Category: Cooperative Design

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The NAFCU-CUNA Merger and Cooperative Democracy

(Case study 2 of 3 on cooperative democracy)

There may be no more critical decision this year for credit unions than the voting now underway to merge NAFCU into CUNA.

Voting is the moment when the cooperative democratic process is most potent. One member, one vote regardless of asset size or other claims to influence.

While both trade organization’s members will vote, the choice that  really matters is what NAFCU  voters decide.  Their approval requires a two-thirds majority to dissolve the trade group.

What NAFCU members choose will affect every credit union.  Perhaps far into the future.

With NAFCU CEO Berger announcing his retirement, directors from both firms already working on transition plans, staffs  briefed on their future and joint leadership meetings to promote a single outcome, is this decision already a done deal?  Does voting matter?  If NAFCU members do not approve, is there a plan B for their organization?

Credit Union Trades Evolve with the Cooperative System

From the initial state leagues and Filene/Bergengren’s Credit Union Extension Bureau, collaborative trade support has evolved.  CUNA and NAFCU’s priorities have closely aligned with the dual chartering system.  CUNA focused on state leagues and regulations from its Madison WI headquarters and NAFCU the federal charter track from it’s sole DC office.  (See NAFCU’s 1967 founding statement at the end of this post.)

CUNA moved its primary leadership to DC in the 1990’s when it selected Dan Mica, a former congressman as its CEO. Has the time come when these different histories and organizational focus should combine?

This short summary by Berger presents the core merger rationale:  We’ve heard from many of you over the years about the need to better align our advocacy, reduce redundancies in the events and trainings we offer, and work together to strengthen the industry.

The (new) organization will be able to dedicate more resources to the areas that matter most to you. It will be the best of both CUNA and NAFCU – strategic, decisive, cost and value conscious, and responsive.

The Diverse Cooperative Model

Credit unions are not a monolithic system.  The genius of cooperative design is that it supports many different business models.   The  $ 15.5 billion Alliant Credit Union’s digital only model is the antithesis of the $5 million Sixth Avenue Baptist FCU (founded in 1963 in Birmingham AL) as described in this CUES article.

Navy FCU with over $155 billion in assets may have the same member-focused mission as the CDFI Holy Rosary Credit Union in Kansas City.  But their national representation needs are very different.

The two trades have addressed differing priorities when representing their members.  NAFCU has been more critical of NCUA spending, the TCCUSF merger and defending the unique 1% NCUSIF cooperative funding model.  CUNA and the leagues have defended the state insurance alternative, more open FOM approaches and even the purchase of banks, the vast majority completed by state charters.

Because NAFCU is smaller with a single organizational presence it has had to “try harder” at times.   When I asked the CEO of a state charter why the credit union belonged to both organizations, he replied: “The NAFCU team is very responsive and discounted our dues. They also have some great training programs and better conferences.”

At the NAFCU Congressional Caucus in DC this week, CEO Nussel described CUNA’s advantage as its “industrial strength” and NAFCU’s as being “more intimate.”

A key question is whether the credit union system is better off with a monopoly of national representation, or whether choice can be more effective for the system’s diverse business priorities?  Is it better to have a single unified voice or the option of a more accessible DC relationship?

Without  alternatives, the diverse needs of credit unions represented by  one organization could quickly follow the path of least resistance.   Instead of promoting more opportunities  for member solutions, lobbying protects the status quo: defeating tax threats, stopping Durbin reforms, limiting CFPB jurisdiction, responding to bank criticisms and challenging regulatory actions that enhance member transparency.

There Is No Easy Answer

This democratic merger vote matters.   The outcome will affect the future of advocacy in Washington for all credit unions.

A merger may resolve the future of NAFCU, but it could also create a new set of challenges.  Without alternatives large credit unions may decide to undertake their own DC representation, which several have done in the past.

Here is just one of many courses that help organizations navigate their DC interests: Decoding D.C.: Policy, Power, and People.

If the decision is indeed still open for your credit union,  consider critical questions before voting.   These could include:

  1. What do I rely on my trade organization participation and investment to yield?
  2. What does my community need from our cooperatives empowered by this combined structure and from the people attracted to these careers?
  3. Credit unions as cooperative organizations are most often local, personal, and vested in action – will this merger dilute or add to these capabilities?

And, does NAFCU have a Plan B?

Editor’s Note: NAFCU’s founding description from its website

In 1967, a group of hard-charging credit union CEOs pushed the envelope. They had to grow, and they needed an association that would help. So they created NAFCU–an aggressive association forged with equal parts expertise, political savvy and boldness.

Since its founding, our small, but agile association has been a highly effective advocate for credit unions at the federal level. We were the first credit union trade association to set up shop in the Washington D.C. area, and we’ve crossed many milestones since our first major victory in 1970, when the National Credit Union Share Insurance Fund (NCUSIF) was enacted.

We were the sole (and successful) defender of the NCUSIF in the early 1990s when regulators and the White House were advocating for major change to it, and we were the only trade association to oppose the CFPB’s authority over credit unions when the agency was formed (a stance we keep to this day as we fight to reduce the agency’s burdensome impact on credit unions).

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The People’s Voice: Saint Lawrence FCU Owners Veto Merger

St. Lawrence is the largest county in New York State.    Its 100,000 residents live in a rural mix of small towns and farms in an area called the “North Country.”   Saint Lawrence CEO Todd Mashaw says he can see the bridge to Canada from his office window.   Montreal and Ottawa are closer to credit union’s Ogensburg head office than Syracuse, the nearest large city in the state.

Prior to his upcoming September 30 retirement, CEO Mashaw’s final project was a six month effort to negotiate a merger with the $806 million SeaComm FCU in Massena, New York.   In the merger video he states:  “If the merger goes through I retire and if not ,  I retire.”

When the final vote was announced in August the result was 2,428 (70%) against to 1,023  (30%) in favor.  This overwhelming rejection is unprecedented.   The approximately 30% of members who voted is the highest participation in a merger vote where proxies are not involved.

The Merger Project

The selling of the merger proposal was a joint “full court press” of the two credit unions’ CEO’s.   The special web site “merger page information” contains copies of the many communications to members including a video with the both explaining why they believed this action was necessary for the future.

The hour long video on the site is a free flowing discussion between the CEO’s presenting their case for the merger.  They cite industry merger trends, multiple predictions about future technology and competition, the need to change now and a frank conversations with staff and members, not all of whom were in favor.

The documents supporting the combination on the site are numerous.  These include the schedule of  ten town hall meetings and handouts, a discussion at the Annual meeting,  a joint letter from both boards, a merger timeline, press releases,  special mailings to members, merger FAQ’s, credit union data comparisons and merger myths.

This four month concentrated marketing blitz  culminated in the mailing of almost 11,000 ballots with the Special Meeting Notice and letter detailing the merger plans.

Why Did the Members Reject the Merger?

Saint Lawrence FCU was established in 1954 for the employees of the St. Lawrence State Hospital and their families. It will be 70 years old in 2024.  It became a community charter in 2002. Mashaw arrived in 2005 and has been CEO for thirteen years.

He acknowledges in the video that the proposal was disruptive and caused some friction with staff and members.    He said members were passionate in  opposition deploying several hundred yard signs and wearing T-shirts opposing the plan.

Saint Lawrence FCU’s Facebook has multiple member questions about fees, possible branch closings, ratio comparisons, even  one objecting to press announcements “as if it is a done deal.”

Mashaw commented, and he chose the word carefully, that there were “conspiracy theories” promoted about the merger.  These  included questions about whether he was receiving any special benefit should it proceed.  This was responded to in merger myth # 7.

Members As Fans

Many factors undoubtedly influenced the outcome.

Despite the volume of information, some of the logic seems self-contradictory.  Both CEO’s argued change is inevitable to confront  industry trends, technology competitors and provide staff with enhanced professional opportunities.

Yet throughout the video both assure members they will experience virtually no changes:  the same branches remain open, no employee will lose their job and both organizations have similar cultures.

As they summarized in the video:  “These are two good credit union taking care of St. Lawrence country members right here that want to continue doing the same thing, but together.”

This effort to assure members even led the CEO’s to agree that the Saint Lawrence signage will stay on the branches and current head office.

There may be two other factors that influenced members’ voting.

Through June 30, 2023 Saint Lawrence has reported “off the charts” financial performance.   The 12-month growth rate in loans is 25%, shares 15%, members 5%, and loan originations for the first six months 47%.  The net worth ratio is 10.6%.  The average salary and benefits per employee has increased from $65,000 to $88,000 or 35%.

The growth numbers are three to four times the national averages at June 2023 for all credit unions.

These results were accomplished when the primary focus of the entire senior management team and board was on the merger effort, including meetings with SeaComm staff on potential organizational roles.

A second factor, is that especially in rural New York state, local matters.  People want to do business with firms they know and trust.

One FB member post summarized his opposition this way:

Maybe it’s small town thinking.

1- bigger is not better,

2- competition is a good thing especially in banking.

3- If it ain’t broke don’t fix it .

The SLFCU is as strong as its ever been. 

What’s Next?

Mashaw leaves at the end of the month, but is staying in the area, remains a member and is available per contract for one year.

The nine-person board will decide next steps whether that be an interim CEO and whether to initiate a full search.

When members campaign using yard signs, wearing T-shirts opposing the plan and post strong opposition on the credit union’s Facebook account, these actions suggest the board and senior leaders were not on the same page as the members.

As one member posted: Haven’t see a SLFCU member who is FOR this merger except the CEO and Bd.

The credit union has been a part of the community for 70 years.  It is locally controlled and intimately involved with dozens of charities, festivals and special events.

The member-owners fought to keep the organization they built, support and believe in.   This is the cooperative democratic process in action.  The people’s voice has spoken.

The effort to retain their own, very successful member-owned financial firm was possible because of credit union design.  More importantly this loyalty is the intangible but real goodwill that is the foundation of every credit union’s strength.

 

 

 

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A Democratic Renaissance Emerging In Credit Unions

Three events, two ongoing, one finished for now, have centered around member voting on the future direction of their cooperatives.

Each election is triggered by specific circumstances.  But they illustrate the benefits of going to member-owners for approval.

Voting is the essence of democratic governance, whether this is for local school board candidates, a political office or national politics.

The instinctive “rightness” of individual voting is so obvious that  the most authoritarian regimes  put on a charade of democratic process.  For even the most dictatorial leaders, voting connotes legitimacy.

In America, freedom and voting are inextricably linked.   When those in power seek to perpetuate their positions, manipulating or questioning the voting process is an ever-present threat to democratic rule.

A Frustrated Member’s Article

One long-time credit union member expressed his exasperation with his Board’s “closed shop”  elections in this opening of a public article.

I asked a friend recently if she could provide an answer based on the following clues:

1) It has billions of dollars in assets;

2) The overseers are not elected, rather;

3) they are appointed among themselves;

4) there are never any elections; and

5) all meetings are closed.

My friend guessed Belarus – a good guess, but Belarus has elections.

The answer is Orange County’s very own SchoolsFirst Federal Credit Union – the largest financial institution in the county and the fifth largest credit union in the nation. . .

The rest of the critique, Schools First . . .Democracy Last, by Dr.  Barry Resnick is here.

What makes credit union design unique is democratic governance–each member has one vote no matter their  savings and deposit balances.  Federal credit unions prohibit proxy voting  further reinforcing each member’s  ballot sovereignty.  Not all state charters have this limitation.

In credit unions, the people rule.  Cooperatives are, in theory, on the front lines in the practice democratic governance.  This was central to their public purpose and tax exemption. Since there have always been more poor people than financially well off, credit unions were intended to be a means to enhance economic equity for all.   Through member loans, the bulk of the population was to have  financing access that  those with wealth easily take for granted.

Moreover, voting for directors converts private, closed decision making in institutions into public accountability.

But to work, the people need to be informed even educated as to their owner role.   Voting is one of vital means for this process.   Candidates or leaders present their priorities to the membership  and seek support.

Democracy is much more than rules, bylaws, or following Robert’s Rules of Order at the annual meeting. These details do matter, but democracy requires a commitment for leaders to take their ideas to the public versus bureaucratic maneuvers to perpetuate positions of power.

Without the test of the ballot, incumbents may not see things as they are.  Rather they see the things that confirm to their assumptions or preferred way of looking at the world.

The Growing Distance

When  credit unions were predominately local,  member voting may be less vital because they see what’s happening with their own eyes.   When credit unions grow large, distant and generic, their responsiveness via democratic process becomes more crucial.

Credit unions have proven to be a success in creating very large, financially successful depository institutions.   But they rarely cultivate their members’ ownership role.

Absent voting where there are more candidates than open seats, credit union strategic priorities reflect incumbent power not policies  supported via a public contest of ideas and priorities.

When boards are on top, any public voting can be viewed as  threatening to their position.  Without leaders efforts to build “civic virtues” democracy can become form without substance.

Why Voting matters

“Democracy holds us together. We are a country rooted in the rule of law, where the protection of the rights of all people is paramount.” (G-20 Press release) Credit unions are a small but vital part of the democratic ethos that Americans often take for granted.

Member  voting is how their ownership  rights are cultivated and protected.  NCUA has long turned its back on any role in this responsibility.

When the will of the people is circumvented, the result is a growing erosion of member influence.  It is easier to lose member confidence than gain it.  Becoming customers versus owners, makes it easier for members to move accounts to a better deal whenever than comes along.

The Need for political courage

Democratic leadership is hard.  It takes courage and maturity to control the  human instinct to accumulate and maintain power.

Cooperatives  must evolve not merely financially, but also in their political  role with members if they are to remain bearers of their trust and unity.   Institutions should work for people, not the other way around.

Today, one can easily identify institutions and activities in the cooperative system that appear more motivated by self-interest than mutual benefit.

The first rule of democracy is the willingness to discuss, debate and argue about what troubles us.   Truth is not achieved by hiring a PR firm to sell a story or presenting a one-sided marketing campaign that has all the hallmarks of propaganda.

Transparency with full and timely information is the key to democratic practice.  I will follow with  commentary on three situations that I believe show the upside of cooperative democracy in action.

Also, a current  example of a credit union’s promotion of open board elections at Frontwave is described in this July 6 blog, Here They Go Again.

 

 

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Going for the Green at USC

A source of federal funding in the Inflation Reduction Act will soon be making grants to accelerate solar energy investments.

The example of a credit union’s preparation to access these funds is from Next City an online reporting blog.

The case study by Bianca Gonzalez was posted this week and is  edited for brevity.

A More Equitable Approach to Financing Our Green Future 

The USC Credit Union, a certified CDCU and CDFI, recently developed several green lending products that make emission-reducing energy upgrades more equitable for communities near the University of Southern California campus in South Los Angeles and East Los Angeles.

In the 2021 Inflation Reduction Act (IRA), the Greenhouse Gas Reduction Fund creates the opportunity for CDCUs and CDFIs to take on more risk and bring emission-reducing and cost-effective energy products to communities that need them most.

The Act provided the Environmental Protection Agency with $27 billion for the Greenhouse Gas Reduction Fund. Through competitive grants, the fund will support financing clean energy and climate projects that reduce greenhouse gas emissions. This program will also meet the requirements of the Justice40 Initiative that 40% of the benefits are for federal investments to disadvantaged communities.

For example a 2021 study on US solar adopter patterns  shows that solar adopters tend to be higher income. In 2019, the annual median solar adopter income was about $113,000, while the overall U.S. median income was $64,000. The difference in annual income between solar adopters and the general population demonstrate that lower-income communities need equitable solar upgrade solutions.

Many USC Credit Union members have been left behind by traditional financial institutions, disproportionately impacted by climate change, and underserved due to a lack of accessibility for Hispanic and immigrant populations. These  factors highlight the need for green lending in low-income Hispanic communities.

USC Credit Union’s Preparation

“South Los Angeles in East Los Angeles are now primarily Latino communities,” says Gary Perez, CEO of USC Credit Union. “Several decades ago, the South Los Angeles area was primarily African American. So as the racial makeup changed, we had to understand more about the needs of the Latino community. We turned to Juntos Avanzamos for counsel.”

Juntos Avanzamos is a designation for credit unions committed to serving Hispanic and immigrant consumers. USC Credit Union became a designated Juntos Avanzamos CDCU  by Inclusiv, a CDCU membership organization and CDFI intermediary.

“We had to understand more about the first and second Latino generation members,” Perez says. Despite how convenient remote banking tools are, “the consensus is that these individuals prefer to bank in person. Why would these people prefer to commute to a bank? One hurdle is that they can’t access the same tools that English preferred or English native people can. So we’ve developed a new bilingual mobile banking system.”

With accessibility tailored to the Latino community and grants from the Greenhouse Gas Reduction Fund, USC Credit Union could  take more risk and loan to  members with a wider variety of financial circumstances.

The grant funding “will be used as loan loss reserves and allow us to lend to credit-challenged or income-challenged individuals who may have nontraditional sources of revenue,” Perez says. “We believe this use of IRA funds will do more for the inner city community.”

 Neda Arabshahi, Vice President of Inclusiv observed that more than financial products are necessary. “They need to be paired with technical assistance, training in how to vet contractors, build partnerships with  clean energy services and education of consumers,” Arabshahi says.

Perez and his USC Credit Union team completed the Virtual Solar Lending Professional Training and Certificate Program.  The course was developed by Inclusiv and the University of New Hampshire (UNH) Carsey School of Public Policy.

“Those who benefit most from lowering their cost of energy are those  struggling with the high cost of housing here in Southern California,” Perez says. “By providing accessible solar financing, we can  lower the energy costs for those individuals and allow them to maintain households in this expensive L.A. market.”

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What “People-Helping-People” Means—A Cooperative Labor Day Story

Many credit union practitioners describe their employment satisfaction by citing the credit union slogan of People Helping People.   This explanation is contrasted with the traditional business priorities of profit, market share, growth and personal financial rewards.

There are definitely credit unions whose culture and employee interactions exemplify this aspiration.  In practice however, many member interactions are straight forward: opening accounts, making loans and other service assists that mirror those of many other community financial institutions.

When a consumer or member really needs “help” the circumstances are often not pretty.   There are financial problems frequently aggravated by other issues of health, job loss or family misfortune.   “Helping” in these situations means the credit union and its staff are now becoming more involved with a member’s circumstances.  They learn about personal difficulties and must often become part of a solution.

“Helping” Starts at the Top

In a recent CEO’s monthly report to staff there is a case study of how the credit union tries to implement this oft quoted standard.

The CEO reminded staff that he puts his email address in the member’s monthly newsletter and invites them to “talk with him.” He wants to recognize their role as owners.  This also demonstrates the credit union’s vision of being their “members most trusted financial partner.”

On August 15, 2023 a member wrote to the CEO as follows (names omitted for privacy):

Dear Mr. (CEO):

I was a previous member of the credit union a few years ago and I am a current member as of 11/2019.  I’ve had some life circumstance and made some mistakes as many of us have.  I tried and I’m still working really hard to do better and to be better financially.

I’ve tried to get a loan to consolidate my debt but the only answer I get told is no.  Which is discouraging.  After adopting my niece and nephew at 19 months, who just happen to be twins, like me, I’m just trying to make ends meet.  They are now 15 years old, and like any other teenager, have their share of troubles.   I just want to be able to pay off all my bills, including the debt I owe to you, so that I can spend more family time with them without struggling. 

Thank you for taking the time to read this. God bless!

The CEO asked two staff to call the member, learn about her situation, and see what the credit union might do. Could she pay us back?  Is this where we might make a difference “one person at a time?”

On August 22, 2023, just seven days later,  the member wrote back to the CEO as follows:

Good afternoon Mr. (CEO’s name).

I just want to say thank you for trusting me.   There are no words to describe how grateful I am to you and your staff for giving me a second chance. I can breathe and enjoy my family with peace of mind. 

I failed to mention my sister is in the late stages of dementia.  I can now possibly visit before she succumbs to her illness.   Thank you again, from the bottom of my heart for lightening the financial burden I’ve been carrying.  I hope to do more business with the credit union in the future as I pay down my second chance finance with you all. 

God is good!  Have a Blessed Day.  Thank you.

A Labor of Service and Peace of Mind

The CEO explained the restructure saved the member over $450 per month in payments.  It may be years before the credit union knows the outcome of the story.   The two credit union employees did the “hard work” by investing their time and experience to find a better way for the member.  They went beyond the credit score and payment history to see who she was and her commitment to learn from prior mistakes.

All members have choices of financial services, even those in difficult situations where predator’s options are close at hand.

This credit union has almost 65,000 members, but believes in serving each member individually, one at a time. 

This is why this cooperative team and millions of others are proud to be part of organizations fulfilling the at times difficult jobs of People-Really-Helping-People.  

As this member might say this holiday weekend, may your labors in coops continue to bless for years to come.

 

 

 

 

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The Greatest Credit Union Market Opportunity

I subscribe to a resource called Visual Capitalist +. The firm transforms data into  pictures and graphs that present the meaning from the numbers.

Below is an example of income distribution in the US using information from 2010.  I suspect the outcome would not be much different today.

I believe this visual illustrates where credit unions have their largest market opportunity.   If the cooperative’s goal is to serve the greatest number of members, versus the members with the greatest wealth, then 80% of Americans owning less than 7% of the country’s financial wealth should be the primary target.

This distribution  is one reason Congress created cooperative credit unions founded on self-help.

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An Opportunity for the Combined Trade Group: America’s Credit Unions.

The merger of CUNA and NAFCU proceeds apace.   The 60-day voting period by members began yesterday. Already scheduled NAFCU educational and network meetings continue. CUNA President Nussle will attend NAFCU’s Congressional Caucus in September to show a united Washington effort.

Joint transition committees have been appointed.  One initial product was a proposed dues structure. As I read the announcement, members of both organizations are expected to continue  paying the same dues  to the new organization until 2027 (three more years) following the same fee structure in place at December 2023.  It seems illogical  to pay dues for a nonexistant organization three years past its demise.

If credit unions are members of both trade groups, “Dual members are encouraged to pay membership dues for both organizations” even though NAFCU nor longer exists.  Apparently, economic efficiency is not a current goal of the merger.

An Immediate Opportunity for a Unified Effort

The merger process has been focused on the political steps necessary for member approval and  less the potential offered from a “unified voice” in DC.  Even though the political agenda may emerge down the road, there is one immediate opportunity that could demonstrate the possibilities of a combined lobbying capability.

An NCUA board position is now open as Rodney Hood’s term expired this month.  This new member’s six-year tenure should outlast the two current members.  It could extend over two presidential election-administration cycles.

For many recent appointments the expectations, even needs, of the credit union community have not been seen as a factor in the Administration’s choices.   The result is that new board members are strangers to both the Agency and the credit union system.  Think Metsger, McWatters and Hauptman.  Having prior NCUA experience as a staff or board member (Harper and Hood) may be useful, but it still does not bring an industry or coop perspective.

One longtime, now retired, CUSO CEO Randy Karnes (CU*Answers) commented during an earlier appointment cycle: “Cooperative principles make us different. When the NCUA believes that and Washington believes that, we have a stronger system.  But when nobody believes that, then it’s simply about banking regulations. I think our system’s position is weaker, and NCUA is not even thinking about their own brand.”

“Congress didn’t create the credit union charter because the nation needed “nice banks.”

In that same appointment cycle, there was a public White House petition, CO-OPS 4 Change, asking that the administration,  “choose NCUA leaders who understand cooperatives.”  And, “who recognize the shared economic value for people and communities created by the Cooperative model from the seven cooperative principles.”

Jobs for the “Boys” or for Cooperative Leadership

All NCUA appointments result from political ambitions and relationships.   That need not be inconsistent with cooperative leadership.  Earlier NCUA appointments included candidates with credit union experience such as retired and active CEO’s, state coop regulators, CUSO executives and even some with trade association connections.

Knowledge of the evolution of the credit union system and its current status can make regulatory decisions more informed and relevant. The unique structure of the NCUSIF, the potential for a fully engaged CLF, the self-interested trends in mergers, the paucity of new charters, and the continuing use of members’ savings to pay off bank shareholders are critical industry topics.

Even with experienced senior advisors, appointees without credit union knowledge easily default to Agency staff perspectives.

As the combined America’s Credit Union marches forward under a single banner, this appointment is an immediate test of its potential role.  Will the promise of enhanced influence bring forth potential nominees who have cooperative experience? Or will the person be another unknown to credit unions? Can the industry hope members’ needs will  be paramount in a proposed board member’s regulatory views?

The appointment, whenever announced, could provide vital insight about potential benefits of a united credit union voice in DC.

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The March on Washington and MLK’s Speech: The Financial Metaphor

On August 28, 1963, an estimated 250,000 people gathered in the nation’s capital for the March on Washington for Jobs and Freedom — the largest civil rights gathering of its time. Today, that landmark protest is remembered for Martin Luther King, Jr.’s famous “I Have a Dream” speech.

Many can recall almost verbatim parts of the content of his “dream.”  Politicians of all beliefs, for example, use his phrase, “that one day all people will be judged not by the color of their skin, but the content of their character” to support vastly different views on affirmative action.

To Cash a Check

The dream’s words are still aspirational and inspirational.   For credit unions however, his metaphor about justice and freedom is a reminder of why coops exist.   Here are his opening words with emphasis added:

Five score years ago, a great American, in whose symbolic shadow we stand today, signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of their captivity.

But 100 years later, the Negro still is not free. One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later the Negro is still languished in the corners of American society and finds himself in exile in his own land. And so we’ve come here today to dramatize a shameful condition. In a sense we’ve come to our nation’s capital to cash a check.

When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise that all men — yes, Black men as well as white men — would be guaranteed the unalienable rights of life, liberty and the pursuit of happiness.

It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned. Instead of honoring this sacred obligation, America has given the Negro people a bad check, a check which has come back marked insufficient funds.

But we refuse to believe that the bank of justice is bankrupt.

We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation. And so we’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.

Why a Financial Metaphor?

America is the world’s leading capitalist society and its wealthiest.   For many the American dream is about becoming financially well off, even wealthy.   Everyone is financially accountable for important areas of their life.

He uses this metaphor because financial services are at the heart of the American enterprise.  People know what cashing a check means.  Checks  only work if people trust that there will be sufficient funds in their account.   In using this analogy, King says all Americans were given this promissory note of freedom and justice.

Credit unions, the cooperatives founded on democratic governance, self-help and common purpose, embody a critical means for this dream of individual equality to be realized.

Financial services as King presents the metaphor are built on trust, confidence and solvency.   I believe that whenever any credit union for whatever reasons compromises these fundamental principles, the integrity of the entire system is eroded.

Whenever any person’s freedom is limited,  the entire system of justice is compromised. Freedom is not an overnight event.  Its meaning, like financial opportunity, is constantly evolving.

Since 1909, credit unions were intended to be one of the important financial options for bringing  equity for all. Especially for those “who have the least or know the least, but today pay the most for financial services in America.”

On this 60th anniversary of the March on Washington, may it remind those of us who make a living from cooperative financial services, to once again acknowledge and embrace our role in bringing Martin Luther King’s dream to reality.

 

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A Friday Morning Homily

From author and speaker Greg Satell’s article: Values Always Cost You Something

“The truth is that, to mean something, values always cost you something. Otherwise they’re just platitudes. . .

“Values are essential to how an enterprise honors its mission. They represent choices of what an organization will and will not do, what it rewards and what it punishes and how it defines success and failure. Perhaps most importantly, values will determine an enterprise’s relationships with other stakeholders, how it collaborates and what it can achieve.

“The problem is that values are often confused with beliefs. When you’re sitting around a conference table, it’s easy to build a consensus about broad virtues such as excellence, integrity and customer service. True values, on the other hand, are idiosyncratic. They represent choices that are directly related to a particular mission.

“Make no mistake. Real values always cost you something. They are what guides you when you need to make hard calls instead of taking the easy path. They are what makes the difference between looking back with pride or regret. Perhaps most importantly, they are what allows others to trust you.

“Without genuine commitment values, there can be no trust. Without trust, there can be no shared purpose.”

 

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When Directors Fall Short as Fiduciaries

Yesterday I quoted from  an NCUA letter which emphasized directors’ primary fiduciary responsibility is to the members, not the organizational entity.

What happens when this principal duty falls short?

Sometimes dissenting directors will just give up and resign.   Other times, the entire board votes to hand over their duties to another credit union via merger.

And the members?  Most of the time they just lose interest and take their business elsewhere. But very occasionally, they revolt. That is happening at SECU in North Carolina.

The former CEO Jim Blaine resurrected his blogging skills when he was contacted by current employees and members concerned about the direction of the credit union under a new CEO.  The daily blog SECU-Just Asking was began in December 2022 with this note:  Caution: Rant in Progress.

The website’s posts of events and opinions would not have become a rallying point if it had not touched on issues of interest to many.

Members Go Democratic

Now that public dialogue has transformed into action.

The primary check and balance on directors’ oversight  is voting to fill board vacancies in the annual election.

Rarely is this process effective.  For nominations and election procedures are controlled by the incumbent directors who try to avoid any election with more candidates than vacancies.

SECU members have become engaged.   The result of the public dialogue is a contested election according to  an article from Business North Carolina.

Social Media Mobilizes Members

Members turned to social media to rally support.  Here is a Reddit example.

How NC SECU is being turned into an elitist piggy bank (and the narrow window to prevent it)

For almost 100 years the State Employees’ Credit Union (SECU) provided low cost loans and financial services to North Carolina’s active and retired state employees, teachers, and their extended families. SECU historically has been one of the only financial institutions that charges the same low interest rates on mortgages, car loans, credit cards, and financial services to all members regardless of whether they come from a rich, middle income or working class family.

Unfortunately, this approach to treating everyone fairly is changing because of actions by the current SECU Board of Directors. This group – for the first time in the history of the Credit Union – has decided to charge middle class and lower income members and their families HIGHER interest rates so that they can give upper income people LOWER interest rates.

And that’s not all the current board has done. They’ve also:

-Cut services, like the tax preparation assistance program that was available to all members.

-Raised interest rates for the majority of members and their families, while failing to raise interest rates for savings accounts.

-And finally, in an attempt to prevent their opponents from running candidates and entrench themselves in power they’ve changed the longstanding rules and bylaws for SECU Board elections.

This is wrong and we must fight back to save our Credit Union!

The current board is made up of 11 people that no longer represent the interests of the hundreds of thousands of active and retired state employees, teachers, and their families that the Credit Union was founded to serve.

What can you do to fix this?

The board changed the rules to make it extraordinarily difficult for anyone new to serve and to try to silence members’ voices. The board’s new rules require a candidate to get 500 signatures, obtained in person, in 5 days time.

In order to stop this board’s attempt to convert SECU into another traditional bank that looks out for rich elitists at the expense of regular folks, please sign the petition allowing these three candidates who support returning SECU to its historic mission to be on the ballot for the board election this fall.

(the three candidates and brief credentials were then listed)

Again, you are only signing to allow these candidates the opportunity to run for the board, so that we may continue this discussion. If they aren’t on the ballot, there will be NO discussion.

Please go to www.secujustasking.com and request a petition form to submit.

Thanks y’all

Over twenty comments were posted to this appeal. Some supported, others asked questions.  Here is one:

I sense that SECU is currently being run by bankers who don’t understand the competitive advantages the credit union historically had. Banks long ago outsourced much of their lending decision-making to people looking at an application and a credit score on a computer screen. That saved them a lot of money (those local loan officers weren’t cheap), but it created an opening for someone like NCSECU to have an advantage. . .

. . .there’s no question that SECU could have made a lot more money over the years by risk-adjusting lending rates (preferably by something a little more sophisticated than just credit scores), but they were able to keep rates flat, because that fit their ethos as a non-profit better.

I just don’t buy that this is necessary now to keep the institution afloat–I have yet to hear a cogent argument for why this is the case now. It apparently wasn’t necessary in 2008 or 2001, but we’re supposed to believe that rates being hiked back to something more like historical norms is threatening the institution? 

Or to put it another way, what have they been doing so wrong lately that they aren’t able to weather this storm the way they weathered storms in the past?

A Test Case

Democracy is a difficult process in all circumstances.  American elections are just the most obvious example.

SECU may be the test that illustrates whether the cooperative model of governance can be a real check and balance by members.  Can democratic voting be the means to counter the ever present temptation to become an “elitist piggy bank”?