Americans Celebrate their Democarcy

Seeing and participating publicly  in community creates hope, especially around shared values.

Common purpose was on full display this past weekend. Nationwide people  exercised their rights of self-expression and assembly supporting democracy.

These principles  are also the foundation for cooperative credit unions.  The movement claims over 100 million members and democratic governance.  Are these assertions still true?  Would members show their support as in these weekend scenes from the DC area?

The Young

And old

Not his first rodeo

Humor

And costumes

No sign, just noise

Brevity

Fpr all Americans

Real conerns

A candidate for 2028 whose appeal is truth

A democratic harvest festival for fall.

How does your credit union celebrate its democratic foundation?

Two Democratic Movement Events

Yesterday I spent several hours in two exercises with organizations founded on democratic principles.  The first was virtual, watching the Annual Meeting of State Employees NC. The second was in person, a participatory exercise for a much larger political event this weekend.

The Coop’s Annual Meeting

The theme. I believe,  of the two-hour credit union event was The SECU Difference.  The first speaker was the parliamentarian who announced authoritatively that the meeting would be under the latest version of Robert’s Rules of Order.

This was followed by the Chairman’s speech, a SECU foundation report and video and CEO Leigh Brady’s summary of the credit union’s performance for the fiscal year ending June 30.   All presentations were shown in a single, stationary camera frame, with no views of the audience or other members on stage.  Brady’s speech used a split screen when she showing slides to highlight numbers and goals.

The nominating committee chair reported that the number of candidates approved for the members’ vote just equaled the number of vacancies.  Therefore no action by members was necessary.  This prior board selection was approved by acclamation in contrast to the previous two years where there had been contests for all  open board positions.

The  President’s Q&A

The final hour was CEO Brady answering questions submitted in advance and read by an employee.  Up to this point every speech and action was fully scripted and  presented as done events with no member input.

So one would hope the members’ queries might be a bit more spontaneous and informative about The SECU Difference.   In short an opportunity for a CEO to show her “chops” that is the grasp of her role and understanding of  issues on members’ minds.

And the member concerns were plentiful and seemed candid even as grouped into common issues.

  • What is the credit union doing to help members feeling financial pressure?
  • Why are you so hard on loan aoolications?
  • Any changes planned to the Field of Membership?
  • Will SECU seek mergers?
  • When will small business loans be available?
  • Will fixed rate mortgages be offered, not just variable?
  • What is her outlook for interest rates?
  • How will the changes at the federal level affect credit unions?
  • When will the problems with the outsourcing vendor managing excrow accounts be fixed? etc.

The questions expressed real member concerns and experiences.  However every question received a written response of three to four sentences, prepared in advance, with little insight or empathy expressed about the topic.  Most replies referenced a process the member should follow if they had a problem, eg. contact your . . .

My take away: this was a 100% scripted event to conduct a required legal activity with no substance or owber interaction wanted.  And especially no live member involvement as in recent meetings.

The emerging SECU Difference is that the credit union is striving to be just like every other large credit union in both performance and example.   Some of the CEO’s accomplishments  include the replacement of over 1,000 ATMs, the installation of digital signage n the branches and the introduction of two new credit card options: a reward and a cash- back choice.  There will be a core conversion but that will take at least three years to complete.

The prior offerings that SECU created within the credit union structure including the life insurance company, the investment broker license, the real estate management company and the trust services were mentioned, but no performance details provided.   It is unclear if SECU still offers its ATMs without surcharges for non-members.  It has stopped the income tax service and ended the operational support ties with both Latino and Civic credit unions.

SECU’s financial performance is stable and it reiterated its commitment to operate branches in all 100 NC counties and focus the foundation’s resources on non profits throughout the state.  So the credit union may have refocused on its roots versus more expansive ambitions contemplated several years earlier.

What is different now is that SECU sounds and looks like virtually every other large credit union.  That’s neither good nor bad, unless you believe  focusing on creating member value options not readily available  elsewhere was the purpose of a coop.

North Carolina is one of the most attractive  states for new bank investment and branch expansion (after Texas and Florida).   Will not having a strategic difference, other than a tax exemption, be a sufficient strategy?  Time will tell.

Preparing to Participate in Democracy

The second two-hour event was a group meeting to discuss how individuals can become more engaged in influencing current political issues. It was followed by a sign-making, pizza-fueled party at a local church’s social hall. About 25 people gathered to learn and prepared to participate in the coming Saturday’s No Kings rallies around the country.

Seeing the Difference in Democratic Practice.

 

Our Legacies

What will our children and their children inherit from our democratic organizations’ efforts today?

 

 

A Unique Beginning, But Is Now the End?

In March 1985 CUNA filed a friend of the court brief to support the newly chartered Local Government Employees FCU.   The charter date May 23, 1983.  The North Carolina Bankers Association filed suit in 1984 saying the FOM violated the FCU Act.

As reported in March 1985 issue of Credit Union Magazine (page 25) the suit was filed after the state Supreme Court ruled that State Employees CU (SECU) could not expand its FOM to county and municipal governments.

CUNA argued that “NCUA has statutory authority under the FCU Act to interpret the common bond provisions of the Act, that its interpretation is consistent with the legislative history and legal precedent and that the State Supreme Court ruling against SECU is inapplicable in this case.” 

Local Government FCU won.  It became an operational partner with SECU providing back office and branch support.  The two grew side by side for over four decades.  Local Government had its own board and began to diversify from total integration with SECU, ultimately founding a digital only charter, Civic FCU , to expand its virtual presence and business options.

After Maurice Smith retired as CEO of Local Governement, the new leadership began exploring other options.  SECU’s board may or may not have made a merger overture to the new LGEFCU CEO.  It depends on whom you ask. The upshot was the Local Government merged with its much smaller digital dopplinger June 1, 2025 , kept the Civic name and then proceeded to end its operational dependence on SECU.  No longer were Civic members being served through SECU branches after forty years of having access.

The Beginning of an End?

As the newly named Civic FCU began its independent existence, the transition has not been easy as noted in its July 24 website post. (link)

As it tries to build out its own delivery system the credit union has reported negative net income for the 2023 and 2024 yearends.   But the losses have begun to hemorrhage at June 30, 2025 post SECU separation.

In every critical financial and operational indicator, Civic is going backwards.  It reported a loss of $24.8 million versus a $9.2 million positive gain while working with SECU in  2024.  Compared to June 2024 balances, shares have declined by almost $600 million to $2.9 billion; members have gone from 407,926 to 380,898 with loan originations (-47.3%)and total loans both declining.

Civic has borrowed $320 million at June 2025 versus just $80 million one year earlier.  It is bolstering its net worth ratio with $52 million of subordinated debt.  Its total assets have declined from just over $4.0 billion to $3.66 in the first six months of this year.

The only increase has been in employee headcount going from 319 to 431 since 2024 yearend as the credit union opened at least ten new branches.

How will this story unfold– a new era or is it the beginning of the end?  Civic In its original incarnation was an example of operational, legal and cooperative ingenuity.   It succeeded in expanding credit union services by showing the power of dual chartering-a state charter in essence sponsoring  a de novo federal one.

Today that spirit has been lost.  Civic is struggling to just become another traditional credit union in a state with intense financial competition.  This strategy is using up the financial, reputational goodwill, and cooperative legacy that created a unique solution for serving their members.   Will the CEO and board find their way back to creating special value for their member-owners who seem increasingly skeptical of this independence turn?

Federal Government Shuts Down-The Importance of Options

In this latest test of political masculinity in Washington DC, the federal government has shut down.

NCUA says it is still open for business.  As evidence  the agency  reissued this guidance from over 14 years ago:

11-CU-05 / April 2011
Planning and Preparedness for a Potential Government Shutdown

This  test of political will and messaging on both sides has an open-ended feeling about it.  No one knows for how long or at what cost this standoff will continue.

This event and its aftermaths will only add to the many economic, financial and consumer uncertainties now infecting future outcomes.

This is not the first era of credit union’s navigating broad events outside their control. Recalling previous periods of change can remind that one of the most useful responses is to have options–not merely  hunker down to weather the storms.

When Options Matter

The headline reads:  Federal Credit Unions Eyeing State Charters as Rate Ceiling Hurts. It is from the Business & Finance section of the January 18, 1980 edition of the Washington Star newspaper.

The opening paragraphs:

Some federally chartered credit unions are trying to switch to state charters because the government’s 12 percent interest rate ceiling is shutting down their loan business. . .

In the last year, the 12 percent ceiling on loans has either shut down lending at some credit unions or generally restricted granting of loans in others.

Energizing the Options-NOW

Leadership is the art of changing before you have to.  The Trump administration’s one consistent theme is disruption, if not the destruction, of traditional government functions.

Recently in an NCUA board meeting the single member Kyle Hauptman suggested that it was possible the agency might have no board members in the future.

Whether that was just a hypothetical musing or confirming his interest in another government position is unknown.

But assume that scenario.  No board at NCUA.  What would the administration do?  What it has done with other vacancies, appoint an “acting Chairman” likely from Treasury.  And then begin a process of assimilation like the OCC under that Department for the agency’s future.

Just one of many possibilities created when the status quo is not longer as political checks and balances are completely gone.

To protect the independence, integrity and unique role of credit unions, it may be necessary to go back to where the movement started and gained its credibility–the state chartered system.

State regulators (NASCUS), state insurance options, trade associations and every credit union, whether state or federal, should now be assessing the ability of the states to be their primary regulatory choice.

It is critical to reinvigorate the state chartering system as a real option as the federal government and NCUA seem to be careening away from any stable leadership and certain future.

Credit unions created the dual chartering system that has evolved into serving tens of milions owners.  It may end up being their best hope for the future.  That is just one history lesson from the 1980’s.

 

 

Serving Multiple Masters

Jim Blaine’s blog SECU-Just Asking!  has continued almost daily for over four years.

His blogs have focused on SECU’s changes of policy, norms and practices which he and Mike Lord, his successor, developed over four decades.

These changes of direction included potential mergers, ending the partnership with Local Government FCU, considering business lending and expansion of the FOM.  But his early and most strident criticism was the implementation of risk based pricing on consumer loans.  The prior practice was to charge each member the same interest rate on loans of similar maturity independent of the members’ credit score.

Jim then exercised the owner’s option to recruit members who were open to his point of view to run for open board seats at the annual meeting.  The first effort was successful in that all three member-nominated candidates won over the board’s chosen.

But since that first success the board has enacted bylaw and other procedures to make it increasingly difficult for independent candidates to run–and then eliminating any “live” member participation at the owners’ annual meeting.

Jim’s SECU blog is sometimes caustic and personal.  But most often he tries to present his policy concerns with facts, logic, SECU’s experience, and occasionally referencing other credit unions.

Creating a Unicorn

He believed that long term success depended on creating unique value through  innovation rather than following conventional wisdom or practice.

He would reference the unicorn as a standard for differentiation–mythical or real.

The Basic Question Animating His Commentary

Recently Jim began a series of blogs on SECU’s use of the the 30-year mortgage as the industry standard for home lending.  A practice that includes periodic sales of those loans in the secondary market to minimize ALM risk.

This analysis began on September 18 with a blog titled: SECU “Reinventing The Wheel” With 1930’s “New/New” Mortgage Model.

Subsequent posts have demonstrated the advantage of ARMS for members in many circumstances, but not all.  You can read his follow on daily analysis at the site.

What’s At Stake?

I chose this issue to illustrate what I see as Jim’s basic concern with the many changes suggested and introduced by his successors over the past four years.  His critique is more fundamental than a difference of business judgment.

At the core is a profound  philosophical difference in what it means to be a cooperative.

Jim’s believes the credit union  is owned and exists strictly to serve the best interests of the members.  The most important corollary is the coop’s loyalties cannot be divided between other stakeholders and their business values.  Especially when choosing operational partners, interacting with regulators or even working with other credit unions.

Reading his critique of the industry standard of the 30 year mortgage, this concern comes through loud and clear.  Yes, many persons believe and have been schooled to think that this is the optimum choice when it may not or would not be the best option.

For this is a product designed, facilitated and controlled by two quasi-governmental entities  Fannie and Freddie.  They determine what is best for consumers and their financial duopoly, not for the  consumer requesting the loan.

When one looks at his other critiques, they often ask a basic question, Why is this action, change, or initiative in the members’ best interest?

What is occuring at SECU and many other credit unions is that industry stature and growth  are the primary drivers of change.   We see this reflected in mergers of long-serving, healthy independent credit unions, the buying of banks and outside businesses.  Most critically this disdain for members well being is demonstrated in the  elimination of any owner role in the election or other involvment at their annual meeting.

The coop model has been increasingly hijacked by leaders who inherited generations of member created financial wealth that they presume is now theirs to use as they alone determine.

One of the oldest lessons from all faith traditions is that a person cannot worship both God and mammon.  A number of today’s credit unions have given up on honoring members’ interest as the highest good.  Instead their goal is to become an industry asset leader, to paraphrase a recent CEO’s defense of mergers.

Or, as explained by the $9.0 billion Community America’s CEO Lisa Gitner (Kansas) in proposing a merger with the $3.5 billion Unify Financial Credit Union in Allen Texas:  “Now, we have an opportunity to expand our reach and create more access to CommunityAmerica for you, your families, and even more people across the country. I’ve always led CommunityAmerica with goals that are defined by how many people we can help–not by how much revenue we can generate. That is the driving force behind a transformative milestone in our credit union’s history–and the reason I am writing to you.”

Or to put the issue more bluntly, what consumer or member is going to choose this credit union because it will now “have a presence in 18 states and 22 markets, with branches in Arkansas, California, Nevada, Tennessee and Texas?”

 

 

 

 

A Shadow Taller than Ourselves?

During this summer’s  legislative and budget battles in DC various spokespersons presented the credit union point of view.  Protecting the tax exemption, interchange fee status quo or jumping on the regulatory reductions were top concerns. Often the credit union position was defended by citing  the special value coops provide members.

In one situation a CEO’s testimony would have been contradicted by his own institution’s performance and priorities if Congress had bothered to look it up.

McCormick Foundation Professor Mohanbir Sawhney describes this natural tendency for exaggeration. While his description focuses on individual behavior, it is also relevant to institutional promotions:

“It’s often necessary to cast ourselves in a favorable light on social media, in resumes, in job interviews, and even on first dates. 

But in doing so, sometimes we end up creating a shadow of ourselves that looks taller than who we really are,” Sawhney says in a video on humility. 

“When this projection stretches beyond the bounds of reality, we can start to feel disconnected from ourselves, from others, and from opportunities to grow. 

That’s not to say that we shouldn’t promote ourselves or polish our brand. Rather,  we should do so, but with humility—by standing tall quietly, without fanfare or drama, and by being confident, but in an understated way.

Do Results Align with our Vision?

The issue is alignment between who you say you are and who you actually are.

Humility isn’t smallness or silence. It’s clarity. It’s knowing your strengths without distorting them. It’s being visible in the right way, for the right reasons.

As the sun sets today, take a look at your credit union’s shadow.   What events occurred  that gives members a true picture of who you are?

Do Cooperatives Change Market Practices?

An historical note to start:  Today is Constitution Day in the United States, because it was on this day in 1787, at the old State House in Philadelphia, that the final draft of the Constitution was signed.

From Jared Brock on capitalism’s financial incentives:

Turning anything — money, houses, scotch — into investment products skyrockets the price of things.

Financialization… the process of turning anything into an investment… skyrockets prices.

Think Taylor Swift concert tickets, Beanie Babies, baseball cards, cryptocurrency, etc.

Turning an item into an investment increases its price.

We’re currently witnessing this with the financialization of classic cars, high-end wine and scotch, and fractional investment in paintings.

A rare piece of canvas covered in colored paint is only “worth” $100 million if the investor knows he can rent that painting to a museum and re-sell it for $110 million in the future.

Because it’s more profitable to get rich by monopolizing stuff and lending it for a profit instead of actually working to create new stuff to sell, the rich are actually incentivized to bid up prices instead of creating new useable goods and services for others. Shareholders are actively trying to destroy our wellbeing for profit.

From a credit union observer:

Cooperatives are the future of our ecosystem. It is how we take care of each other, how we take care of our community, and it’s how we can create generational wealth for all of us moving forward without being a part of this really extractive system.”

The question:  Do credit unions practice both these economic goals for example in mergers and bank purchases? Is being a part time coop good enough?

Jump the Likely Drop in Market Rates

Unless there is a complete change in market sentiment or a “black swan” event, the consenus is that the Fed will lower interest rates by .25% in September.  Or for sure by October.

If that is your assessment, why not get ahead of the market with a special announcement to your members such as:

We’ve lowered our mortgage rates!

If you’ve been waiting for a sign to buy a new home, this could be it. Take advantage of ournew rate discount

Or it could be auto loans, student loans or HELOCS.

If you wait till the Fed makes a move, you will just be part of the market’s noise.

Why not get ahead of the game?  Start your “lowering our rates” campaign while everyone else just talks about it.  The President might even take note of your initiative!

Learning from History as We Debate the Past

Eighty years ago in August  1945  America exploded atomic bombs over Hiroshima and Nagaski. These actions propelled a quick end to the war with Japan.

President Truman’s  decision has been much debated since.  Some believe it was necessary; others disagree arguing that either a “demonstration” explosion or continuing the fight with an invasion of the Japanese homeland was the better next step.

As the topic will again be raised this week, I believe history provides an important perspective on this  decision. And insight as to how  we justify decisions now.

Two Post WW II Events

There were two WW II  related events that occurred when  while I was in the Navy on a ship homeported in Yokosuka, Japan.

The first was the return of the Okinawa islands to Japanese control via a treaty signed  in June 1971.  Return of this part of the Japanese territory was very emotional and deeply meaningful to the country.  Today Russia has failed to return the northern islands of Hokkaido they occupied at the war’s end.  It has left a deep emotional scar on the country’s  national pride.

The second was the surrender of the last Japanese soldier from WW II .   I remember the Japanese newspaper and TV accounts of this March 1974 event.  Here is  how the BBC described the event:

Lieutenant Onoda finally handed over his sword on March 9th 1974. He had held out in the Philippine jungle for 29 years. In interviews and writings after his return to Japan, Lt Onoda said he had been unable to accept that Japan had capitulated.

To many outsiders, Onoda looked like a fanatic. But in imperial Japan his actions were perfectly logical. Onoda had sworn never to surrender, to die for the emperor. He believed the rest of his countrymen, and women, would do the same.

Japan’s Internal Divide on WW II Surrender

Recognizing the Japanese strong allegiance to their homeland and their loyalty to the Emperor  exemplified by Lt. Onoda (who died in 2014), one can understand how difficult the decision to end the war was for Japan’s leaders.

The  internal political debate was intense. Whether Japan should accept  unconditional surrender or continue to fight is  reported in historian Martin  Gilbert’s book The Second World War.

At the very moment when the Nagasaki bomb exploded, the Japanese Supreme War Direction Council was meeting in Tokyo.  News of the bomb led to a renewed discussion as to whether Japan should accept unconditional surrender.  

The Council was evenly divided; three generals were for surrender, three for continuing the war.  The Foreign Minister, Shigenori Togo, cast his vote for surrender, as did the Prime Minister, Admiral Suzuki.  But the Minister of War, General Anami, was emphatic that there should be no surrender.  “It is far too early to say that the war is lost,” he told his colleagues, and he added:  “That we will inflict severe losses on the enemy when he invades Japan is certain, and is by no means impossible that we may be able to reverse the situation in our favour, pulling victory out of defeat.  Furthermore, our Army will not submit to demobilization.  And since they know they are not permitted to surrender, since they know that a fighting man who surrenders is liable to extremely heavy punishment, there is really no alternative for us but to continue the war.”  

The impasse was complete; but Togo and Suzuki were determined to end the war at once, and, in a secret meeting with Hirohito, prevailed upon him to summon a further meeting of the Supreme War Direction Council, and to preside over it himself.

The meeting took place shortly after midnight, in the Emperor’s underground bomb shelter.  First Suzuki read out the Potsdam Declaration.  Then, Togo urged its acceptance, provided that the position of the Emperor and the throne could be respected.  Suzuki supported Togo, General Anami opposed him.  For nearly two hours the discussion continued.  Then Hirohito spoke.  “Continuing the war,” he said, “can only result in the annihilation of the Japanese people and a prolongation of the suffering of all humanity.  It seems obvious that the nation is no longer able to wage war, and its ability to defend its own shores is doubtful.”

The time had come, Hirohito told the council, “to bear the unbearable”.  He therefore gave his sanction to Togo’s proposal that Japan should accept unconditional surrender.  The message to that effect, a formal acceptance of the Potsdam Declaration, was sent out from Tokyo, early on August 10, to the Japanese ambassadors in Switzerland and Sweden, for transmission to the Allies.

Is History Inevitable?

When an historical event is done, the outcome can seem almost inevitable.  In the use of the atomic bombs, there is an ongoing issue with the counter-factual argument that the US not have used the atomic weapons.

I believe the record of the internal political divisions and subsequent events such as the two above, suggest that this option was necessary.  That is not to dismiss the concerns about ever using atomic weapons again nor continue to learn from the aftermath.

I believe this event involved sober discussion and conflicting points of view by both the US and Japan’s leadership.  That is the point to remember today.  Few situations are without options, sometimes better ones, but not necessarily easier.

One of the most important questions any leader can ask in a crisis is what are my options? To describe choices by leaders as inevitable or dictated  by circumstance, takes away the agency and responsibility of those involved.   This is especially true when  the welfare of the whole is overridden by the self-interest of the few.

This acceptance of unalterable fate is a temptation the cooperative democratic system was designed to prevent.  But it hasn’t always worked that way.  Why?