The video series He Gets Us relies on multiple methods to communicate a vision of common humanity in an era of cultural turbulence.
It was funded by a group of Christian business leaders who were concerned about the relevance of spiritual values in a time when even religious communities have become part of the current impulse to take sides on every topic.
The videos push against this social divisiveness. Several were among the most watched ads from the last two Super Bowls, an effort that some felt was not the best use of funds.
They are intended to be a conversation starter. To build a bridge to a culture increasingly dubious about the role of spiritual values in contemporary life.
Unconditional Love in the Hardest Times
The group’s longer first-person, authentic life stories are memorable. This five-minute video is an example of a mother and her family’s unconditional love. Most of us have had the good fortune to experience this relationship as either a child or as parents. But perhaps not with the burdens this family encountered.
The video suggests our lives are not just a series of insulated, unrelated events. Human stories reveal deep truths which we may know only in part. They sometimes “speak” to us outside our conscious awareness.
Life Is How We Affect Others
The mother’s story shows a life of purpose a goal for which many aspire. She tells of learning the necessity of humility, “how to set aside everything we know to honor, respect and love another human being.”
In doing so, it suggests all are part of the great human cosmic enterprise. Life comes full circle for everyone. This narrative expresses the belief that we live in a world grounded in shared meaning.
On Monday I introduced the video series, He Gets Us. They were created by a group portraying the relevance of spiritual life today. The work presents pictures of our common humanity.
Works of Art
I believe these videos are works of art. They have the power to evoke an epiphany. We may not know the full wisdom being offered. But one can feel the experience connecting with something inside you.
My hope is to inspire an appraisal of today’s coop messaging. The goal is to move beyond the headlines and priorities of the current moment to rediscover the passions that made the industry a movement.
A Second Language
Today’s selections begin with what seems a simple task, asking nonnative speakers what are most difficult sounds for them to pronounce in English.
But then each person acknowledges the real question is about the words we find the hardest to say emotionally in human interaction. In any language. This short introduction is the source for five longer personal stories from each.
The final speaker is from Finland. The words he found hardest to say emotionally arose in very difficult circumstances.
They were: “I love you.” Saying them makes us vulnerable. A phrase repeated often by rote but still changes lives when stated.
His story sketches the growth in his understanding of this universal expression that enriches all human relationships. It begins with a trigger warning.
Communication transforms when it touches a person’s emotions. It transcends the moment. It becomes art. It helps us see beyond what we knew before.
The most difficult challenge for any organization is telling anyone why they should be interested in joining with you.
Messaging is more than competing for our attention with a product commercial or a clever brand. Ultimately, it must appeal to something inside. It should make us care.
He Gets Usis a video campaign that attempts to represent the “greatest love story ever told.” It suggests the relevance of christen belief in today’s context of religious decline or misuse.
This creative group states its purpose as follows:
We’ve done a lot of homework on our culture. We researched how people feel about each other and what they think about Jesus and Christianity. We’ve connected with thousands of people of various faith traditions and those who claim no religion. We spoke to all kinds of people — different backgrounds, beliefs, and, yes, political affiliations.
And this is what we’ve learned: From politics to sexuality and religion, so many of us feel like our values, beliefs, and identities are under attack by the ideological “others” around us. Many perceive those who differ with them on issues of justice, dignity, and humanity as not just wrong or misguided but also as evil. As enemies. We often see these “others” as close-minded, selfish, hypocritical — and if we’re honest, many of us respond in kind.
This week I will share several of the group’s “presentations” which look and are sometimes presented as commercials. But they are much more. They help us see, to understand more than we did before watching them.
The Credit Union Parallel
What do these “messages” have to do with credit unions? To be seen as relevant in today’s crowded social media is the same challenge credit unions confront. There are a number of organizational parallels.
The participation trend lines in most religious denominations are trending down. Smaller churches are closing. Larger ones are greying. Sunday or Saturday “sabbath” is a time for family errands, fun outings and preparation for the week ahead-not participating in a community of shared purpose. Society’s divisions are mirrored in our religious practice as presented in the group’s purpose:
The more ideologically defensive we become, the more we are willing to sacrifice things like kindness, patience, and the respect and dignity of others for the sake of victory — the righteous ends justifying the dehumanizing means. And it’s tearing us apart. We experience it in politics, in the workplace, in schools, and even in churches. And at the heart of the conflicts is a fundamental disagreement about what it means to be good.
Credit unions and churches no longer seem central to many persons’ lives. Our basic needs and core values, “to be good,” are fulfilled in other ways and commitments.
The He Gets Us videos try to show the relevance of lessons from generations ago for real people today.
My hope is to inspire rethinking for today’s coop messages. We need to move beyond the headlines and priorities of our current moment and rediscover the energy that made the industry a movement, an alternative to the status quo and rediscover who we can aspire to become.
The Immigrants
A hot button topic when people are polled about public issues for political campaigns is the flow of migrates to America.
The one-minute video, Refugee, presents this ongoing human circumstance with a specific context.
(https://hegetsus.com/en/featured-videos/refugee)
What I found equally compelling is the producer’s five-minute story telling how this video was assembled. The making of the Refugee video:
Does this message open one to a different way of seeing this issue? Does it stay with you after viewing? Does this human-centered perspective suggest a parallel in your credit union’s role?
The Good: 125% Risk Based Capital Ratio for a $6.6 Billion Credit Union
If you were ever curious about the difference between a state and federal credit union regulatory environment, the open public meeting of the North Carolina Credit Union Commission the past Tuesday, April 9, is an eye-opener. (It was online).
In 90 minutes a listener received comprehensive, transparent. and timely information from multiple presenters. The topics covered state and national legislative priorities by a League representative and a thorough state-of-the industry review for all 29 state charters (ratios with and without SECU) by the Commissioner. There were updates on the status of the state system: sixteen credit unions have the low income designation and one pending merger.
Administrative briefings on the Commissioner’s office including an examination update (one done, six in process, and 22 to go), examiner training and staff openings.
At the agenda’s completion, the chair solicited comments from the attendees. Credit union members presented concerns about the Administrator’s oversight of SECU bylaw changes. One questioned the Administrator’ support for House Bill 410 to change the operating authority for North Carolina state charters.
The meeting showed the accessibility and transparency of the state’s regulatory environment. All were welcome. It was an open town hall with democratic participation and citizen oversight.
An Up-to-the-Minute Market Update
One of the most interesting reports for me was by Fred Eisel, CEO of Vizo Financial Corporate which serves the Carolina market and credit unions in 40 other states. His information was timely, positive, and specific. Several of his points: liquidity is growing in credit unions with corporate shares up and borrowing by members down. Vizo’s financial results are strong enabling increasing returns for members. Credit union operations are stable.
However, the number that struck me was Vizo’s Risk Based Capital Ratio at March end of 125%–that is not a typo.
Vizo financials through February are posted on their website. It has extensive disclosures of balance sheet and income statement details, shows total available liquidity of $6.5 billion, and includes nine measures of capital adequacy.
Fred sent me the March 2024 numbers showing the 125% RBC ratio.
Vizo’s Multiple Capital Calculations
The NCUA’s RBC requirement for well-capitalized corporates is 10%. Vizo’s ratio is twelve times that standard. Moreover, the corporate’s total capital exceeds 10% of assets.
Vizo CEO’s presentation of March’s final data just seven working days after month end, is extraordinary. It is a disclosure practice documented with web posting, that every credit union might model for their members. The timeliness is a tribute to the credit union’s management. It is also a standard NCUA should emulate in its reporting of the three funds it manages for credit unions.
The Bad:
Coffee hit a 30-month high today. The commodity is up 16% so far this year. One of the reasons is a heat wave in Vietnam.
Cocoahas been soaring due to weather problems in Africa. Cocoa is up 150% so far in 2024. (source: stocks at Night by CNBC Pro April 11, 2024)
The Beautiful: Eclipse Pictures
From my driveway by Luis Escalante who was repaneling my workroom in Bethesda, MD. Luis used my eclipse glasses to cover his camera lens.
From the shores of Lake Ontario by Scott Patterson, CEO Credit Union Student Choice.
His commentary on being in the moment: Clouds didn’t cooperate to see the sun much, but we did get total darkness for a few minutes. Very eerie. The expansive lake view let us watch the darkness line approaching across the water and then see the full daylight on land in the far distance. A thrilling experience.
I recently received a copy of a CEO’s description of a fraud/robbery event at the credit union.
The CEO’s summary was sent to all employees for two reasons:
To fully serve and assure any members whose accounts might have been affected by the event.
To convert the incident to a learning experience for the entire staff.
Here’s why the CEO believes full transparency matters:
“Whenever we take a loss I consider it a tuition payment. The least we can do is become smarter as a result of making that payment. We’ve already taken all actions to mitigate/manage the risk. Hopefully others can become smarter as well.”
In that spirit, here is his summary description of this very well-planned theft used with permission.
ITM Defalcation
Everyone should be up to date on the robbery that occurred in early March . Perpetrators placed skimmers on two of our ITMs in mid-February and removed them just over a week later. They captured the magnetic stripe data of all cards used during that timeframe, re-encoded vanilla gift cards and drained our ITM’s on a Sunday morning in mid March.
All affected member accounts were immediately made whole, and all cards were blocked and re-issued. We identified all member cards that were compromised and are almost through the process of blocking and re-issuing all of them.
The Secret Service and FBI joined local law enforcement and we are assisting their efforts as much as we can. A bond claim is being filed so we remain uncertain as to what net loss we’ll incur.
What’s Important
Several configuration and procedural changes were implemented immediately, a few more in the days that followed, with still other changes under consideration. What’s important is that no credit union system was compromised at all, we know exactly how the perpetrators did what they did, and are actively taking steps to mitigate any future loss exposure. The perpetrators did not obtain any personal identifiable information (PII) such as name, address, account number, social security number, driver’s license number, etc.
Rapid action was taken to both replace any funds taken from member accounts and to prevent a repeat of this in the future. Everyone in the financial centers and contact center did a great job interacting with impacting members.
Everyone a Risk Manager
The incident was not a “local” gang. This theft was perpetrated by professional thieves who move quickly from state to state. Collaboration is a credit union advantage especially when a CEO is shares his “learning experiences” with his peers. Thank you.
Who do members turn to when they believe their credit union is not responsive to requests for greater transparency or accountability? These situations can arise around bylaw interpretation, board oversight, and election conduct.
Following are two examples of members’ interacting with their state regulator when they believe accountability is lacking in credit union conduct.
A Live Hearing-NOW
The first is a hearing of the North Carolina Credit Union Commission at 10:00 AM EDT today. Several members have sought clarification of the regulator’s approval for bylaw changes, especially those that affect the board election process. The toll free call in number is 1 (984)-204-1487. The access code757767261#.
There are thirteen items on the agenda, but the primary one is an update by the state administrator, Kristina Ray, on all areas of her responsibility. The ability to listen to a live state update is an important opportunity not just for North Carolina charters, but for all credit unions who are interested in the state and federal oversight process.
A Member Complains- the Regulator Responds
A reader sent me a March 18, 2024 article form the Lost Coast Outpost titled:
The story is a press release from one of the candidates for Coast Central’s board. She filed a complaint with the California Department of Financial protection over the credit union’s failure to release vote tallies for the 2024 board elections.
As a result the credit union posted the vote totals for all candidates for the most recen two years with the Chairman’s reply:
“In response to members requests at the annual meeting and in the spirit of enhanced transparency and goodwill, we have taken the additional step of posting the vote totals from the previous year on our website. We hope this action demonstrates our commitment to transparency and our dedication to addressing the concerns of our members.”
Prior requests to the CEO for details of the vote had been turned down.
The complaint was filed by Carrie Peyton-Dahlberg who wrote the press release for the local paper. The posted results showed she had come in fifth place just 172 votes behind the fourth place elected candidate in the 2024 election:
Matt Wakefield: 1,641 votes (73.1%), elected to a 3-year term
Terry Anne Meierding: 1,600 votes (71.3%), elected to a 3-year term
Ron Rudebock: 1,520 votes (67.7%), elected to a 3-year term
Dane Valadao: 1,346 votes (60.0%), elected to a 1-year term for the remainder of a 2023 retiree’s term
Carrie Peyton-Dahlberg: 1,174 votes (52.3%), not elected
In her commentary “she urged Coast Central member-owners to use their comment cards to ask for further progress, such as publicly announcing board vacancies, revising board election rules so they don’t hinder election outreach, and changing the board appointment process so that future vacancies can be filled in a way that is more representative of community demographics.”
“Coast Central is moving in a good direction, including releasing these numbers, putting 2024 election reminders in each branch and making sure that its ballots were sent in clearly labeled envelopes. All of these are big improvements over the January 2023 election, and I hope this is starting a new trend.”
“Bit by bit, if member-owners stay involved, we can encourage Coast Central to move further down this path of listening to the people who own it.”
Democracy Takes Work
Releasing the actual votes in a member election would seem to be a fundamental requirement, a no-brainer. The California regulator seems to agree that members are entitled to know the actual votes cast in an election. That may seem like a small step, but is still not followed in all credit union merger and board elections-whether for state or federal charters.
This California precedent matters. Democracy can be a contagious activity. It is also a participant activity, not a spectator sport. Carrie Peyton-Dahlberg has done every member-owner a service by raising this issue of election transparency in her credit union. Hopefully, all regulators will soon see this fundamental accountability for a democratic process the same way.
Today is Maundy Thursday of Holy Week. The day of the Last Supper and Jesus’ arrest in the Garden of Gethsemane.
Events on this and subsequent days include two intense examples of human motivation not limited to strictly spiritual contexts. Rather the story shows how any individual might react to events in their own life.
Prophets and Honor
Every social system has ways of recognizing the successful and the benefactors of their profession. In credit unions a major event is the Herb Wegner dinner, the occasion for presenting lifetime achievement awards to honor selected leaders.
These traditions salute individual’s values and/or performance that fulfill the goals of the industry: profit, service, innovation, growth or even longevity. Some goals are very tangible, others more qualitative.
Those Without Honors
But whose contribution does not get honored? The topic is raised at least twice in the New Testament:
In Mark 6:4 Jesus said to the crowd, “A prophet is not without honor except in his own country, among his own relatives, and in his own house.”
And, in Luke 4:24 (English Standard Version 2016): “Truly, I say to you, no prophet is acceptable in his hometown.”
Why this disbelief? Does familiarity breed contempt? Are we skeptical of any special insight let alone prophetic wisdom from persons we know well, have worked with over years. and who seemingly share the same experiences as everyone else? Why should one peer’s views be trusted over another’s?
There is an inherent caution to see those among us, whom we know well, as having special insight versus merely expressing a different opinion. Persons, often outsider who focus more on the message, are often more inclined to listen to these singular views.
Ordinary people can have extraordinary wisdom. Sometimes their outspokenness make them unpopular with those in authority or leadership. The “prophetic voice” is uncomfortable. It challenges current shortcomings often with a passionate hope for a different future. For those who are being challenged, this passion feels like anger.
I am not referring to the purveyors (often consultants) of innovation who promote operating improvements. The prophet’s concern is more deeply rooted in fundamental meaning and purpose.
The question for credit unions is, are there any prophetic voices challenging local or national priorities today? Who might they be? What is basis for their critique?
And if we can name none, what does that say about the state of our “movement”? Has consensus trumped wisdom?
The Thirty Pieces of Silver
A second example routinely pulled from Maundy Thursday is Judas’ betrayal of Jesus in the Garden for 30 pieces of silver.
Think of how often this metaphor is used to accuse someone taking an action for monetary or other rewards seemingly to betray their personal beliefs.
Rev. Megan Brown takes a more nuanced view of Judas’ motivation:
“Judas was not a peripheral bystander, but one of the twelve, the inner circle of disciples who had accompanied Jesus in his ministry and in a shared, communal life together.
Surely Judas knew the implications of his actions. Surely, he knew that the chief priests and the elders were growing weary of this rabble rouser, Jesus, and that they wanted him gone. This exchange, and the kiss that follows later are ominous moments in the life of Jesus and his followers. They leave one wondering about Judas’ motivations. “
Judas was a believer. Some have interpreted his action as driven by deep disappoint that Jesus was not radical or bold enough in his Jerusalem journey. The march from the Mount of Olives to the Temple should signal a rebellion against Roman rule, not a pacificist call to turn the other cheek.
Or, maybe he sensed that the multiple political forces mobilizing against this upstart rabbi from Nazareth were becoming too strong; so he decided to go to the other, more likely “winning” side.
Perhaps he was emotionally confused by the historical intensity of the Passover remembrance, the increasing crowd appeal of Jesus and the growing immanence of a life-making choice.
What we know is that Judas deeply regrets his actions, attempts to return the silver coins and commits suicide.
Judas shows us the very human side of intense hope and belief. Is this a movement that will go in the directions I believe it should? Is there another option to this leader’s course of action? How does one express dissent if convinced current directions are not the best?
How many initial “reformers” give up their quest from exhaustion, just to get on with life, and be comfortable with their peers?
Whether Prophetic Voice or Judas?
All movements have both personalities in their adherents. We all might cite leaders who took courageous stands or whom we believe compromised their duty to their followers.
That is what makes leadership so critical, and often controversial. It is also what makes public dialogue so vital.
We live in an era where there is continuing reinterpretation and debate after millennia about faith, whether Christian, Jewish, Muslim or just a value-centered life. While many believe that truth, when proclaimed, is universal; even some would challenge that assumption.
The one common approach that all faith and other “movements” followers have ultimately taken to succeed, is to pursue these issues in community. People aligned with one another agree to listen and learn together how their differing perspectives can arrive at common purpose or priority.
The Necessity of Community
Scott Galloway has put the power of relationships in a much broader context in his precent post Mammal.ai.
“Within and across species, relationships are essential to surviving and thriving. . .
“Humans have speedballed the power of relationships. Physically we are weak, slow, and fragile, with mediocre senses and absurdly long infancies. Yet, thanks to our superpower of cooperation, we’ve dominated our environment and become the apex of apex predators. There are more birds in captivity than birds in the wild. . .
“We are wired to seek and sustain relationships and cannot survive without them. The future of the human race won’t turn on space travel or climate tech, but on our ability to attach to others. A sense that we matter, that we can call on and be called upon by others to ease burdens and celebrate joy.”
It is not coincidence that the last moments of Maundy Thursday’s Biblical events were spent in community. Christians call it The Last Supper.
Music for Holy Week
Stabat Mater, by Antonio Vivaldi (1712). There have been many beautiful settings depicting the scene of the Mother of God standing in sorrow at the foot of the cross.
Oscar Abello is the senior economic writer for Next City. His focus is community initiatives that bring opportunities to those left behind by existing financial options. New credit union charters are an area of special interest.
The announcement of this new charter’s background has been reported by the credit union press. Abello’s story focuses on the difficulties of the process. Here are some of his observations:
Chartering a new credit union today is like traversing a long-lost trail through the woods, one that used to be well-traveled but is now overgrown, littered with fallen trees and other obstacles no one has had to navigate in many years. Prior to 1970, there were 500 to 600 new credit unions chartered across the country every year. After a steep decline to near zero, the numbers have never recovered. Over the past 10 years, fewer than 30 new credit unions have been chartered across the country.
New Credit Union Charters
The annual number of new credit union charters issued nationwide by the federal government, as published in the annual reports from the NCUA.
According to Inclusiv, a network of credit unions that focus on community development, minority credit unions across the country are closing at the rate of one per week, making the new Arise Community Credit Union’s chartering even more urgent if that trend is to ever be reversed. (Editor’s note: all credit unions close at a rate of more than three per week). . .
Arise hopes to fill in the gap left behind by other more conventional banks and even other credit unions. Predatory lenders have jumped into the gap left behind by the retreat of the mainstream banking system from certain communities. African Americans are twice as likely to live within 2.5 miles of a payday lending storefront, compared with all Minnesotans. . .
Chartering a new credit union is a huge lift. It’s been nearly eight years of organizing for Arise, but it’s not uncommon for aspiring credit union organizers to take multiple years between initial conversations to raising startup capital to finally getting a new charter. The Association for Black Economic Power also had to deal with a leadership transition along the way — it’s now led by Debra Hurston. The new credit union has its own CEO, Daniel Johnson, who has deep family ties and professional ties to the Northside of Minneapolis.
It would have been easier — and quicker — for Hurston if her group just brought in an existing bank or credit union as a partner organization to provide access to credit and basic financial services to the Northside.
But Hurston says in surveys, town halls and just informal conversations over the years, the Northside’s desire for its own institution has only gotten stronger.
“The mistrust in the banking community, it’s not a small thing, and it can’t be fixed overnight,” Hurston told me last year. “We’re starting from the wrong spot…if I have to protest in front of you to make you treat me right. Something’s not right about that. So no one from our communities has ever asked me if we should just partner with a larger bank.”
Insight for Those Who Care
Abello’s reporting should be a boon to the credit union community. For as Robert Burns wrote of this ability to see what others may not:
O wad some Power the giftie gie us To see oursels as ithers see us! It wad frae mony a blunder free us, An’ foolish notion: What airs in dress an’ gait wad lea’e us, An’ ev’n devotion!
Music For Holy Week
Christ on the Mount of Olives, by Ludwig van Beethoven (1803)
This month the Congressional Budget Office (CBO) released a 27-page report analyzing the Federal Home Loan Bank System.
The significant chapters include an Overview, Financial Condition, Subsidies and Risks.
The FHLB system is the largest lender to credit unions. Hundreds of credit unions have capital invested in individual banks and rely on them as critical partners for liquidity and ALM management. At 2023 credit union borrowings reached a peak in the system’s history:
The Central Liquidity Facility
How can the cooperatively owned, tax exempt FHLB, created to serve the savings and loan system, thrive with credit unions while their own funded CLF plays no role at all? Certainly, the borrowing demand is there.
At February 2024, the CLF reported $913 million in total assets, equity of $862 million and one loan for $1.0 million.
A 5% return on the fund’s retained earnings of $42 million would pay all CLF’s operating expenses. It’s 4th quarter 2023 dividend of 4.62% trailed the overnight market by .75%. Why aren’t members even receiving a market return on their shares?
More importantly, what can credit unions learn from the CBO’s analysis and the system’s response?
The CBO and FHLB Summary
Ryan Donovan, CEO of the Council of the Federal Home Loan Banks posted a reply #FHLBank to the CBO report: “it does a fair job of acknowledging the many things we have been saying.” He singled out a number of key success factors:
Private investors — not the government or taxpayers — bear the cost of any “subsidy” associated with the FHLBank system.
The FHLBank system plays a valuable role in providing liquidity to its members, particularly during times of market stress.
The benefits the system provides accrue not only to the members but to borrowers and the public. In fact, it says,
“Lower financing costs on FHLBs’ debt are passed along through lower rates on advances than members would receive when borrowing in private debt markets. In turn, competition leads members to offer lower rates to borrowers.”
“Because members are both owners and customers of FHLBs, almost all of the subsidy (after afford-able housing payments are deducted) probably passes through to them, either in the form of low-cost advances or, to a lesser extent, through dividends.”
The existence of the FHLBank system “reduces mortgage rates and provides liquidity to the housing market, particularly during period of financial stress.”
The FHLBank system poses very little risk to taxpayers. If one accepts the CBO’s figure of $600 million in federal tax exemption, the roughly $1 billion that the FHLBanks will distribute in affordable housing and community development grants this year seems like a very good investment for taxpayers.
Donovan concludes: The report stymies critics . . .because CBO makes clear FHLBanks pose little risk, they provide significant public benefit, the implicit guarantee is perceived by bond investors and the benefits of the system flow through to borrowers and communities.
The FHLBank system is poised to deliver $1 billion toward affordable housing and community development . . .We’re engaged every day with our members and other stakeholders on how those resources can be used most effectively. (end)
All these housing and community benefits should be possible with the CLF. Why isn’t this happening? What might a CBO report on the CLF say? Would anyone care?
Music for Holy Week
With each daily post I will be adding excerpts from some of the great classical music inspired by this Holy Week. Today’s is the “Resurrexit” from Berlioz Messe Solennelle.
One of the extraordinary advantages of a credit union charter is the choice of either a state or federal license. This choice has been a critical aspect in credit union’s expanding role in the economy and responding to changing market conditions.
So when I recently received a letter from the CEO of Harvard University Employees Credit Union (HUECU) announcing a members’ special meeting to approve a conversion to a federal charter, I was very interested in why the change.
Was this a one-off situation or an indicator of an imbalance in charter choice in Massachusetts?
A Current Study
HUECU reported $1.2 billion in assets and loans of almost $1.1 billion, serving 55,000 members at December 2023. Most operating ratios are in a stable to strong range: Net worth 8.5% Delinquency .65%, ROA .28 and operating expenses of 2.74% of average assets.
The loan portfolio continues its healthy growth in three distinct components: an alumni credit card with $44 million in balances, a $252 million student loan portfolio and $721 million real estate loans.
The CEO’s cover letter included five pages summarizing the pros and cons for the action:
Advantages:
Reduces multiple credit union exam and compliance requirements;
Potential flexibility with various initiatives, especially branching and CUSO investments;
MSIC insurance for all deposits above $250,000 will be continued, but is no longer required;
Easier to open branches outside the state;
A redefined and broader field of membership with a multiple FCU common bond to seek growth outside Massachusetts:
No state sales tax, lower supervisory fees, and elimination of state CRA compliance.
Disadvantages:
The costs of conversion including signage, changes in legal documents, and consultant’s fees totaling as much as $600,000;
Loss of local regulator accessibility and responsiveness;
Limited ability to influence national regulation and issues;
State law offers greater interest rate loan flexibility and longer maturities on other loans.
The special meeting requires a quorum of 18 members and a majority of votes by ballot or in person in favor to approve the conversion.
The CEO’s cover letter states the members will see no operational differences after the conversion.
In addition to my membership in the credit union, the CEO Craig Leonard encouraged members to call in with questions. I was given his email, and we talked for an hour this past Monday.
He outlined three priorities which he hoped to accelerate with this step.
Faster growth, beyond the Harvard community into other New England states and perhaps Florida;
Immediately draw in more savings especially as loan demand has always been plentiful—with an initial focus on the small business market;
Retain the Harvard name (Harvard Federal Credit Union), its strong brand and the relationship of its employees to the University and its benefit plans.
Craig said this topic had been raised several times as he perceived a lack of a “level playing field between state and federal” charters in Massachusetts.
The state is home to approximately 135 credit unions that rank it as the 12th largest in total credit union assets. Of this total, 50 are state charters.
Both regulators have approved the credit union’s business plan forecast. It is now up to the members. Craig holds periodic town hall meetings with members because he believes “I work for you.” This Special meeting is March 26 at the Harvard Faculty Club.
While this may be a unique event, the balance and perceptions of charter advantages are an important metric on the soundness of the credit union system.
Whenever state or federal regulations become less responsive to their credit unions, charter change is a real option for many. It is one means of keeping regulatory accountability. It is also a spur to keep the multiple state regulatory systems, individually much smaller than NCUA. responsive to their local charters.
The State of Dual Chartering
The ability to convert from a state to a federal charter and vice versa remains a uniquely cooperative option.
In 2023 there were twelve charter conversions. Nine state credit unions (from seven different states) converted to FCU’s, two federal charters went to state and one state chose ASI insurance versus the NCSIF. The longest serving state charter was Mississippi’s Mutual Credit Union, founded in 1931. Two other Mississippi credit unions also converted to federal.
A choice of share insurance is also permitted in ten states which allow their charters to choose between ASI cooperative insurance or the NCUSIF. This option remains central to a real choice as well as validating the underlying the 1% deposit design of the NCUSIF.
Dual chartering option creates a check and balance, even positive competition, among regulators. It provides an opportunity for a credit union program as some states still do not have a charter option. However, the state system can often change more quickly to meet new market and member needs when response by NCUA may take years or in some situations, never happen.
The dual system is a critical aspect of credit union history. The first credit union charter was in 1909 for St. Mary’s Bank. Until the federal credit union act was passed in 1934, only state charters were available, and then limited to about two thirds of the states.
These state “startups” created multiple charter variations and operating authority. As there was no single example, charter details and oversight were sometimes drawn from already operating financial examples. For example, proxy voting is authorized by nine states, drawn from mutual S&L practice, but not an option for federal charters.
The Turning Point in Dual Chartering: The creation of the NCUSIF
The choice of either a fed or state charter from 1934 onward led to a 30-year period of rapid chartering across America. The states were often the laboratories for change, innovation and system leadership with local leagues and chapters forming potent political state-wide organizations. CUNA itself was an organization of state leagues, not individual credit unions.
The introduction of the NCUSIF in 1970 was led by a group of federal charters in the newly formed direct-member organization NAFCU in the late 1960’s. CUNA opposed this mandatory insurance requirement and supported multiple state-chartered alternatives to the federal program.
CUNA’s fundamental concern was that mandating federal insurance would inevitably create a single regulatory system for all charters. The diversity and choice created by dual chartering would be negated, if not lost all together.
The NCUSIF Override of State Options
This concern that the insurer could become a single regulator had a very quick example. Bob Bianchini, who was simultaneously President of the Rhode Island League and a member of the state legislature, encountered such an issue in the mid 1970’s.
NCUA refused to insure the NOW/checking accounts authorized for Rhode Island state charters. In response, the credit unions formed their own state chartered deposit insurance corporation. In Bob’s words:
The NCUA’s decision refusing to insure Rhode Island credit unions that offered checking account services to its members led to the creation of the private insurer RISDIC .. Seems to me there was never any specific law that would have led to that decision, but rather simply pandering to the commercial banking industry which claimed checking accounts fell strictly under their purview ..
RISDIC would have never gotten off the ground if Rhode Island credit unions that provided checking accounts to its members, could have obtained NCUA insurance.
The other RISDIC insured institutions were Loan & Investment companies. privately owned for profit financial institutions and it was one of those organization’s demise that led to RISDIC’s failure.
NCUA’s insurance power has led to other differences in regulatory interpretations. The insuring requirement has also been a major hurdle for groups seeking new charters.
Ultimately the major advantages of state charters continue to be their more accessible local regulatory oversight and the capacity to respond faster to changing market conditions.
The Final Word
The S&L crisis in the mid 1980’s resulted in that system’s failure of its state sponsored insurance options. It led some credit union leaders to back away from the credit unions’ insurance choice.
In a 1986 speech to the credit union league xecutives (ACULE), former NCUA Chair Ed Callahan, now CEO of Callahan and Associates spoke to the group. He described the importance of choice saying that “the insurer is the regulator.” His words are just as true today. Scroll down to the video.
