed versus elected position in government.  NCUA chair’s will routinely reference a  restatement of safety and soundness oversight.  Or in some cases an adaptation of the Administration’s governing priorities.

In Hauptman’s new role an important question will be how Trump’s priorities for the federal bureaucracy shape his administration.  This is especially true for personnel policies and appointments, agency spending and regulatory and rules review. Will he assert NCUA’s independent agency status or try to implement Trump’s efforts to reform what the president calls the deep state?

The Most Critical Agenda Issue

While these opening statements are part of the ritual when appointed to NCUA leadership, the most important question that all chairs must answer is, In whose interest will they serve?

Will it be incoming administrations?  The agency staff? Or the needs of credit union member-owners and their communities?   Each constituency wlll have its special claims and interests.

When NCUA leaders arrive without a track record of working within the credit union system, the assertion of agency priorities can easily overlook the most important issues the industry faces.  It is easy to repeat the regulatory mantra of safety and soundness without having to explain what that means.  For example, from 2007-2024 the losses to the NCUSIF have averaged less than 1 basis point per year.  So what are the underlying performance issues?

The Credit Union Way for Developing a Relevant Agenda

I believe the most important priority for NCUA leadership should focus on the credit union member-owners.   “It’s the member, stupid” is how one prior leader explained the challenge.  But how does one put members first?

The answer lies at the heart of the cooperative model.  Leaders within the credit union system must talk with and listen to credit unions.  For a relevant regulatory agenda, NCUA and credit unions should be co-creators for  setting the priorities to enhance the mission of the cooperative system.  And the well-being of its owners.

Not all credit union decisions involve a regulatory issue.  But credit unions need to recognize individual actions can have system wide consequences on the reputation and public support for their special status in financial markets.

Just as Hauptman has drawn up his initial talking points, so too are credit unions, or their lobbyists, asserting their priorities: protecting interchange fees, the tax exemption and reducing over-regulation.

But are these the primary issues that should form a collaborative agenda for the next four years?   How do credit unions balance their increasing financial stature with the absence of any effective member owner governance?

Is the growing mergers of sound credit unions and removal of local roots in the long term interests of the members?   What is credit unions unique responsibility, if any, in addressing the needs of individuals left behind or the macro issues such as the national shortage of affordable housing?

Ultimately an effective leadership agenda is a collaborative process.  No institution has all the answers. Listening to competing agendas and reaching a consensus is the art of political compromise.

Some “leaders” will want to avoid this task preferring to assert the power of their appointed or earned positions.  Getting after it  may work in the short run.  Americans respect authority implied by the rule of law.   But it is not a formula for lasting change as we see the current approach of a new administration just overturning the priorities of the former.

Credit unions and the regulator are at their most effective when each uses their special skills and experiences to work cooperatively furthering the best interests of members, not a partisan agenda.

Here is an example of how an NCUA board and credit unions responded to the issue of the movement’s federal tax exemption in a prior administration transition.

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The Unmatchable Competitive Advantage

Recently  legal counsel  Henry Meier posted an article outlining his reasons for the decline of personal customer service in many retail organizations. His title The Demise of Customer Service and What It Means for Your Credit Union is a thoughtful analysis.

But  what does effective customer service look like?  Is  it just a process of smiling and using the member’s name when they enter the credit union?  Following are examples of experiences these members will never forget.  They were included in the CEO’s monthly report to staff.

An Impact Maker

Destiny referred two members to our partners at Trinity Debt Management. Trinity specializes in negotiating with credit card companies (think Capital One, Bank of America, etc.) on behalf of individuals who may be over their heads in credit card debt. They can make a big impact in the financial lives of our members.  Here are the two stories..

Destiny made a referral to Trinity for a member that owed $5,230 on two different cards. The original payment was $160 with only $73 going to the principal at 20% interest rate. The new payment is $15 with $123 going to the principal with the new interest rate of 7.45%! The member will save over $600!

A second member had four different credit cards with a balance of $6,122. The original payment amount was $256/month, with only $104 going to the principal at 29.63% interest. The new payment is $173 with $129 of that going to the principal. The interest is now only 9.33% saving nearly  $1,400.

Way to go Destiny!

Why Service Works in a Digital Era

Saving members money is certainly a memorable service.  But  Meier’s  article provides several reasons why this personal service is no longer the preferred business model.

Somewhere along the way, customer service became a necessary evil rather than a means of helping to build brand loyalty. Part of this trend reflects the digitalization of commerce. . .

But I’m afraid that the demise of customer service also reflects a more troubling trend, which I believe is a direct result of the rise of smartphone culture and the aftereffects of the pandemic. First, it has become too easy not to talk to each other. . .

Meier’s Credit Union Takeaway

Customer service is a lost art that has become so conspicuous that in its absence, now more than ever, it can be a differentiator for credit unions that continue to cling to the antiquated notion that customers should be treated with respect and dignity in return for giving businesses their money.

Here is my operational takeaway, no matter how good your credit union’s apps or bots become or how informative your website is: Avoid the trap of thinking of your customers as inconveniences.

Communicating with Staff

I could not help but note two other notes also in this CEO’s staff update.

The Call for Candidates for the 2025 Board of Director elections resulted in 11 candidates applying. The Board Governance Committee is in the process of constructing the ballot.

Could there be a connection between  service and actual board elections by members?

The conforming loan limit is the maximum amount of money a homebuyer can borrow using a conventional mortgage that’s eligible for purchase by Fannie Mae and Freddie Mac and is increasing from $766,550 to $806,500 in 2025.

Just one example from many of how this CEO informs staff about the political, competitive and business context in which they operate.

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A Lesson from the Past: Could NCUA Be Reorganized Away?

While credit unions focus on the threat of federal taxation, there is another event that could end the independent cooperative system.  To understand how governmental agencies are reorganized, it is useful to review what happened to the separate S&L industry after a decade long series of industry and regulatory failings.

From an Inspector General Report dated March 2012: Title III of the Dodd-Frank Act sets forth provisions to address problems and concerns in the multiple agency financial regulatory system by abolishing OTS and transferring its powers and authorities to the FRB, FDIC, and OCC as of July 21, 2011 .

All OTS functions relating to federal savings associations, all OTS rulemaking authority for federal and state savings associations, and the majority of OTS employees transferred to OCC; OTS’s supervisory responsibility for state-chartered savings associations and OTS employees to support these responsibilities transferred to FDIC; and OTS’s authority for consolidated supervision of savings and loan holding companies and their non-depository subsidiaries transferred to FRB.

Prior to this 2011 transfer of supervision, chartering and examination, the separate FSLIC insurance fund had been merged into the FDIC in two steps.  The FSLIC was abolished in August 1989 and replaced by the Resolution Trust Corporation (RTC). On December 31, 1995, the RTC was merged into the FDIC which became the sole deposit insurer for all thrift institutions.

The Presidential Transition Center describes one surviving regulator’s situation today: “The OCC is one of eight Treasury bureaus and has approximately 3,850 total employees. Headquartered in Washington, D.C. It has four district offices and a London office that supervises international activities of national banks. Operations are funded primarily by assessments on national banks and federal savings associations.”

Current numbers under OCC responsibility are  approximately 1.500  national banks and federal savings associations and 50 federal branches and agencies of foreign banks.

The administrative head, the Comptroller, is nominated  by the President to a five year term and confirmed by the Senate.

As of mid-2024 there were 556 surviving savings institutions.  There was no single regulator however. Supervisory oversight of their $1.2 trillion total assets was divided among the OCC-242, the FDIC- 278 and the Federal Reserve-36.

An  independent consolidated thrift industry does not exist today.  Depending on each institution’s charter history and scope of operations, regulatory oversight is divided among the three federal banking agencies.

The Relevance of History

A goal of the Trump administration is greater governmental efficiency. Combining regulatory agencies is not a new idea. Merging the cooperatively designed NCUSIF into the FDIC, closing the unused  CLF and transferring  chartering and supervision to a new Treasury bureau would seem a reasonable proposal-for some.

A New North Star: Faster Alone, Farther Together

How might a single OCC administrator view this possibility?  The following is from an exit interview with the acting OCC head during the Biden administration:

Michael Hsu, a longtime bank supervisor and former top Fed staffer, threw himself into what he describes as a dream job: running an agency full of examiners. The OCC chief was at the table as officials managed through a regional banking crisis and a crypto crash.

MH: I made safeguarding trust the North Star for all that we were doing…I feel good about what we’ve done.

I’m most interested in long-term, durable wins. I’ve been in government for 20 years, over 20 years doing this stuff. There’s nothing more frustrating than this kind of fleeting, pendulum-swing of announcements. . .

There’s a saying: Faster alone, farther together. I say it to my staff all the time, which is frustrating, because sometimes we have to slow down…But if you just do it alone, you can get the quick win, but then the next guy is just going to undo the quick win.

Responding to a Reorganization Review

To counter the inevitable suggestions for more coordinated financial regulation, the so-called level playing field, requires rethinking what is being communicated at every level about credit unions today.

Some areas for messaging might include:

  • An NCUA led by informed and articulate leaders presenting the contributions and role of credit unions and cooperative design to the pubic and Congress;
  • An industry performing with stable and successful financials capable of responding to ever-changing markets;
  • Meeting public and individual interest in and demand for cooperative charters to lift up local groups and communities;
  • Daily examples of member-owner benefit that rises above traditional service and product options from for-profit providers;
  • Leadership at all levels communicating the advantages of cooperative design. A former NCUA executive director once summarized credit union’s purpose with the phrase:  “it’s the member, stupid.”

Much of today’s credit union commentary reads and sounds like all the other lobbying and jockeying with a new administration.  Protect the status quo.  Align one’s vision and “asks” with the incoming administration’s priorities.

That apprach may be smart politics.  But credit unions did not succeed by preserving the status quo.   What will their role be in responding to the numerous areas of unmet member needs and expectations?  That response will position NCUA and credit unions as leaders for greater contribtions or, if not, as a part of  governmental policy that needs rethinking.

 

 

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Honoring our Cooperative Heritage

A June 26, 1984 gathering of “Old Timers:” current NCUA board members, prior Administrators, past General Counsels and senior staff celebrate the 50th anniversary of the passage of the Federal Credit Union Act.

Seated  left to right: Deane Gannon, Joe Blomgren, Richard Walch and Bernard Snelick.

Standing left to right: Joe Bellenghi, Austin Montgomery, Fred Hayden, P.A. Mack, Ed Callahan, Elizabeth Burkhart, General Herman Nickerson and John Otsby.

A statement of cooperative enterprise from a church’s bulletin board

LEGACY

All of us are indebted to the past,

to those who precede us.

We drink from wells we have not dug.

We enjoy liberties that we have not won.

We share faith whose foundations we have not laid.

 

At the same time,

We are seeds of the future,

for those who succeed us.

 

We dream and envision

and set things in motion.

The fruition of our decisions

will be known only to others,

whom we wll not meet.

 

We are called to partner in faith

with those who have gone before us

and to offer the best

that we have to give

to those who will follow.

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Reflections Entering 2025

Some individuals believe leadership is about the spirit of the poem Invictus:  that I am the master of my fate and the captain of my soul. 

The majority, I believe, understand our future will more likely be shaped by communities and groups with which we participate, professionally and voluntarily.

The following is a selection of issues that we will  encounter in the year at hand. In contrast to the certainty of Invictus, management guru Peter Drucker cautions:  “Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. ”

Success May Look Boring

I start with an observation by banking consultant John Maxfield:  Banking is a sport of unforced error. The harder one tries the worse one performs.

Tennis.

Ping pong.

Don’t be too ambitious.

Credit Union Leaders Out of Touch?

Outlining vital missions is the job of leadership.   But this skill does not necessarily come with those in positions of authority.  Consultant Ancin Cooley described one industry challenge:

A core question is about advocacy in our movement: Who are we really advocating for? If we claim to represent the interests of members, why does it so often feel like so much public energy is spent protecting interests that don’t align with members’?

So, should we be out in front of the overdraft fight or supporting legislation that limits corporate ownership of single-family homes? The response you get from some folks is often very telling. I often wonder who is actually making these decisions for the credit union movement because the direction we are going seems out of touch with our members and the communities we serve.

A good example to understand Cooley’s concern is the debate on credit card fees.  This article clearly outlines the conflicting positions credit unions must balance for members.  One of the author’s observations:  “Nobody ever got rich through credit-card rewards, yet lives have been ruined due to credit-card debt.”

Innovative ideas and compliance mandates cannot create the kind of priorities that clearly define credit union’s unique role in the American economy.  That can only come from persons who care deeply about their members’ future and financial lives.  When leaders combine both mind and heart in their roles, it may be possible for coops to discover possibilities  never imagined before,

The Loosening of Social Norms-Culturally and Politically  (by David  Kaiser, American Historian)

“From Shakespeare: “The fault, dear Brutus, was not in our stars, but in ourselves.”  So it is again.  What my generation has done was only human.  The self-restraint which, as the Founders realized, was essential to make the American experiment work, had weighed upon too many generations for too long. 

“It could not, human nature being what it is, endure indefinitely, and it didn’t.  It had indeed gone too far in some ways, and humanity has benefited from loosening some of those restraints. 

“Now it will fall to future generations to re-establish some of those restraints and enable us to live together and solve new problems in the large, cooperative communities which their vast numbers now need to survive.” 

The Proper Use of Artificial Intelligence (AI)

What if AI is unleashed and never quite controlled — not in the sense of a robotic takeover but, as Harvard law professor Jonathan Zittrain puts it, as a new form of asbestos: dangerous, everywhere and hard to get rid of.  

Trump Administration: Uncertainty about Everything

( Analysis from  Kellogg Insight, Northwestern University)

Two months have passed since the election and the policy landscape under a second Trump presidency remains as uncertain as ever. We suspect that the Republican-controlled Congress will squeeze some savings out of the budget, but not enough to have a material impact on economic growth 

Economists generally view innovation as the main long-term contributor to living standards, as new ideas make people more productive and richer, freeing up time to innovate anew. But there is a second strand of thinking in the economic growth literature, and it holds that political institutions matter most of all.

Peter Thiel famously said, “We were promised flying cars; we got 140 characters.” With crypto we were promised DAOs and smart contracts; we got $100,000 Bitcoin.  

Technical progress desperately needs to be matched by social progress that increases trust and delivers better decision-making — from neighborhoods to boardrooms to relations between heads of state.

The Outlook for Interest Rates

How will markets perceive the growing burden of national deficits and debt?

From the Rising Burden of US Government  Debt

Federal Debt as a Percentage of Gross Domestic Product

From Bloomberg Forecasts:  Hopes that the Federal Reserve would keep up a swift pace of interest-rate cuts have dwindled. That means stocks and US consumers could face mounting pressure, and borrowing costs could remain higher for longer.

An Environmental Change That Aligns with Credit Unions?

From: Addison Del Mastro on Bringing Back America’s Small Cities and Towns

In last year’s predictions roundup, I predicted that 2024 would see the housing crisis, and urban policy more generally, become more of a mainstream issue. Of course, that didn’t happen all at once, but I feel pretty good about the trajectory of these issues’ salience.

This year, I’m thinking about a laterally related issue that may have the wind at its back: the question of economic revitalization in small cities and towns.

However much (or little) the incoming administration may do in terms of housing affordability or lifting the fortunes of deindustrialized or “forgotten” places, the hope that they might do something about it was certainly a factor in Donald Trump’s victory. And a lot of small cities and towns are seeing new construction in their old downtowns for the first time in decades.  

The eye-watering expense of housing in the biggest metro areas, the rising appreciation for classic urban patterns and the sense that perhaps we owe something to places that have lost out to globalization, may all combine to create a real movement or effort behind bringing back America’s intact but battered small old cities and towns.

(From Discourse)