Category: Cooperative Design

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The Missing Framework for NCUA Success (part I of II)

It is an accepted truism for NCUA board members presenting their credentials  for Senate confirmation, or whenever the agency is justifying a new rule, reg or policy, to state their ultimate goal is “to protect the insurance fund.”

Current board members have even called that objective their goal or North Star.  Their primary job.

This assertion turns upside down the logic of means and ends.

What is NCUA’s End Purpose?

NCUA’s primary responsibility, its purpose,  is encouraging and sustaining the resilience and integrity of a cooperative financial system for American consumers.  The FCU Act states:

The term Federal credit union means a cooperative association organized in accordance with the provisions of this chapter for the purpose of promoting thrift among its members and creating a source of credit for provident and productive purposes

To achieve this end, NCUA was given multiple means in the law:  chartering, examinations, supervision, administration of charter changes, issuing regulations and providing expert guidance.   The tool least used, as it is rarely needed, is calling upon NCUSIF.

Most importantly, the FCU act specifically states the NCUSIF’s financial solvency is protected by the full faith and credit of the credit union system.   All members must deposit and maintain 1 cent of each share dollar in a credit union with the NCUSIF.  Every member is part of this collective guarantee ensuring all other member shares are indeed safe. This is a cooperative movement commitment, unique to the NCUSIF.  It is the law.

If all of NCUA’s every day tools ( the other “means”) are effectively managed, then the members should never be called upon to provide additional resources.  That is how NCUA protects the Fund.

The first four-decades of regulatory responsibility to maintain cooperative system integrity from 1934-1971 did not require the share insurance tool.

One aspect of “integrity” was certainly promoting credit union solvency as there has always been reserving and net worth requirements in the law.

But just as important, system “integrity” (as a source of credit) also included vital cooperative components to provide a distinct financial alternative for members.  These  include democratic governance, values such as education and collaboration, volunteer leadership (unpaid directors and committee members), access for all Americans regardless of financial circumstance (capital), focus on community (common bond), and contrary to the capitalist model, building common wealth versus private equity, to be used by future generations .

Over time additional characteristics have been developed including interdependence (corporates and CUSO’s) and system support augmenting the critical initial role of sponsors.

A Reward for Performance

When Congress approved the NCUSIF for credit unions in 1971, it was a reward for their performance.  As stated at that time, insurance was not due to financial problems with credit unions or the cooperative system.  Rather it recognized their growing contribution to the American economy and that they might not perceived by the public as the equal of their FSLIC/FDIC alternatives.

A Cooperative Policy Framework Is Lacking

For NCUA to faithfully fulfill its mission to protect the integrity of this cooperative financial alternative, an appropriate regulatory policy framework is necessary. Such a framework should be nonpartisan and multi-administration.  Past examples are the deregulation of shares by NCUA or the redesign of the NCUSIF.

Without a thoughtful and evolving framework, NCUA becomes a mishmash of regulatory justifications or each Chairman’s personal priorities.  What do the banking regulators do?  Or let the “free market” work its will.  Or elevating suboptimal tasks and agency operations  to define priorities.

Absent a policy framework, the unique role of cooperatives becomes increasingly confused with all the other financial activity in the marketplace.   No longer are the well-being and rights of member-owners front and center.  Bright shiny objects such as innovation and new technologies take center stage.

The ambitions of managers and boards seeking to outgrow their for-profit competitors become the industry’s defining priority.  Some credit union leaders chart success not by developing a better alternative to attract members, but rather using their decades of member reserves for buying out bank owners at a premium.

That activity would certainly seem contrary to the spirit of the Act.  And therefore worthy of public debate.

Credit union CEO’s, nearing retirement, game the system for personal enrichment  “selling their credit union” via merger.  They capitalize on the transfer of members’ accumulated wealth and loyalty for additional bonuses and extended payments beyond those merited as CEO.

In these transactions, the financial and relationship legacy, its goodwill, is turned over to boards and CEO’s with no prior connection.  And justified only with vague future promises that bigger is better.  The unique character of the charter and its local legacy and traditional focus are eliminated.

Tomorrow Part II, developing a policy framework.

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An Exchange On Credit Union and DEI Focus

In response to the August 8th post by Jim Blaine, (Deification: The Eighth Wonder of the Cooperative World) there was the following exchange between Jim and a reader. 

I believe their insights are very helpful for this topic.

  1. Chip,

    I’ve been waiting for people smarter than me to comment… I know they’re out there!

    My observation is that if you do the Seven Cooperative Principles right, DEI feels like it’s already built in. Raising DEI as an Eighth Principle seems like we need a collective kick in the butt for not getting the first seven properly implemented!

    Far from dismissing the idea, I see this as a challenge we need to take on. If anyone, either within the movement, or on the outside, isn’t feeling it, then it MUST be raised up – but not as a revolutionary new principle for us to debate, but as an EVOLUTIONARY opportunity to fix what’s already in place.

    Too many people are feeling disenfranchised these days, and the view from my soapbox is that credit unions specifically, and cooperatives generally, are the best way to restore power back in the hands of the people.

    By all means, credit unions should raise the DEI issue – not as a “checklist” item – “here’s our position in response to this issue” – but as a challenge to their own leadership, their staff, their members, and their communities, to GET INVOLVED.

    Our grounding principles are solid. If we erred in the how we built on them, we need that diversity and inclusivity to drive our evolution.

    P.S. I recommend the writings of Ray Dalio (don’t settle for watching him on the financial channels; really dig in to his 3 “Principles” books). I’m also a fan of Israeli historian Yuval Harari (3 books), as well as French economist Thomas Piketty for his work on participative socialism, and Thomas Hobbes for his ideas on the social contract… he was too late to save the heads Charles I, or Cromwell, but Charles II learned a few things.

    We seem to have lost that social contract, and have allowed a much larger Leviathan to form.

    Reply

  2. Leo, may I recommend a book to you – “Jesus and the Disinherited” by Howard Thurman. It’s a short read and don’t be put off by the title if you’re not religious. If you’re black you should read it, if you’re white you must.

    But, it is far more than just another sermon about race relations in the U.S. It is about the often dehumanizing psychology underlying any relationship between those with power and those without – an “unbalanced” equation which, in the economic world, credit unions were created to address.

    So many of our cooperative leaders seem to have loss sight of that original thought, that original principle. A financial cooperative with a social purpose is not a bank, nor should it be. Without a social purpose….?

    “Life is not the way it should be, it is the way it is”… with our task growing larger daily, perhaps we shouldn’t rest on our laurels – nor our principles.

    Hope you will take a look at what Howard Thurman has to say about all of us, including you and me…and credit unions.

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Leonardo’s Horse: A Vision Outlasting Its Creator

Sometimes important, well-conceived ideas do not at first succeed. But if they truly inspire, sooner or later the vision will be fulfilled.

Leonardo da Vinci was a Renaissance master, a student of almost every area of knowledge being practiced. A painter, architect, designer of war machines, statues and inveterate keeper of notebooks recording every area his curiosity took him.

In 1482 he was commissioned to create a bronze horse statue by the Duke of Milan to be a gift to the Duke’s father, Francessco Sforza. The statue would be the largest ever cast requiring over 70 tons of bronze and standing 26 feet high.

Leonardo prepared by writing a treatise on horses’ movements, their anatomy and how he might balance a figure in motion, with just two of the four legs on the ground. In 1493 he made a full size clay stature of his design. He developed a unique engineering process recorded in his notes. The statue was to be cast in two halves and then joined together.

Full details of the sculpture.

Unfortunately, his patron gave the bronze collected for the sculpture to the Italian defenders of the city of Milan after it was attacked by an invading French army. The Italians lost, the clay model was used for archery practice by the French, and subsequently destroyed by weathering.

End of Story?

No, 500 years later a United Airlines pilot and art collector Charles C. Dent read about Leonardo’s vision in the September 1977 edition of National Geographic. He founded a non-profit to bring da Vinci’s vision to reality for his hometown of Allentown, PA. He died before the vision could be realized. His nephew took over the foundation and hired an experienced animal sculptor, Nina Akuma, to explore da Vinci’s drawings to create a fully realized instantiation. Two full size casts were made, one placed in Milan, Italy and the second commissioned by Frederik Meijer. (additional details)

It was this second horse I saw  on a visit to the Frederik Meijer Gardens and Sculpture Park in Grand Rapids, MI.

Although based on decades of Leonardo’s artistic work, it is today named the American Horse. The sight is truly majestic with the entire bronze weight supported by only the two opposite hooves. Its monumental standing is accentuated by the grass and tree sheltered green amphitheater which it alone inhabits.

The Promise of a Vision

Today the credit union vision is just over a century old. There have been almost 50,000 state and federal charters issued, of which 4,950 are still active. The challenge as in the artistic effort to recreate Leonardo’s horse, is what is core to the vision today? What is timeless in cooperative design  as it evolves in subsequent environments?

And is the design more than a single expression or does it require a “system” (as in Leonardo’s workshop) to support individual credit unions?

The commission that inspired Leonardo’s vision lasted long after its creator and sponsor left the scene. However the vision was so well conceived, that new artistic pioneers were motivated to fulfill the work, albeit in a contemporary context.

There is I believe a parallel with cooperative design. It is well conceived by founders, but requires contemporary architects  to ensure its relevance and sustainability for future generations.

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Being a Leader: Where is Kristian Christian When Members Need Her?

Bank Transfer Day.   It was a national headline PR story and marketing tsunami in 2011. The activity was started by a young woman who took action when Bank of America began charging fees because her combined balances were less than $20,000.

The person behind this movement was Kristian Christian.  She stepped up because she believed  bank executives were “out of touch” with their customers.  Her example raises a question: do credit unions need her activism even more today?

The Bank Transfer Day Story

The time was the fall of 2011.   The worst of the 2008/09 Great Recession was over.  Banks were being held to account by regulators.  Customers were paying the price.

Two brief videos that capture this movement’s moment.  The first is a 6:26 minute video from the news program Democracy Now on November 9, 2011.   The report estimates that as many as 700,000 people may have transferred money by the November 5th transfer date in response to Christian’s call to action.

In this news interview Christian also tells how she started  by  just sending a Facebook post to her 500 followers and asking them to join.

The second video from Christian, one year later in November 2012, gives an update on the  results and describes some of the online attacks she experienced.  Her message is for activism to succeed, it requires initiative and courage.

Where Grass Roots Efforts Are Needed Today

In the first video, Christian says banking executives were disconnected from the people they were meant to serve.  She urged her “followers” to seek out a not-for-profit credit union or community bank and transfer their funds to these locally-focused institutions.

Today might Christian see this same situation where  some credit union CEO’s and boards seem totally removed from their own member-owners?

In recent  years  a number of credit union members have experienced the merger of their sound, long serving coop justified with only rhetorical statements about the future.  But also creating immediate benefits and payouts for the initiators.   In several cases the CEO’s promised to stay in leadership roles to oversee their former members’ interests only to bail out within the year.

Here is one member’s comment on a merger vote completed this month:

Have asked several times for the actual voting numbers and have been told that no one has then and if they did they would not share them.
 Have you ever voted and not known the voting results? Employees from SEFCU were asked what they’re shirt sizes were for the new logo well before voting even ended. Also that it would become legal as of August 1 . Again before the end of voting. Whole thing smells !!!!

In another case, the Chair and CEO transferred $10 million dollars of members’ capital to a newly formed private “foundation” under their control as part of the merger.   According to  IRS form 990, the FCCU2 is a private foundation holding assets$11,973,971 at 2021 yearend.  The $2.0 million increase in assets occurred in less than 6 months. There is no mission statement, operational activity or officers listed in the Guidestar (Candid) report from the IRS (EIN: 87-1724276).

The Fix Is In

Credit union boards have ignored or stifled efforts for members to participate in the annual election of directors.  Virginia Credit Union is a well-publicized example because some members  challenged the status quo and submitted nominations.  The credit union turned a blind eye to their efforts and the disenfranchised members went public.

Few credit unions today actively encourage or seek board candidates.   Annual elections have become moot as internal nominations just equal the number of open seats.

The democratic governance model has been converted to a self-perpetuating board oligarchy.

Solution: Credit Union Transfer Day

Christian’s effort shows there is nothing more powerful than an engaged person who wants to change the world.

How might her example empower credit union members who feel overlooked by their coop’s leaders?

Should they identify another credit union willing to open their doors to persons seeking a responsive coop?  Transfer their money?   Refinance their loans or shift their direct deposits?

Christian’s method was simple: vote with your funds. Do something, not just complain.  Let your personal network know what you have done and ask then to support your position.

In 2013, Christian again stepped up by joining over 6,000 credit union supports to sign a petition to the White House to “Choose NCUA leaders who Understand Cooperatives” when making appointments to the Board.

Maybe concerned members should contact Christian to see what she is doing today?

 

 

 

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Abraham Lincoln and the Challenge Facing the Credit Union Cooperative Movement

In the Gettysburg Address Lincoln summarized the ever-present challenge of keeping alive the spirit of a  revolution’s  original intent.

Dr. Eva Braun’s essay describes Lincoln’s grasp of the declining motivation of later followers in his Gettysburg speech:

From Dr. Braun’s  analysis: Lincoln begins, “Four score and seven years ago.” “Four score,” With its long oh’s, sounds a more mournful, solemn note than could the words “eighty-seven years,” but the choice of the phrase is not only a matter of sound; it also carries a special meaning. It is the language of the Bible, as in Psalm 90:10:

The days of our years are threescore years and ten; and if by reason of strength they be fourscore years, yet is their strength labour and sorrow; for it is soon cut off, and we fly away.

With the psalm in mind the phrase implies: just beyond the memory of anyone now alive, too long ago for living memory.

Now, we know that from youth on Lincoln was concerned with a peculiarly American danger: the death of sound political passion. In his speech on “The Perpetuation of our Political Institutions,” of 1838, Lincoln drew a clear parallel with the early community of Christians, whose danger lay in the fact that the generation of disciples and eye-witnesses had been followed by a second generation which had only heard by word of mouth, by a third which had only read of Christ, and by a fourth which had begun to forget.

So in the American community; the scenes of the revolution, he said, “cannot be so universally known, nor so vividly felt, as they were by the generation just gone to rest.”  The men who had seen the Revolution, who were its “living history” are now gone.

“Beginning to Forget”  A Peculiarly American Habit

Remembering the contributions of earlier credit union founders is vital. Last week Jim Blaine described the legacy of Ralph Swoboda. As CUNA General Counsel and then President, he helped transform the movement through two system-wide challenges: business modernization and deregulation.

While leading NCUA in the early 1980’s, Ed Callahan and Bucky Sebastian in their presentations promoting deregulation would cite the original practice of common bond going back to the early years of state chartering.   They pointed out that some of the first fields of membership were often city-wide.  The intent was to be inclusive, not limiting,  for those who sought a cooperative financial choice.

But this reference to the spirit of the cooperative founders, where purpose surmounted existential challenges, can  dissipate as the “living history” passes on.

We cannot resurrect those who have left the playing field. But we can certainly rekindle passion for member advocacy in all its cooperative possibilities.   And in the process keep the “movement” alive.

The Current Challenge

When a motivated popular movement aligns itself with another cause to promote its  agenda, the hybrid effort can pervert its primary purpose.

An example is the tying of Christian nationalism with white nationalism.  Christianity becomes less about faith and more about political power.

A parallel confluence of activity is occurring in credit unions.  Since the imposition of PCA in 1998 through the Credit Union Membership Access Act, NCUA has increasingly equated credit union oversight  with banking practice.

The latest effort is the imposition of RBC/CCULR completely incorporating the full bank regulation in its rule. This embrace of banking models, a frequent standard cited by Chairman Harper, also includes the promotion of external capital.  It neglects the unique capabilities of cooperative design.

Collaborative institutions include the CLF and NCUSIF, both under NCUA management. CLF’s role is moribund.  As for the NCUSIF, NCUA has converted the insurer into an open-ended funding draw for the agency’s daily operations.

Another example of cooperative diminution is NCUA’s lockdown of the corporate network, especially its services for smaller credit unions.

Credit unions have read the regulatory signals.  “Treat us like banks, and we will follow that industry’s lead.”  Mergers, not collaboration, become a priority growth strategy.  Bank purchases, paying premiums to bank owners with credit union member capital, is promoted as an immediate expansion opportunity. In other words, “If we can’t beat ‘em, let’s just buy ‘em.”

The regulators are silent. As long as credit unions’ financials mirror bank’s, everything is OK.  Mergers, bank purchases and novel (SPAC) growth tactics are just the free market at work. Even when a CEO and Chair transfer $10 million of members’ funds to their control following a merger.

Let me be clear that these are not the actions of the majority of credit unions, but they  dominate the headlines.

Losing Faith

The credit union system’s unique capacities are simplified to  safety and soundness, defined by ROA and net worth with a dollop of growth thrown in.  Purpose becomes dressed as creative public relations campaigns and promotional branding efforts.

An example of this waywardness is VyStar Credit Union.  A member forwarded their most recent assessment of its recent flawed digital channel conversion:

In regards to VyStar, we have decided to move our account to another credit union.

Facebook posts (https://www.facebook.com/VyStarCU) have certainly slowed down.  I do not know if it is due to apathy or is X number of people who have just gone to other financial  institutions.

Login online has greatly improved.  There is little to no wait time.

They updated the mobile app on June 26th.  Many people had difficulty getting on the app, especially the android version.  

Getting a hold of someone in customer service is very difficult at best.  Very long wait times on the phone (in excess of two hours).  You can log into chat, I had almost an hour wait the other day.  While they have now added internal transfers, you still cannot do member to member (linked account) transfers (like to other family members).  You can only transfer funds internally within your savings, checking, MMA, etc.  

You still cannot see any account history prior to 05/13/2020 which was the day they shut down the system they used prior to the current one.  

You no longer get copies of your checks written online as before.  

I see no “Improvements” or new features in the new system whatsoever.  The new bill pay is cumbersome and not user friendly.  I filled in the bill payees into our new credit union with ease, it is almost exactly what  we used to have at VyStar before this poor unsatisfactory installation.  

Lastly, and most disappointingly, is the fact that the CEO has still not addressed the members directly.  I know of no statement to the press since about May 23rd.

I have no idea how many members have left and I am not sure we will ever know.  I hate leaving but, I have lost faith in them.

A Two-Way Street

The fundamental flaw in VyStar’s strategy is not a bungled conversion.  Many conversions have temporary problems.   Rather it is VyStar’s strategy that credit union membership is a one-way street.   Members just transact and are viewed as customers, not owners.  There is no respect for members’ “faith” which is the primary foundation for any credit union’s long-term success.

A two-way street means the owner’s role is understood, honored and continually enhanced.  The primary means  is seeking to expand the multiple ways value is created for members, especially those who have the least or know the least.

A Member Advocate

The credit union model is foremost an advocate for members’ well-being.   That was the original intent.

The vibe at VyStar is all about the institution and its size. This is a sentence from an April 2022 merger announcement before the digital debacle:  VyStar, which has more than 800,000 members and over $12 billion in assets, will remain the 14th-largest credit union in the country by asset size.

When the member relationship is always front and center, the owners return much more than transactions.  They give their loyalty, patience when necessary, and word of mouth endorsements with friends and family.

That was how the credit union movement achieved their current $2.3 trillion position while serving the fourth or fifth generation of members.   Members’ contributions are paid forward to benefit future members.

For the founding members’ spirit of purpose to prevail, it must  be constantly renewed in the words and actions of those leading cooperative charters now.

 

 

 

 

 

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The $846 Million Missing Item From Thursday’s NCUA Board Agenda

While NCUA’s $350 million annual budget is the primary Board item, that is not the most important financial issue.   For there is unfinished business stretching back over a decade.  The agency owes credit unions an amount that is 250% greater than the budget it will be discussing.

Here’s the details.

In March 2009 NCUA Board member Rodney Hood along with Chair Michael Fryzel and member Gigi Hyland voted to conserve US Central Credit Union and WesCorp, the two largest corporate credit unions.

My hunch is that board member Hood never expected to be overseeing the continued distribution of US Central’s almost $2.0 billion surplus thirteen years later during a second term on the Board.

Credit Unions Due $846 Million

As of the March 2022 AME financial reports for the five liquidated corporates, NCUA projects over $846 million is remaining to be paid. The majority, $556 million, is from US Central’s estate.

When completed total AME payments to credit union member shareholders will exceed $3.2 billion.   As a comparison, the total capital of the eleven active corporates at December 2021 was only $2.5 billion.

Put bluntly, the collective funds returned by the four liquidated corporates is 132% great than all the equity in corporates active today.  Closing these solvent corporates was a catastrophic error in  judgment!

The March 2022 AME financials presents the total forecasted payments to the four corporate’s members and the remaining amounts due.

US Central:     $1.832 billion with $ 556 million due

Mbrs United:  $  622  million with $130 million due

Southwest:      $  613 million with $127 million due

Constitution:   $     48 million with $  32 million due

There are no payments for the $1.1 billion of credit union member capital at WesCorp.  NCUA projects a WesCorp deficit after all recoveries at $2.1 billion.  This is the only loss to the NCUSIF from the five corporate liquidations.  (from line B4-Due to Government March 2022 AME financials)

Total Corporate Surplus Now Tops $5.8 Billion

The above amounts do not include the $2.563 billion added to the NCUSIF when the TCCUSF surplus was merged on October 1, 2017.   Adding this amount brings total recoveries to almost $5.8 billion.

This surplus continues to point the need for an objective review of the entire corporate resolution effort.

When US Central was seized in March of 2009 NCUA Chair  Fryzel was quoted in a Wall Street Journal March 21 article:  “With us in control, we’d get honest numbers.”

If subsequent events have shown anything, it is that  “honest” numbers in an environment of uncertainty depends on who does the accounting.   Especially when the underlying process relies on valuation  models that claim to project the economic climate and related cash flows  years or even a decade into the future.

The Core Regulatory Failure

The problem is not the models or their incorrect assumptions, both of which were wrong.  The error is that predictions should not be the primary basis for resolution strategy.  All models are wrong; some are useful.

The required response is managing the daily dynamics as markets change.  Trying to predict the future  as the basis for today’s tactics led to disastrous decisions in NCUA’s  assessment of the corporate assets.

With NCUA’s ALM/NEV supervisory tests becoming more prominent in today’s rising rate environment, the limitations of financial modeling  is a much needed lesson to bear in mind.

The Need for a Look Back

But a look back is important for another reason.   Still today NCUA Chair Harper and senior staff use the apocalyptic estimates and conjectures thrown out in 2009 as NCUA  projected future events.  The hyperbolic forecasts were incorrect then; it is double injury to repeat them today when the actual facts are known.

In the same WSJ article above, Chairman Fryzel was quoted:  “regulators aren’t concerned about the health of any other wholesale credit unions besides the two brought into conservatorship.”  Yet just a year later when no longer chair, member Fryzel supported the liquidation of three more corporates, a decision that was devastating for the system and individual corporates.  Both Southwest and Members United are paying liquidating dividends on top of returning all their members’ capital shares.

By forecasting disaster, NCUA took unilateral action without any industry involvement except paying the bills.  There was no check and balance, no transparency and no alternative solutions developed.

Unfortunately, that unilateral regulatory mindset continues today.  It undercuts the unique cooperative advantage of collaboration represented in the common credit union funded resources  in the NCUSIF and CLF for individual turnarounds.

The most important takeaway from the corporate debacle is not estimation failures or the value of patience when resolving problems.  Rather it is NCUA’s failure to understand the unique cooperative capabilities when developing regulatory work out plans.

That lesson should include respect for the institutions in difficulty and a willingness to work together for solutions versus liquidating problems to make them go away.

The one board member who is best positioned to state the importance of this learning opportunity is Rodney Hood.  He was there at the Alpha and now hopefully, the Omega.

His counsel should be heard.  And credit unions should get their funds back ASAP. Enough delays!

PS:  I hope a board member will ask what the additional $10 million in liquidation expenses paid (outside the NCUA budget) in the first quarter from the AME recoveries was used for.

 

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Credit Unions and Small Town America

(This is an observation based on three previous write-ups about my 60th high school reunion.)

My reunion visit to Rensselaer, IN (pop.6,000) had some surprises beyond the high school alumni gathering.

Ten years before (2012), the town’s main street seemed in decline.  New school buildings, a strip mall with a Walmart and several assembly/distribution  plants were located on the outskirts, not in town.

In 2017  St. Joseph College closed due to financial shortfalls.  The college served as the creative ying to the farming yang of the community.  What could replace this intellectual and institutional resource?

The Changed Environment-Ten years Later

At the Rensselaer City Council’s June 21st meeting a presentation was made from a firm which specializes in attracting  new residents to smaller communities to support economic development.  This is  from  the Rensselaer blogspot report of that proposal:

A company called MakeMyMove gave a lengthy presentation to the Council. The company, based in Indianapolis, is a marketplace that connects communities with workers who work remotely. So far this year they have helped 14 Indiana communities with 52 relocations with 59 others being processed. The idea is that a community pays MakeMyMove about $35,000 to prepare a marketing package and a listing on their site. The community also prepares an incentive package that usually includes funds for relocation.

The State of Indiana has funds that might be used to help a community with these costs. Some members of the Council were intrigued with the idea but others had reservations about the cost and whether Rensselaer would compare well with the other communities using the service, all of which were bigger than Rensselaer.

The community that was given as a comparison was Greensburg, which is about twice our size. The proposal was taken under advisement, and what happens next is unclear.

The National Movement to Smaller Communities

At the same moment the Wall Street Journal published a story with a similar theme: Rural Counties are Booming, But Can it Last?

The article pointed out that pre-pandemic, rural areas were growing slower and losing population compared to larger towns and  cities.  Those trends have now reversed for a number of small towns as related in the article:

  • Rural counties saw a net gain in population in the twelve months ending June 2021;
  • Remote work possibilities were an important driver of these relocations;
  • Job postings in rural areas increased 52% in the three years ending 2021;
  • Wages were growing faster in rural (6.3%) versus urban (5.7%) areas  in the same three years;
  • Housing is much more affordable in smaller towns;
  • Persons appreciate being part of a tight knit community and still live within commuting distance of bigger cities.

My brief visit to Rensselaer supported many of these advantages.   As shown in my earlier posts, wages are high and workers in short supply.   There are new businesses opening and investment in older ones.

Here are two examples: a new brewery begun in 2017 and since expanded, and continued local ownership of the Ritz Theater first opened in 1925.

The local owner even works the snack and ticket line before the show starts.

The economy is becoming more diversified with new services opening including health care, retirement living, Walmart and new restaurants.    Rensselaer also has three radio stations, two country and one classic rock.

Even though St. Joe college is closed, there are continuous efforts to use the buildings and campus for further education.

The public mural project is an example of a town going through a unique transformation that brings visibility and fresh thinking to visitors and residents.

Rensselaer is driving distant from three major cities, Lafayette (with Purdue University), Indianapolis and Chicago.   The town continues to invest in public infrastructure and new government funded buildings such as the National Guard base, fire station and a government business office.

Credit Unions and Community Transitions: A Home Court Advantage

The origins of credit unions were common bonds, that is people who had pre-exiting relationships  that could  be the basis for pooling  funds to help fellow members.

This  “community” feeling is generally stronger in smaller towns and in rural areas which should make these a natural fit for a credit union, what might be called a home court advantage.

To succeed in these markets will require the same commitment, patience and creativity to support their transformation that  local leaders are providing.  Smaller size is an advantage in smaller markets.

Action Steps

Find out if there are Rensselaer kinds of opportunity in the areas you serve.   To grow larger, most people believe that an organization should seek out bigger markets.  In fact the opposite may be true.

Rensselaer’s five bank branches have an asset base of almost $400 million.  A 6-8% market share of the town’s deposits would be a healthy branch or in some cases support a standalone operation.   Once established, growing that share from out of area bank branches should be possible.

Almost  every state has many more Rensselaers needing credit unions than there will be big city options such as Indianapolis, Gary, South Bends and Evansvilles.

For a number of these smaller markets the quality of life, the cost of living and the opportunity to make a difference will make them an ideal fit for lasting impact with a cooperative charter.

As the sign in the jewelry store said:  Shop local, Buy local. 

 

 

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Learning from  My High School Experiences  or, Back Home Again In Indiana

(Note:  the next three blogs were inspired by attending my 60th high school reunion in June.  For most Americans, these years are the most widely shared common participations  of our lives. These posts are a perspective on their influence  later in life.)

The teenage high school years are times of ever-expanding new life experiences.  However it may take decades before one understands the significance of these happenings as an adult.

Would attending my 60th high school reunion in Rensselaer, Indiana be worth the time and effort?  I was in RHS only 2 ½ years there before  transferring to Springfield, Il in the middle of my junior year when my Dad took a new job in the town in which he grew up.

I’d probably not recognize anyone.  Had kept in touch with just two classmates. The only planned group event was a Saturday evening meal, with many whom I would be meeting for the “first time.”  Would this just be a nostalgia trip?

After the weekend, one classmate shared a note which characterized her feelings.  Even though my time in Rensselaer was much shorter at five years, her words also captured my experience:

The 60th anniversary milestone caused me to reflect on the blessings of the first 18 years of my life.  My family, friends, schools, church and community provided a sense of security and belonging that I never questioned or doubted. The emphasis on self-discipline, hard work, integrity, wise choices and faith provided a solid foundation on which my whole life has been built.  I am so  grateful that I was–and always will be–an Indiana farm girl.  

Rensselaer in Perspective

The reunion  reminded me that who we are today is deeply influenced by where we came from.  It also called attention to why the cooperative model’s roots were first planted in farming communities across America.

Rensselaer is a farming town, the county seat of Jasper County.   On google maps, It is 84 miles from Chicago. It was sufficiently remote and lacking  big city attractions that Chicago Bear’s owner George Halas held the team’s summer training camp at St. Joseph’s College in Rensselaer from 1944-1974.  The athletes ate in a basement cafeteria under the campus’ large chapel building.  There were strict curfews.  Nothing to distract.

The College was founded in 1889 but due to financial deficits was closed in 2017.  The campus is intact today waiting for its next evolution.

St. Joe’s chapel  bell  still rings each quarter hour. Cornfields bind the college on three sides while the sports grounds on the campus’ south side snuggled up next to the parking lot for the town’s bowling  alley.

The Town’s Foundation

Rensselaer’s economic base is agriculture.  Farming requires patience; nature can’t be hurried.  Results accrue from persistence and hard labor.  Time is measured daily from sunup to sun down. The  changing seasons mark the longer passages of time.

Rensselaer is the country seat for Jasper County which had a negative .2% population growth over the last decade.  In contrast the US population increased 6.5% and Indiana’s 4.1%.

The town’s  population is just over 6,000. In the 2020 census, the county’s population is 91.2% white (non-Hispanic) and the demographic group increasing the most  is Hispanic/Latino which comprise 6% of the population.

That probably explains why there are now four Mexican restaurants in town versus none when I visited ten years earlier for the 50th reunion.

One even featured a mural of Mexican artist Frida Kahol on the inside of a newly opened restaurant.

Farming is the Priority

Several new businesses have opened in the town in the last decade, but farming is still the economic foundation.

The largest non-farm related businesses/employers opened after 2000 and include:

  1. Franciscan Healthcare
  2. Sealy Mattress Corp
  3. Talbert Manufacturing Inc
  4. Donaldson Co
  5. Conagra Foods
  6. Rensselaer Care Center
  7. Walmart

Businesses are hiring.  Conagra’s Orville Redenbacher popcorn facility is looking for people by offering $20-$34 per hour, a 9% 401 K match, paid maternity leave, gym membership and a $1,500 perfect attendance bonus.

McDonalds is aggressively seeking help with the slogan We Need YOU and starting pay of $12 per hour.

Five banks have branch offices in Rensselaer.  First Trust Credit Union had a branch but closed it ten years ago.  Their former office now houses the town’s bakery.   The five banks’  total deposits  as of June 2021 were  $363 million, a 16% increase over the prior twelve months.

The High School Experience

My 1962 high school class graduated 106.  Six decades later the high school’s 2022 senior class was just one more.  Becoming bigger is not a primary goal of the community.

High school is the most widely followed experience in town.

The old high school building  is gone, replaced by a new single level sprawling campus surrounded by  multiple sports fields and courts on the edge of  town.

Sports are a major high school commitment with ten boy’s and girl’s teams. In my one varsity junior year there were just three boy’s sports (track, basketball, and football) and  no girl’s teams.

Today there is a full-time athletic director but most of the coaches are part time, with jobs outside the school system. In the last three years two RHS girls placed first in the state’s track meet in shot put. The boy’s football team won the state championship for division 2 (the next smallest out of 6 divisions) in 2014.

The school produced two plays this past year, the musical Princess Ida and a Shakespeare production.  The seniors in the art class are able to paint and attach their work to the ceiling tiles around the school.  They can paint their own spaces in the car parking lot.  But no painted senior cords, the tradition in my era.

Instead of Latin, Spanish is now the  foreign  language option. Classes are offered for future farmers and  technical trades including welding .  The welding course was over subscribed so the school installed  two more stations for the class. These students can walk right into local jobs one teacher said.  Between 80-90% of seniors go on to further education.

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Religion and Politics

Religious options continue to expand in the community, both longstanding and new denominations.  Twenty three churches are listed for Rensselaer in the Worship Guide of the local advertising  handout.

My dad was minister at the First Presbyterian Church which is celebrating its 175 anniversary this year but is trying to find a full time pastor.  The church yard contains the family grave for the person after whom the town is named:  James Van Rensselaer.

Rensselaer had two local newspapers in my era.  The six-day afternoon local paper was called the Rensselaer Republican.   The weekly was the Jasper County Democrat.  The Republican is now a once-a-week publication covering multiple towns and counties across northern Indiana.  The Democrat no longer exists.

In the 2020 Presidential election Trump received 74%  and Biden 25% of the vote in Jasper County.  Statewide the totals were closer: 57% to 41%

The town’s most famous politician was Charlie Halleck who served  in Congress from 1935-1969 and was House Minority leader from  1959 to 1964.  He gave a speech nominating Wendell Willkie, a fellow Hoosier,  as the Republican candidate in 1940.  In 1948 he was thought to be a vice presidential option for Thomas Dewey who instead chose governor Earl Warren of California as his running mate.

As House Minority leader Halleck would partner with Senate Minority leader Everitt Dirksen to become the Washington face of the Republican party in their news  conferences called the Ev and Charlie Show.   Halleck opposed the social liberal programs of the democrats.  But supported the Vietnam War and the several Civil and Voting rights Acts of the 50’s and 60’s.

Conservative  Shared Values

Even as wind turbines now add a new source for farm income and new businesses open in town, change occurs slowly.  Making a living from the land  is for most farmers a lifelong commitment to a place.

Tradition matters. Summer events include tractor pull contests, vacation bible school (VBS), family picnics in the covered park shelters, summer plays (The 25th Annual Putnam County Spelling Bee), baseball and a full schedule of public library events.

Following Its Own Time Line

Indiana is divided into two time zones.  Rensselaer is part of the northwestern counties that follow central time.  The rest of the state and most big cities are on EDT.

Farming shapes the pace of change.  Work flows with the seasons. Planting crops is a partnership with nature.  It is not a manufacturing process to produce  a product.

Nature’s output is at a different rhythm than the speed of the modern Internet economy.  Growth must be nurtured and is always subject to forces outside one’s control.

This timeless human endeavor creates respect for the land and those who depend on it. Values of endurance and resilience are essential.  Results come from consistency, not scaling up or being first to market.

Farming creates community through a shared destiny.  For many farmers it is a multi-generational ambition. Their fondest  hope is that their children will take over the family business.  The You-Only-Live-Once (YOLO) mindset is contrary to the deepest instincts of farmers.

This conservative temperament is not limited to farming.  It can be a foundation for a well-served life  in any occupation or place. That I believe is what my classmate meant when writing she was glad to have been an Indiana farm girl.

In following articles, I will share an unusual public mural art effort in Rensselaer and visit the Saturday Farmer’s market.  Both capture the town’s enduring spirit.  And why it survives.

A 60th RHS reunion after dinner photo: 

My best high school friend was Dale Garriotte.  We shared sports together, delivered  newspapers on our bikes and both ended up in the Navy.

Chip and Dale in 1961 during Easter weekend finishing up our junior year.

Chip and Dale at the 60th RHS reunion:

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The Supreme Court’s  Roe Reversal and a Lesson from Credit Union history

Back to the Future

Noah Regan’s cartoon below portrays the logic of the Supreme Court’s overturning the Roe v. Wade precedent.

Supporters of the decision openly assert this puts the US back to what the situation was 50 years ago.  The “freedom to choose” right will now be a state by state determination.   The legal circumstances will vary widely in every jurisdiction.   Even within a single state, the decision could be modified anytime there is new political leadership elected.

Women and their partners will find themselves in an ever changing legal and/or criminal status.   This was an overt political decision.  The courts and lawyers demonstrated their profession’s singular ability to present arguments about woman’s rights that are completely contradictory to each other.  Therefore the solution will be political, not legal.

A Credit Union Perspective

How does a Supreme Court decision that goes against both precedent and common sense get changed?

Two of the current justices were involved in the NCUA vs. First National Bank and Trust case decided in February 1998 in a 5-4 decision written by Justice Clarence Thomas.  The lawyer presenting the NCUA-credit union position was John Roberts, now Chief Justice of the Court.

The court ruled that the NCUA’s interpretation of       § 109 of the Federal Credit Union Act (FCUA) that: “federal credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district” -permitted federal credit unions to be composed of multiple, unrelated employer groups, each having its own distinct common bond of occupation” was incorrect.

NCUA General Counsel Bucky Sebastian in 1983 had interpreted, and the Board agreed,  that in section 109 the word “groups” was plural, and therefore authorized multiple group charters.

The Supreme Court ruled in favor of the Bank position that the NCUA’s decision was contrary to law because § 109 unambiguously requires that the same common bond of occupation unite each member of an occupationally defined federal credit union.

Justice Thomas wrote: “the NCUA’s interpretation makes the statutory phrase “common bond” surplusage when applied to a federal credit union made up of multiple unrelated employer groups, because each such “group” already has its own “common bond,” employment with a particular employer. If the phrase “common bond” is to be given any meaning when the employees in such groups are joined together, a different “common bond”-one extending to each and every employee considered together-must be found to unite them.”

This Supreme Court also overruled a district court’s decision that NCUA had correctly interpreted § 109 following the Chevron precedent of deferring to Agency discretion when implementing a Congressional statute.  Note:  this week the Supreme Court is expected to announce a decision which may modify the Chevron precedent.

The Credit Union Response

This FOM ruling would have put federal credit unions back into the legal and practical world of 1934 when the Federal Act was passed.   The court decision ignored the entire history of credit unions and the evolution of financial services under deregulation.   Common sense and real world events made the court’s finding both impractical and a potential end to the federal chartering option.

For decades almost all state systems had much more flexible common bond regulations than NCUA’s.   If the ruling stood, there would have been a wholesale conversion to  state charters.

Credit unions mounted a coordinated and united campaign to change the federal law to continue NCUA’s common bond interpretation that had been followed for almost 20 years.  The result was the passage of the Credit Union Membership Access Act (HR 1151) by congress and signed by President Clinton on August 7, 1998.  This action preserved the NCUA’s FOM regulations albeit with a new set of regulatory requirements under the label of Prompt Corrective Action.

In this situation the state system was  where consumer’s freedom to select a coop financial option was preserved.

Women’s Rights

In the Roe decision, the return to the states to determine what rights a women has, will have the opposite effect of the credit union example.

The Court’s decision echoes an earlier time in our history:  “A house divided against itself cannot stand,” Lincoln warned Americans. “I believe this government cannot endure, permanently half slave and half free. I do not expect the Union to be dissolved—I do not expect the house to fall—but I do expect it will cease to be divided.”

The credit union case is very different in scope and political significance.  However both decisions show the Court’s willingness to turn back the clock, to ignore real world consequences, and throw issues back to the political process.

The common thread in these retro interpretations is the role of Justice Thomas.  He wrote the credit union opinion and assigned the Roe one.

The Roe reversal will, as in the credit union circumstance, require political action.   The court’s abortion  decision resolves nothing.  Like the credit union case, it will eventually come back to congress.

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Starting a High School Credit Union Branch

“The Burbank Teachers FCU in 1974 wanted to grow the membership. This was before HR1151. The credit union was limited to the Burbank Unified School District. Basically, growth only came when someone retired & the new hire joined & brought in family, too.

Peggy Holliday, CEO approached the two Burbank High Schools’ student body looking for students on campus willing to launch the student credit union at each high school. I was in 10th grade (Sophomore) & expressed interest.

Peggy had previously obtained BUSD approval after presenting a business plan, etc. The NCUA approved the FOM charter expansion for high school students.

The BUSD was impressed the business plan included marketing & educational pieces on savings, compound interest, loans, financial money management, check book management, etc.

Each student credit union at the two high schools operated independent of each other. Each student credit union had their own BOD, Supervisory Committee, Credit Committee, tellers, manager, etc. It was fully staffed by the students all volunteer help.

Each high school had a Burbank High School faculty advisor (these folks were also directors of Burbank Teachers FCU). When students graduated high school, their membership would transfer to the parent sponsor credit union Burbank Teachers FCU.

Loans were approved for new/used car purchases, prom date, musical instruments, stereos, etc. We did business loans…some students started pool routes, or carpet cleaning businesses, etc & some became quite successful as we could see the deposit account balances increase!

So the loans could extend beyond graduation from high school. Because most all students were less than 18 – just about 100% required mom or dad to co-sign to make the contract valid. Contracts with minors as you are aware are not enforceable!

Once the student joined the credit union, of course family members became eligible, too.

The high school student credit union was open during the lunch & before and after school. We accepted cash and check deposits. We balanced daily, closed the books at month end, and paid dividends on deposits.

This was all ledger paper accounting.

Remember…pre-in house computers. We had monthly board meetings, and prepared the Balance Sheet & Income Statements. Loans in collection were followed up by the student credit union collectors!

We reported monthly to the credit profile agency (Trans Union, Experian, Equifax).

The student volunteers obtained “work experience” credit – it was considered an elective class. Instead of wood shop, arts & crafts, you got work experience credit for high school graduation. Students could get checking accounts at the credit union.

Some of the students continued career paths from the high school credit union, including myself, Robert Einstein CEO @ Ume FCU ((formerly Burbank Teachers FCU)). There is an attorney at Styskal, Weise, Melchoine – Bruce Pearson – that got his start from there, too, as I recall. Some of these high school students are now on the BOD at UMeFCU.”

This account was provided by Stuart Perlitsh who retired in March 2017 from Glendale Area Schools Credit Union after 22 years as its CEO.

For a current take on the concept, Credit Union of Texas is stepping up by opening SMART branches in local high schools.