Category: Cooperative Design

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Credit Union Shareholders Receive $16 Million; NCUA Receives Judge’s Reckoning

Yesterday the Dakota Credit Union Association announced that NCUA had agreed to pay more than $11.9 million to the former credit union members of Midwest Corporate Credit Union.  Their pro rata share of US Central’s capital, along with a similar recovery by Iowa credit unions, will bring the total payments to over $16 million.

This outcome culminates efforts commenced in 2021 by the two Leagues and their members.  Ultimately legal suits were filed when NCUA rejected the credit unions’ repeated recovery efforts.

In his October 2023 ruling the Chief Judge of the US District Court District hearing the case wrote: “simple logic and hornbook property law support construing the FCUA as including automatic transfer of assets.  In general, assets do not simply evaporate when the owner is unable to collect; rather the property must go somewhere.

Consequently, a credit union’s asset likewise do not cease to exist come the last day of a wind-up.  Instead, the most logical conclusion is that the assets vest in the credit union’s shareholders.”

A Three-Year Bureaucratic Slog

According to an August 29, 2022 statement by the Dakota League challenging NCUA “To Do the Right Thing”, the Agency had actually been ready to release checks in 2021. NCUA changed its mind when informed that the (federally chartered) corporate had been voluntarily liquidated years earlier.

North Dakota’s two Senators wrote NCUA Chair Harper concerning the nonpayment. He replied on September 2, 2022 that “After careful review and legal consideration, the liquidation agent determined that because Midwest no longer exists no distribution can be made to Midwest or its former shareholders.”

The League tried the administrative claims process. Again NCUA denied the request.   President Olson’s response to this final effort in February 2023 showed his frustration: “This is a clear case of obstruction through bureaucratic hurdles and complicated language where the process is the punishment, and does not provide justice.”

The North Dakota League filed its lawsuit in April 2023.  This was followed in June when 63 of Iowa’s 75 credit unions sued the NCUA for $4.2 million to recover their U.S. Central claims. Joining in the lawsuit was the Iowa Credit Union League, its foundation, political action committee and an employee benefits company.

A Lesson in Bureaucratic Obstinacy and Blindness

These years long efforts included all three branches of government.  The Dakota league attempted to play NCUA’s administrative game in which it learned that “the process was the punishment.” It requested and received support from North Dakota’s  two senators.  Chairman Harper stonewalled the appeal from the legislature.

The last remedy was the judiciary. The judge explicitly rejected NCUA’s logic.  “The fund’s vest in the credit union’s shareholders.”

It is not a comforting example of regulatory judgment when common sense or “doing the right thing” apparently had little role in NCUA’s decision.  When dozens of staff lawyers and three “independent” board members see only one position, this raises concerns about the agency’s deliberative processes and/or the competency of the advice being given.

CooperatIve Action in the Members’ Interest

The good news is that cooperative efforts, especially at the league level, persistence and advocacy did prevail.  It is hard for an individual credit union to counter an NCUA position.  Collective action is a credit union advantage even in regulatory judgments.

The credit union shareholders, the members of Midwest and Iowa corporate, have received their just due.  And that standard, what is in the members’ best interest, should  be the determining one.

Thank you to the cooperative leaders in these two states that stood by their members.

(Editor’s Note:  I first wrote about the situation in February 2023, urging NCUA to do the right thing.

 

 

 

 

 

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January 1985: An Historic Turning Point for Credit Unions

For forty years, the NCUSIF has maintained  not only its own financial integrity but more importantly, the trust and confidence of the credit union system’s members. This record of stability began in 1985 and continues unabated through 2023.

Over the same four decades the FSLIC, the separate S&L fund, failed and merged into the FDIC.  The FDIC has had negative net equity on several occasions requiring an explicit government guarantee.  It has constantly modified  its premium model to accommodate numerous industry crisis.  These  include multiple premium levels, risk based pricing, an expanded assessment base for premiums, differential pricing according to institution size and other financial or accounting maneuvers. It’s equity to insured deposits has fluctuated from negative to 1.1% at June 30, 2023.

During this same period of national economic and interest rate cycles, the NCUSIF’s unique cooperative design allowed it to remain strong. The fund’s yearend equity level  of 1.2-1.3% of insured shares has always been met.  Premiums have been necessary only four times in this four decades.

“D” For Deposit Day

This fundamental  redesign was a two-year industry wide effort.

This priority came to fruition in January 1985 when the first 1% credit union deposit underwritings for the new insurance model were delivered to NCUA.  The event was pictured in NCUA’s 1985 Annual Report (pg 21):

(caption:  NCUA Staff Member Wayne Robb accepts a hand-delivered capitalization deposit in the unheated Washington lobby of the NCUA.)

The Chicago Tribune described this historic change in an article later that year:

“The solitary messenger clutched a plain brown envelope as he picked his way carefully across a deserted, icy sidewalk near the White House.  In- side was a check for $13 million.

“It was inauguration Day, 1985, a morning most memorable for the raw cold that forced cancellation of a parade and drove President Reagan inside to take his second oath of office.

“But for the messenger, and for the trio huddled around an electric space heater waiting for the check, it was also the deadline for credit unions to deliver payments to the new-look federal insurance fund that backs the deposits of 51 million credit union members.

“The $13 million check, the largest single payment, was from the huge Navy Federal Credit Union in Washington.

“The little-noticed transaction–one of more than 7,000 totaling $480 million that frosty January weekend–illustrates how the nation’s 15,000 federally insured credit unions have quietly put their house in order.

“Edgar  F. Callahan Chairman of the National Credit Union Administration said credit union’s willingness to embrace a new approach to shoring up their insurance fund was just one example of how the industry has recovered from the hard times of 1981.  

The challenge for his successor, Callahan said, is to keep Congress and other policy-makers aware that credit unions are unique.

“You’re in an industry this often grouped with banks and S&L’s and there’s a tendency to get painted with the same brush,” he said.  

“There is a danger to getting sucked into that atmosphere.  My successor will need to maintain that credit unions have been ahead of the problem curve and need not be grouped with other financial institutions.”

The Workup for Change

The NCUSIF was created in 1970, with no government-provided startup capital.  The Fund’s design mimicked the premium base of both the FDIC and FSLIC each which had a 35-year head start accumulating retained earnings.  But from 1979 onward the premium approach, even with doubling assessments,  did not prevent the Fund’s equity ratio from decline.

In April 1983 the NCUA presented a Report to Congress on the Credit Union Insurance Fund.  The Report was over 130 pages in seven chapters responding to specific Congressional questions and making four recommendations:

  1. All credit unions, federal or state, should have a choice of insurer;
  2. Capitalize the NCUSIF with a 1% deposit of insured shares;
  3. Authorized at least one uninsured share per member as capital;
  4. Keep the  insurance fund independent from FDIC/FSLIC due to the unique nature and role of credit unions.

The Report included direct quotes from leagues, private cooperative insurers, credit unions along with a history of credit union stabilization options prior to NCUA insurance.

Following the publication of this Report, NCUA and credit unions working in partnership developed an alternative to the traditional premium model describing it as, A Better Way.  It drew upon the two decade experiences of private insurer alternatives.  It rested on the fundamental cooperative concept that members should own their own fund.

The financial logic and analysis was summarized in a video sent to all credit unions and interested parties on the NCUA’s Video Network.  The following is an excerpt from this longer analysis,  A Better Way:

(https://www.youtube.com/watch?v=IlqxLeFkuLY&t=30s)

This redesign was achieved by challenging long time conventional governmental practice.  The alternative was drawn from cooperative experience and principles.

Trust in the Fund was not due to more regulation or open ended premium assessments.  It was constructed on mutual commitments including frequent and audited financial transparency, accountability for expenses and legislative guardrails.

This capacity to “imagine differently” resulted from collaboration and open communication at every step.  The historical financial analysis (above) and future forecasts were public, for all to review and refine.

The effort was not a sudden epiphany. Rather it resulted from hard work, shared viewpoints, a desire to create something better and courage to change.

The First Year’s Bottom Line

At the end of fiscal 1985, the fund held $883 million in 1% deposits.  Earlier in the year each credit union received a pro-rata equity distribution (in excess of the Fund’s .3% equity) of $80 million to meet the January 1% funding obligation followed by a $30 million cash dividend at yearend.

This 12.5% return on the 1% capital deposits was on top of fact that this was the first year since the Fund opened in 1970 that no premium was charged. (page 5, 1985 NCUSIF Annual Report)

In future blogs I will present how the fund  navigated specific economic and industry challenges.

Continued success does not rest on design alone.  Credit unions must also exercise continuous oversight of NCUA’s vital  responsibilities for fund management and supervisory oversight.

 

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The Person of the Year-One View

Scott Galloway is professor of marketing at NYU’s Stern School of Business.  He is a prolific writer, commentator and provocative analyst  of America’s economic successes and failures.

The following is an excerpt from a much longer December essay on current trends titled Prof G Person of the Year:

The real Person of the Year in 2023? A:  Money. 

I’ve experienced this firsthand, watching as faculty who can’t teach or pen relevant research create a weapon of mass distraction from their mediocrity: DEI. But that’s not what this post is about.

America is becoming more like itself every day: Money is the arbiter of … everything.

There’s a view that the rise of money is a good thing. Or at least not all bad. Human society has never been fair, and as long as people are status-seeking, competitive animals in a world of scarce resources, it won’t ever be. Historically, many of the lines that divided society traced innate characteristics like race or sex, were based on inheritance, or were determined by the exertion of physical strength.

Money doesn’t care about any of these things, and it has washed away barriers in ways that potentially make institutions more accessible. There are now nine Black American billionaires. Good news — and their rise is correlated to an increase in civil rights.

What stops this from being a Hallmark channel version of capitalism is that money, when not reinvested/redistributed (pick your word) quickly pools and concentrates, and innovation and competition decline. “Competition is for losers,” is how Peter Thiel puts it. And he’s following through, buying Senate seats (his protégé, J.D. Vance, is leading the charge to defund Ukraine) to secure the influence of his money.

We aren’t going to end the power of money any time soon. In an economy increasingly run on financialization, with so much wealth in circulation, our objective should be to ensure that it keeps circulating. Money = power, and power should be distributed as widely as possible. . .

My Comment

Galloway’s critique is one of the reasons for cooperatives such as credit unions in a capitalist economy.   That is until the alternative begins to act like capitalists.

I believe the greatest challenge for credit unions is not external–competition, economic uncertainty or technology disruption–but rather internal.   That is, the loss of confidence in who we are and how we try to counter the inevitable goals of more and more money and power, not for  members, but for our personal and institutional ambition.

The greatest challenge is how do credit unions re-engage with members, not as mere customers, but as real owners in the “distribution of power” as Galloway describes it.

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The “Goldilocks” Interest Rate Curve

Yesterday the treasury market closed at these yields for the maturities listed:

Yield           Maturity

5.50%        Overnight

5.55%         One month

5.46%        Three month

5.24%        Six month

4,80%        One Year

4.33%        Two Year

3.95%       Ten year

This inverted yield curve, where short term rates exceed long term, can be an ideal time for asset management.

This is because return and liquidity are both optimized by staying short.   If an asset or investment  manager is matching with specific liabilities, the prospect of a duration gap between asset and liabilities can be minimized.

This is a Goldilocks ALM environment where return and liquidity are both optimized.   By going long now, an investment manager will have a lower return versus staying short.  That might seem like a surefire market bet as Chairman Powell has forecast several  rate reductions this year.   That is until inflation possibly comes back, and further reductions put on hold.

The Credit Union Opportunity

An additional advantage, besides reducing ALM mismatches,  is that it allows balance sheet management to remain agile.   Shorter maturities provide more opportunities to respond to market and/or liability changes.

A prime example is NCUA’s management of the $22 billion NCUSIF investment portfolio.  The fund continued its 7 year ladder as rates went to near zero in 2019-2021.   When the market turned, the entire portfolio was underwater, burdened with an average duration of almost three years.

Through October 2023, the year-to-date return on the Fund is 1.92% and the portfolio reports a $1.7 billion unrealized loss.

When looking at historical trends, a yield on the NCUSIF portfolio of just 2.5% would result in a breakeven, that is stable, equity ratio in almost all years.

Recognizing this liability target for asset returns, makes NCUSIF investment decisions easy in this rate environment.  By moving from overnight to maturities up to two years, the yields would be more than sufficient income to maintain the Fund’s equity ratio at or above 1.3% for any scenario.

Many investment managers were surprised by the Fed’s rate reversal to counter inflation.  Today’s interest rates provides a rare moment for stabilizing both liquidity and return for credit union portfolios and the NCUSIF.

 

 

 

 

 

 

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Two Endnotes Going Into 2024

Excerpts from two perspectives for sustaining success as we head into the New Year.

Dream or Die

“All social entities or movements need dreams, which can be defined as an indispensable capacity to envision a future for themselves that considers both the practical means at hand and a higher ideal. Societies that do not dream are doomed to die.

“We have no knowledge of any human community where men do fail to dream,” writes Irving Kristol. “Which is to say, we know of no human community whose members do not have a vision of perfection—a vision in which the frustrations inherent in our human condition are annulled and transcended.”*

Source: *Kristol, Two Cheers for Capitalism, pg 153

JPMorgan’s $4 Trillion Balance Sheet Widens Lead Over Rivals – Firm has added the equivalent of one Wells Fargo since financial crisis

“As the spring bloodbath among regional banks began, nervous depositors with more than $50 billion began showing up at JPMorgan’s door. Bank executives went on to raise expectations for net interest income four times throughout the year, eventually pulling in so much cash that managers have taken to warning of “over-earning.”

“That’s put JPMorgan on track for the biggest annual profit in the history of American banking. Analysts predict that by the end of this month, its annual net income will be 36% higher than last year.

“By comparison, the combined earnings of the next five largest banks looks to be about 1%. For JPMorgan and its chief executive, Jamie Dimon, it was a year like no other.”  (Source:  Bloomberg, December 27, 2023)

As we turn the calendar’s page, which approach will be your credit union’s priority?

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Credit Unions and Popular Culture

Yesterday’s post on The Bank of Dave was a tru-ish movie about an actual effort to organize a local financial institution focused on the needs of the town of Burnley.  Dave Fishwick, a real person, was the hero.  The antagonists were regulatory bureaucrats, lawyers and of course entrenched financial institutions.

As in It’s a Wonderful Life, the founder Dave  is portrayed as someone serving the common good versus personal profit.  The movie’s message is that this person’s purpose is one that present day  society should honor and support.

How are credit unions portrayed in popular American culture?  Are there any movies, books, plays or other artistic recognition of their special history?

Last night I attended a performance of The Seafarer, a play about Irish life by Conor McPherson. The scene is Christmas eve. The four personal friends drink for camaraderie and to cover the darkness in their lives.

A fifth character (Lockhart), the devil in disguise, enters to participate in a poker game, the main action (after drinking) of the second act.

This inebriated poker rounds are a metaphor for Lockhart’s stated intention of capturing the soul of Sharky, a character trying to give up drinking.

During the final betting round, the stakes go higher, and all raise with the last money they have on hand. At that moment the lead character challenges one of the other players, “Where are you going to get your stake?  From the credit union?”

In the midst of this realistic-surrealistic tale is a direct reference to a financial  reality an Irish audience would understand.  The play was written in 2006 as credit unions were becoming more widely available in Ireland, a generation-long process.

Similarly, The Bank of Dave is set in the post 2008/9 financial crisis in Great Britain when consumer lending was unavailable.  Current day  viewers would be familiar with the real circumstances motivating Dave’s initiative.

American Culture and Credit Unions

Where and how are credit unions referenced currently or in past American literature?  Is there a Norman Rockwell painting that illustrates this financial opportunity for a  common person? Or a story of a local entrepreneur lifting up the community with a cooperative charter?

Is the credit union story so prosaic that the occasional coverage in the business section of the paper or on CNN/MSNBC captures our public reputation and contributions?

Have the many remarkable achievements of local credit unions been so taken for granted, that they are now just another ready option in the financial marketplace?

Have credit unions so lost their unique cooperative character that American culture and ordinary citizens, no longer see them as doing something special?

 

 

 

 

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A Praiseworthy Life

Christmas is a time when we remember, honor and celebrate people whose life was the gift of service to others.

Credit unions attract and provide fertile ground for  persons with this character.  They create an ideal platform for assisting others at important junctures in their lives.

These individuals’ efforts are not measured solely by numbers; more important is the personal legacy of bringing “soul” to their work in the movement.

The following tribute to a long-serving credit union employee is by Jim Blaine.

James McArthur Williams (1943-2023)

Why do we so often become confused when taking the measure of greatness? Why are we so easily distracted – and dazzled – by the spectacle, the swank, and the swagger? Why do we so often miss who is truly important – and what really makes a difference in each of our lives?

Had the privilege of attending the funeral of a great man last week at St. Paul A.M.E. Church in downtown Raleigh. James Williams was a beloved husband, father, grandfather, brother, cousin, and friend. He married his high school sweetheart Ginger; he called her “Bread“. They had two children – JaSonne Yvette and James Eric.

James Williams was a veteran, 33rd degree Mason, Emeritus Board Steward in his church, graduate – and beyond ardent supporter – of his HBCU, “THE” North Carolina Central University  – “Go War Eagles!“. James was a devoted family man at heart, loved traveling, and as an empty-nester, cruising with Ginger. A full life – important, meaningful.

James Williams came to work at the State Employees’ Credit Union in 1973. That was 50 years ago. That seems like a long, long time ago. Much has changed in that time, much hasn’t.

James McArthur Williams was the first Black employee to work at SECU. He faced some unusual challenges, not of his making. But he persevered, he persisted. James Williams was a senior lender at SECU for over a quarter of a century. No individual was more important in building the reputation for integrity and fairness at State Employees’ Credit Union than James McArthur Williams. With humor, grace, and kindness, James Williams navigated all the “historical difficulties”; he left a positive mark on all he touched; because he knew how you felt – he had walked in your shoes.

Thank you, James Williams, for helping me and many, many others to understand better. 

Can an organization have a soul? As a faithful “soul man”, James McArthur Williams spent a lifetime showing us there is a path…

Can you measure greatness in people and in institutions? Here is what SECU members say:

 “James will long be remembered as a person who showed many of us how to overcome obstacles in the world of finance. He demystified bank forms and protocols. And most importantly, he always encouraged patrons of SECU as we realized with God all things are possible!”

“James was our greatest ally at the State Employees’ Credit Union.”

“James and Ginger are two of the warmest people you’d ever want to meet. Many state employees knew James through the State Employees Credit Union in downtown Raleigh.”

Thank you, Sir!

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Observations From NCUA’s 2024 Budget Approval

After a public hearing, multiple written comments and some give and take between board members, these are some of my initial observations from last Thursday’s board meeting on the 2024 Agency Budget.

  1. Only .02% of 1% was reduced  in the final budget of $385.7 million by the board from the initial staff amount.
  2. No discussion of why the Office of Information Serves (i.e. computer support) depends on contractors for 71% of its operations totalling $44.5 million.
  3. A 16.4% in the federal credit union operating fee when the Operating Fund’s cash on hand now would almost cover a full year’s expenses.  Or why the $24 million “carry forward” from 2023 (unspent  amounts collected) is not returned to credit unions, but “reallocated” to 2024.
  4. Why only four new charters justifies a 18% increase and 41 staff in the office of Credit Union Resources and Expansion(CURE); also when the industry’s total numbers declined by almost 170 credit unions.
  5. Most curious was the increases in staff to a total of 23 and 20% budget raise to $6.4 million in the Asset Management and Assistance center when the total reported losses to date in the NCUSIF are just $1.0 million. The remaining corporate AME’s are to be disbursed soon.  The office is spends more on staff than on the assets it oversees.
  6.  The CLF’s $2.2 million budget is nothing more than an effort to transfer NCUA’s overhead expenses to another set of books which credit unions fund separately. The CLF’s 4.62% third quarter dividend was at least .75% below what credit unions could earn in the overnight market, meaning NCUA requires members to subsidize this inert operation.

There are multiple other expenditures that appear with no specific goals or outcomes.   The board discussions were general observations.  Credit unions deserve more coherent and specific details to have confidence in how their funds are used.

In the spirit of the season, this cartoon caught my eye.  It summarizes NCUA’s budget review from a credit union perspective.

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Today’s Vital NCUA Board Meeting-Will it Be Productive for Credit Unions?

December’s NCUA board meeting will set the spending budget for 2024.  What will be the guiding star in the voting, to borrow words from yesterday’s post We Three Kings?

Is the guiding star one that illuminates the unique design and resilience of cooperatives? Or will it enhance bureaucrat resources as the number of credit unions falls to its lowest level since before the passage of the 1934 FCU Act?

Rodney Hood’s Credit Union Service

Hood has served as an NCUA board member during three tumultuous financial decades.  The first (November 2005-August 2009) saw the Great Financial crisis unfold.  The second  from April 2019 included the Covid national economic shutdown and the highest inflation since the 1980’s.

This meeting may be his final one as his current term ended in August. His two tenures over 18 years provide a unique perspective on the board. He brings a shared history of an important era for the cooperative system. 

We can only understand and celebrate the present when we appreciate how it came to be.  In the words of historian David McCullough, “history is who we are and why we are the way we are.”

Hood’s Focus as a Board Member

Relevant for today’s meeting is his support for the long time, traditional NOL cap on the NCUSIF of 1.3%, full transparency for all financial calculations including reserves, and most urgently, a more meaningful presentation of the fund’s equity ratio using current data in both the numerator (the 1% deposit) and denominator (insured risk.)

As chairman he oversaw the only year in NCUA history since 1984 that recorded an actual fall in NCUA’s expenditures. He has supported returning to credit unions the increasing surplus cash built up in the Operating Fund.

Another example of his expense focus is that his office is  the only one of over 25 NCUA budgets to request a lower amount in 2024, by 1.8%, versus the current spending level.  NCUA’s  2024 overall operating budget projects an 11% growth.

An Honorable Gentleman

The first time I met Rodney was at a credit union meeting in New York during the emerging financial crisis.   He was and still is a true gentle man, unfailingly polite and easy to talk to.

His manner at NCUA board meetings is always respectful.  Even when staff’s answers to his questions might be non-responsive, he never publicly challenged the presenter.

In his voting, he rarely dissents even when he disagrees with the motion or policy.  He would explain his vote as either deference to the Chairman’s role or to promote bipartisanship.  These acts of corporate courtesy were not the practice when he was chair.

As a board member in 2008 he approved an NCUSIF dividend when the NOL exceeded 1.3%.  That was the last time a dividend was paid.  This is a legal commitment intended to reward credit union’s perpetual 1% deposit underwriting. Last year he succeeded in urging the board to reduce the cash stockpile in the operating fund by giving credit on the FCU operating fee for 2023.

His approach to budgeting and board decisions to set meaningful agency  guardrails reflects the experience and wisdom of his years of credit union service.

Should this be his last official board meeting, his perspective  will be missed.  As Pearl Buck’s observed “if you want to understand today you have to know yesterday.”

In recent Board meetings, Rodney has tried to raise important issues and seek meaningful data. What might he propose today to recognize credit union’s exceptional performance this year?  Tune in at NCUA.gov at 10:00.

The Question in The Three Ships Carol

To recognize the pivotal nature of today’s many board votes, I believe the lyrics of the carol I Saw Three Ships are most relevant.

Here are some pertinent stanzas:

I saw three ships come sailing in
On Christmas Day, on Christmas Day
I saw three ships come sailing in
On Christmas Day in the morning

And what was in those ships all three
On Christmas Day, on Christmas Day?
And what was in those ships all three
On Christmas Day in the morning?

(https://www.youtube.com/watch?v=A9fselTsYSE)

 

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The Unmatchable Credit Union Spirit

This is a story of a credit union led by an extraordinary CEO.  It is so heartening that the writer prepared two articles to describe fully her accomplishments.

The headline says it all:  The Tiny Credit Union Powering Brooklyn’s Economy.  The author’s writeup illustrates the power of passion and commitment in service to a community.

This account is a beautiful gift for all who believe credit unions can do something special.  It demonstrates the good will created with a small amount of resources and dedicated leadership.

My summary is to encourage you to link to the full accounts.

Part I: How it Got Started

“With just $50 million in assets, Brooklyn Cooperative Federal Credit Union is a rounding error compared to the nation’s largest brand-name banks. But in terms of impact on marginalized communities, this tiny institution punches well above its weight.”

In this first segment, the writer, Oscar Abello, describes how the current CEO Samira Rajan -a graduate of Harvard’s Kennedy School of  Government became involved.

She joined the startup in 2001 in a catch-all position as an AmeriCorps VISTA volunteer program.  This paid her a stipend as the new credit union didn’t yet have enough income to offer her a salary.  She became a loan officer.  First loan she made, went bad.

In 2008 she became CEO.

The founding CEO Jack Lawson was a PhD student in economics at the New School in the late 1990s.  He was looking for a part-time job related to his research.  He received a grant from a local foundation to support his goal of organizing a credit union for the Ridgewood-Bushwick Senior Citizens Council.  Over time this startup evolved to become Brooklyn Cooperative.

Until his departure in 2008 he focused on seeking grants from local sources and the CDFI Fund to underwrite the startup expenses and “build the runway” for sustainability.

This process continues. Since Rajan became CEO, the credit union has received eight grants from the CDFI Fund, totaling $11.3 million.

Part II Focusing on Character Lending

The credit union today can underwrite loans with little to no collateral, to members with an average credit score below 650, and to members without social security numbers.

Residential mortgages for one to four family homes are more than half of Brooklyn Cooperative’s current loan portfolio.

But its small business lending efforts are especially critical for the credit union’s local impact.

Counting by the number of federally-guaranteed the Brooklyn Cooperative is ranked fourth, behind only TD Bank, Chase and M&T Bank.    The  cooperative’s average 7(a) loan size is $24,000.

The writer’s description of the CEO’s relationship with NCUA is also enlightening. This is Rajan’s candid opening comment:

“Every three years, we have literally a new examiner come in and they’d be like, we’ve never seen this before. Yeah, I know you’ve never seen that before. New examiners have to get their whole head wrapped around the fact that you’re going to be doing lending which is non-conventional, that you’re deliberately going to be lending, knowing that your loss rates will be higher than the normal and you’re going to be lending to borrowers who on paper don’t qualify. … It flies in the face of what apparently you’re supposed to be doing, which is lending only when you definitely have a 700 credit score.”

For the full account of this remarkable institution, read both articles.  At the close the author asks the following of his readers and those who work in the cooperative system:

Brooklyn Cooperative is proof that it’s possible to build a financially sustainable institution that provides credit for a variety of purposes to people and communities like those it serves — Black and Brown, immigrant, low-income. . .it raises the question: should there be more credit unions like this one across the borough? Or across New York? Or across the country?

Serving Strangers

During this season, the mail brings more requests for donations than Christmas cards.  There are two broad categories of asks.  One is the multiple nonprofits serving the arts or education-choral groups, museums, Chautauqua and public television.

More plentiful are the organizations serving human need:  Hope Hospital in Seattle, Achungo Community Center (Kenya), World Kitchen and dozens of local efforts to assist others, often strangers,  this time of year.

A carol that recognizes this ever present reality of human suffering is Christ in the Stranger’s Guise.   This arrangement by Karen Marrolli is from a summer choral workshop in Montreat, NC, and includes the words.  They portray for me, Rajan’s example of service to her community.

(https://www.youtube.com/watch?v=CM2Ii1GclOE)