Category: Credit union History

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Some Events You May Have Missed

Several events you may have overlooked.  I believe each has significance for credit unions’ future.

  • GESA credit union will purchase  the Salem based Oregon Bancorp at at purchase price of $43-$45 per share.  Prior to the announcement the bank’s publicly shares had traded around $27 or lower for the past year.

According to a Banking Dive article, this is the fifth proposed whole bank purchases by credit unions in 2026.  The report says there was a record 22 bank purchases in 2024.  The number. fell to 16 last year.

 

  • Bloomberg News reports the US 30-year bond yield is trading above 5% for the longest stretch since the beginning of the financial crisis in 2007. One factor is the US government’s detonating fiscal situation.  Total Treasury debt is $31 trillion or about the same size as US GDP.   Total debt was only $4.7 trillion in 2007. Interest payments on the debt not total $1.0 trillion per year.  This government borrowing is  occurring at the same time debt issuance in the private sector for AI and data center growth is expanding by hundreds of billions of bond and corporate borrowing.

 

  • Two days ago the House Committee on Financial Services held the first Congressional hearing on the Federal Home Loan Bank system in 15 years. The 11 regional Federal Home Loan Banks made $677 billion in loans to financial institutions  in 2025.  Two notes from this Next City’s The Bottom Line report on the hearing:

After Fannie Mae and Freddie Mac, the Federal Home Loan Banks are the third-largest “government-sponsored enterprise” created by Congress to support the housing market, ,  ,

Today, . .the nation’s largest banks and private equity funds on Wall Street have become the biggest borrowers from Federal Home Loan Banks — and recent analysis shows those large institutions no longer use those funds to boost their residential mortgage lending, as was the original purpose of the Federal Home Loan Banks. . .

The articles conclusion: Even if all the reforms discussed in today’s hearing were to pass, many communities won’t benefit from those changes without local banks or credit unions to make use of those changes.

And what has the CLF been doing to assist credit union mortgage lending?

The Rest of the Story

In and earlier post this week, I lifted a headline from a front page story in Credit Union Times April 22, 1992, “High Roller” Lifestyle called “contemptible” in NCUA Memorandum. Several readers asked for more details.

The opening paragraphs in a very. long account:

Former credit union leader RichardD. Mangone has been enjoying the kind of retirement many people dream about: frequent cross-country trips, first-class accommodations, top-notch entertainment  and more–all free of charge.

But Mangone’s “high roller” lifestyle was brought down to earth this month by court-imposed travel restrictions. The reason, according to National Credit Union attorneys, is that Mangone’s “life of Riley” has been at the expense of defrauded credit union members.

Since August 26, 1991, Mangone, most recently the president of Digital Employees Federal Credit Union, has been under a court order to limit his spending to $8,000 a month. The order was imposed to prevent Mangone from draining or transferring his assets while lawsuits are pending against him.

Mangone has been sued by NCUA, Digital Employees, and Berkshire County Savings Bank for his role in an alleged real estate loan scam.

The Article’s Relevance Today

Following several additional paragraphs, there is a related story with the title: Digital Members Set to Vote on New Board

So there was a time in the not too distant past  when the NCUA, the members, the credit union’s new leadership and the community stepped up to hold self-serving leaders to account.  Without leaders with integrity, governmental regulation and exams,  internal governance and leader accountability are just concepts, not meaningful checks and balances.

The coop system did have such individuals who rose to their responsibility in the past.  There was a credit union  press which published traditional investigative journalism. And in the present?

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Why History Matters-Three Past Same Day Headlines

Before the era of virtual media, credit union stories appeared in print. The most newsworthy were the front page leads.

Here is an example of on issues top news:

NCUA Suspends Salary Bonus Program

“High Roller” Lifestyel called “contemptible” in NCUA Memorandum

From Iron Wills to Silver Anniversary, NAFCU Turns 25

The front page picture was of a CEO holding a piggy bank in one hand during a speech at a CUES conference.   The speaker  compares the priorities of credit unions versus those of for-profit banks.  The CEO: Jim Blaine

If anyone can tell me the date and publication name, I will send them the only extant, actual copy of this critical chronicle of credit union history.

The issues and challenges remain very similar-high rollers, and NCUA costs-just the names of the players change.

Without a knowledge of the past, the movement’s leaders can become zombies-no past, no future, just present scares.

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Do Credit Unions Have Values?

At the Western CUNA Management Scoool, students are discussing the future of credit unions.  Is the cooperative system just another financial option for Americans or does it have a different public priority from its founding  and subsequent tax exemption?

Some assert what makes credit unions different is that the system is based on values.  Some would point to the seven or eight cooperative principles as one indicator of the difference from for-profits.

But can institutions have values?   America was founded on values, especially the freedoms and rights founders asserted were enabled  by democratic rule, that is the consent of he governed.

Are Organizations People?

The Supreme Court has repeatedly ruled that organizations (such as corporations and unions) are “legal persons” and possess First Amendment free speech rights. Landmark cases like First National Bank of Boston v. Bellotti (1978) and Citizens United v. FEC (2010) established that political spending and advocacy by organizations are protected forms of free speech.

But institutional design, or legal character,  do not guarantee virtuous conduct.  Individuals are the source for corporate decision making.   All organizations need individuals to participate and in some instance, to get their future back on track.  Even credit unions.

The Challenge of Power

Calling credit unions financial service providers is not incorrect, but the issue is why we believe that is credit unions’ defining characteristic.  The challenge is not that the description is wrong, but why is it the primary focus.

People can lead credit unions but may have their outcomes  set on the wrong things.  Some believe and act as if it the size of the balance sheet along with the supposed advantages of scale are the critical factors in credit union success.   Size denotes market power and can lead to market and financial dominance.

But credit unions succeed not with conventional approaches to market conquest, but with relational power.   That is the trust and service that promotes members’ financial well being.   Trust does not come in big or small packages.  It is present or not in an organization’s action.  A lesson Rudy Hanley used to guide his tenure at Schools First for almost 30 years.

Institutions don’t have values.  People do.  The responsibility for ethics and justice lie not in some abstract organizational concept, but  directly with the individuals who design, participate in, and regulate that system.

The democratic credit union governance can be an advantage in achieving this relationship power.  For democratic participation  should  enable constant debate to restate what ethical boundaries and values should be embedded in the financial rules of the game.   Is this how your credit union acts?

Discuss with your fellow students.

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Credit Unions and America’s 250th Anniversary

As we head to this Saturday’s national celebration, this week’s posts  put credit unions’ role in the context of the country’s ongoing pursuit of “life, liberty and happiness.”

The country’s fulfillment of its ideals has not been a straight line for either individuals or our collective accomplishments.  Independence and interdependence in our common life often seem at cross purpose.

Credit unions operate in an economy dominated by capitalist ownership and the incessant drive for financial success, individually and corporately.   The cooperative way is a decision we must actively choose for ourselves.

As one commentator observed:  It is almost impossible to turn away from what seems like the only game in town (political, economic, or religious), unless we have glimpsed a more attractive alternative. It’s hard to imagine it, much less imitate it, unless we see someone else do it first.

Cooperatives are designed to meet individual needs with collectively managed resources in a democratic structure.  Theory and practice unfortunately do do not always align in specific cases.  As in the country at large, credit unions must constantly strive to achieve their goal of enhancing members’ economic freedom.

Doing the Right Thing and  Me-First Ambitions

Credit unions’ ongoing challenge to be an alternative to the dominant ethos is not new.  It is a struggle for individuals in all generations as described in this story-poem.

Grandma Shorba’s Ragamuffin Stew

by Freya Manfred

During World War II, Grandma Shorba
handed plates of bread and meat to strangers
who asked for work in exchange for food.
After chopping wood and mending fences,
the lean, stoop-shouldered men went on their way.
“May God watch over them,” Grandma said.

I was glad I didn’t have to follow them
down the long train tracks silvering west.
I didn’t want to sleep beside a strange campfire
around the bend, in the next world.
But I worried how they’d survive, and asked
my parents if they could live with us.

My begging only made everyone nervous.
Maybe Grandma’s stories of The Good Samaritan
and the Loaves and Fishes weren’t true?
If I’d been in charge, I’d have asked those men to stay—
but Gramma, who trusted God,
fed them, then sent them on their way.

The Eternal Striving for an Unclouded Day

We all have a dream in which life’s contradictions are resolved.  A home where we don’t have to face all the ambivalent choices of life  This dream of perfection. of “a city on a hill”  motivated America’s founders.  Credit unions are one example of searching for this “home where no storm clouds roam.”

Credit unions are  a uniquely American accomplishment.  In just over 100 years  an alternative, member-owned financial choice is thriving in a system dominated by privately owned, profit making institutions.   And in doing so they constantly strive to bring  “unclouded days” for members.

(https://www.youtube.com/watch?v=CE3nN6IvlGA)

 

 

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Credit Unions & America’s 250th Celebration-History’s Lessons

Today credit union  momentum for the 250th birthday of America was interrupted by a Supreme Court decision. The 6  – 3 conservative majority ruled  the President had authority to fire members of independent agency boards established by Congress to be partially shielded from total Presidential direction.

The decision overturned almost 100 years of precedent. It means Trump’s firing of NCUA board mebers Harper and Otsuka will  be upheld by lower courts where the case is on hold.   Trump  may then choose to select two new board members to join his recently nominated Chair John Crews, a republican working in the Treasury Department.  Or he could leave the positions vacant.

This event and its conseqences will be greeted with mixed reactions by credit union supporters.

But history can also provide us perspective to the current moment.  And more importantly, point the way forward.

Not the First Time for President’s Firing NCUA Leadership

On March 10, 1976, Administrator Herman Nickerson, Jr. of the National Credit Union Administration testified before the Senate Banking Subcommittee on Financial Institutions (chaired by Senator Thomas McIntyre) regarding S. 1475. The hearing focused on proposals to restructure the NCUA from a single-administrator agency to a multi-member board.
Nickerson testified that a single-administrator structure left the agency highly vulnerable to political pressure, stating that under his “day-to-day” tenure “you don’t know whether you’re going to take a position that would be your last day in office or not”. He argued that a three-person board would provide better long-term stability and continuity for regulating federal credit unions. 
In the hearing Administrator Herman Nickerson, Jr. was asked about his vulnerability to being fired, and Senator Thomas McIntyre confidently responded by assuring Nickerson that “it would never happen”.
Merely two hours after the hearing concluded, President Gerald Ford summoned Nickerson to the White House and fired him without cause.
March 19, 1976 Office of the White House Press Secretary

————————————————————

NOTICE TO THE PRESS

The President has accepted the resign.,tion of Herman Nickerson, Jr., as Administrator of the National Credit Union effective upon the appoint ment and quaJification of a succes sor. He was appointed on September 15, 1970. There is no successor to announce at this time.

The Three Person NCUA Board Legislation Approved

Senator McIntyre was reportedly shocked by the firing. He used the incident as a stark, real-time example on the Senate floor to successfully argue that the NCUA must be restructured into a multi-member independent board to protect its leadership from sudden political retaliation. 
This hearing served as a major catalyst in the legislative shift that eventually established a multi-member, bipartisan board to govern the agency. 
(Sources:  Rosemary Hardiman, then a reporter for  CUIS, Gerald Ford Library, AI search for hearing summary)

Today’s Response and the Future of Credit Unions

The three person, independent NCUA board was intended to moderate the extreme policy fluctuations if every President could choose to appoint new regulators who would then implement whatever policy  priorities he wanted.
In contrast,  the theory supporting independent agency status was to ensure experienced, knowledgeable board members  would be appointed to protect and promote the public interest not  partisan political agendas.
Only two NCUA board members could be from the same party.  In theory this assured some public debate or even opposition in policy and agency oversight.
The theory worked for NCUA’s first two chairs, Larry Connell and Ed Callahan. Both were experienced state regulators with direct knowledge of credit unions.   While other board appointments would appear more like political sinecures, agency leadership was in expert hands.
The assumptions of industry expertise and apolitical Chairs ended with the appointment of Senator Roger Jepsen (defeated in a re-election effort) to succeed Callahan in 1985.  Rarely have future Chairs had regulatory or credit union experience with the exception of JoAnn Johnson from Iowa.
She had been Superintendent of credit unions for the state and joined the NCUA board in 2002, becoming chair from 2004-2008.  After returning to Iowa she was again Superintendent of Iowa’s credit unions until her retirement in May 2017.
The vast majority of NCUA board appointments have had little to no credit union affiliation.  NCUA’s board appointments have been filled with former congressional or agency staff members seeking continued federal employment. Some have had strong professional credentials (McWatters) but virtually none had prior credit union associations or knowledge.
Credit unions have long abandoned efforts, individually and as a system,  to identify and promote knowledgeable individuals for NCUA positions.
 Both democratic and republican administrations have used NCUA board seats to reward political loyalists versus those with credit union credentials.
In pactice the theory of the independent agency with expert leadership acting in the best interests of credit union members has rarely happened  Instead  NCUA board appointments have become a backwater for those seeking the prestige, or sometimes the spoils, pf a political appointment.

The  Future of Federal Credit Union Regulation

Just as in 1976, there will be a reaction to the current political excesses and  NCUA’s increasing impotence  shaping the future of the cooperative system.
The Agency may become a department with a single administrator within Treasury, like the OCC.  The NCUSIF merged with the FDIC.
The future may be a more cooperative and innovative state support system.
NCUA may be caught up in a sweeping federal government reform post election or post Trump.
Following yesterday’s precedent in this week leading America’s 250th ,  it is useful to express our future hopes for the country and cooperatives in music.  While this was not my original choice for today, it seems to be one approach to future events when  asking  Who shall wear the starry crown?.
(https://www.youtube.com/watch?v=d2LjgalcsVI)

 

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Credit Unions Learning from America’s 250 Celebration

This week ends with the 250th July 4th national birthday celebration.

It is a moment of community consequence for a country founded on ideals and a vision begun  with the words all men are created. .  .

Our implementation of this founding declaration has been uneven. Even with ever increasing economic prosperity that leads the world.

So this milestone celebration creates ambivalent feelings for many who believe our vision is falling short in critical areas of our national life together.  For example, those whose families came to America from far away and many who believe immigration has been a source of America’s international standing and internal strength.

The Credit Union Parallels

Likewise there are strong parallels in today’s credit union story which spans  less than half the country’s.

The movement was founded on an ideal that cooperatives could be an alternative to the for-profit capitalist motivation which viewed  consumers as profit centers.

Credit unions’ financial success is impressive.  These institutions are now the second largest depository system in the country with  $2.5 trillion in assets and generations of members numbering in the tens of millions.

However, as financial success is achieved, some ask if the system has lived up to its aspirations.

For in America today, as Jim Blaine stated decades ago, “those who have the least or know the least, pay the most for financial services.”

There have been significant contributions by the movement’s founding  mothers and fathers that have given credit unions a legacy to be proud of and a system that can do great things for individual members and  their home communities.

But as in the country’s celebrations, there are concerns that the founding ideals are being lost.  There is increasing evidence that in some credit unions, and as common practice in many, the impact  is to actually widen the gap between those who are well off and those  who live on each pay period’s income.

Reasserting the Things that Make Us Special

To address any ambivalence you may feel  about either our country’s or our movement’s histories, or current challenges, I want to select music that honors our aspirational goals as a nation and as individuals.

When words are sung, their meaning is amplified and transformative.

Visions never die.  They lie dormant until leaders arise to challenge our ambitions, to call us to our higher selves and  to ignite hopes that spark everyone’s individual pursuits–of life, liberty and happiness.

A Credit Union Anthem

Here is an anthem for the credit union movement’s collective purpose: Hard Times Come Again No More.  Written by Stephen Foster in the 1850’s, it addresses the cycles of economic reality and the collective willingness to help each other when these circumstances occur.

(https://www.youtube.com/watch?v=5Fddr0CTflQ)

 

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Dollar’s Merger Claim: Merger Guidance From the Experts

Garrison Keillor of Prairie Home Companion fame, is taking his radio performance on the road around the country in one night stands.

Recently he was in Des Moines and drove across the Iowa farmscape prompting this post:

It was dramatic to drive for hundreds of miles and see no barns or silos, no windmill or grove around a farmhouse, the Grant Wood landscape of rural America, and see what corporate industrial agriculture looks like. It looks like Siberia. A place you send people as punishment.

A culture is slipping away that raised some fine self-reliant relatives of mine like my Aunt Eleanor who could handle a rifle, hitch up horses to a wagon, bake bread, plant a garden, throw a baseball, kill a chicken, sew clothing from a pattern, do basic repairs, and speak her mind in firm declarative sentences. The farm made her a strong woman and I say the world could use more like her.

Well, cultures are mortal, just as we are, and it’s a shame when the worthwhile peter out and the worst prosper, such as the culture of consultancy. Some of the stupidest managers I’ve encountered in my life now hang out their shingles as consultants prepared to advise on strategic planning and team building, who when I knew them were adept at strategic blather and creative imitation. I believe that AI will devastate their ranks and soon we’ll encounter them at drive-up windows, consulting on condiments and large vs. medium shakes.

Mortal Cultures

I found myself reflecting on the idea that cultures are mortal in this obsevation  which Keillor titled Looking Around, Not Looking Ahead as I read the following ad via a virtual credit union daily subscriber list:

Dollar Associates has successfully guided over 400 credit union mergers in their 22 years in business.  As their tagline says, “We know credit unions backwards and forward.  Especially forward.”

Mergers as a so-called growth strategy began in earnest following PenFed’s national McKinsey-like strategy of seeking mergers nation-wide in 2016.  The first big success was acquiring Fort Belvoir FCU,  a local well-entrenched competitor.  The standard gambit was promises of a better future combined with multi-year sinecures for the CEO, plus bonuses for senior management, three-year employee commitments or large separation payments to staff.  And of course, nothing for members except a bigger organization.  All details wrapped up with non-disclosure agreements including non-disparagement clauses for everyone who cashed out.

The solicitations were overt.  And PenFed’s over two dozen mergers from a post office credit union in Wisconsin to a Sperry Associates in New York did not add a single member, loan or asset to the movement.

But it changed the merger game from historical rescues of faltering credit unions in return for expanded FOM’s by regulators, into a wide-open pursuit of non-organic growth strategies.  Mergers looked easy, quick and most importantly, the continuing credit union gets paid in-free capital.  Just for taking over a business you already know how to run.

These are not market based transactions despite occasional regulatory utterances suggesting the same.  They are private deals, done in secret without any member input or notice, documented by signed “definitive agreements” and then sprung upon members. Often accompanied with a PR barrage with videos of the two CEO’s proclaiming a new promised land all executed without any member input or knowledge.

This is the merger world today.  Dollar claims to have “guided over 400 credit union mergers” which it would be fair to assume the bulk have taken place in the last decade of the movement’s merger frenzy.

Not Business Combinations But Political Events

These transfers of control of an entire credit union’s operation, net worth, facilities and its legacy franchise value are not business transactions.  The only “negotiations” involve how much the selling CEO and senior staff and sometimes board members will gain from the deal.  If there are enforceable agreements about future commitments, they are never disclosed or done so with the caveat “if conditions permit.”

While members have a say in all states except Illinois state charters which use proxy voting, the process, transparency and information for informed consent is a charade. Almost all votes are returned by mail ballot with the official Board Notice letter urging member approval—as the event has already received regulatory blessing, subject only to the member vote.

The Need for Facilitators and Go-Betweens

Because these are political events not real business transactions, facilitators are needed.  Brokers to quietly solicit candidates, test the waters and make introductions. Accountants, “strategic” consultants and lawyers to draft the private definitive agreements, Most importantly, external professional experts, such as former regulators, to assure boards, for whom this will be a singular and the final event of their tenure.

These volunteer board members need external assurance that they are doing the right thing, because it is irreversible. The so-called professionals will assist getting the necessary regulatory sign-offs-just look at our track record of 400 cases. Trust us, everybody else is doing it as well. You are in good hands.

The facilitators all take their cut of the pie, the vendors who are eliminated get cancellation fees, and staff promised greater professional opportunities. The member-owners receive nothing and lose their accumulated net worth. Most consequential is that  the legacy relationships and goodwill which built the credit union as a community resource to be paid forward for future generations is now gone.

“Looking Backwards”

Invoking Dollar’s hindsight, almost all mergers in this decade long period of private deal making have been of credit unions at least three generations old, with long serving records of meaningful community relationships and contributions.

Per Dollar’s claim, the industry now has lost 400 independent charters, their several thousand volunteer board members, and the CEO and other professional community leadership roles.  Their local and state political standing is gone.

Most importantly their function as an economic intermediary, taking the savings of local members and reinvesting back into loans for those same owners, no longer exists.  For now all these functions and responsibilities are controlled by a new board, often without any connections or knowledge and whose priorities are set following their historical ties and priorities.  The merged entity has no standing or recourse as the new brand and culture assert their sway and  operational model over the merged field of membership.

“Looking Forward”

The facilitators and apologists for this cooperative self-annihilation claim they are positioning credit unions for the future. Consolidation is inevitable, just let us show you the charts.  You need to get ahead of the game before all the “best” options (read payoffs) are gone.  Or worse, there might be a new regulatory change that would make it harder to get your cash prize payout.  Or worse, you may have to be more transparent in your intent and process.

Let’s be clear.  No one knows the future, Change is inevitable.  The current culture and political example of getting yours while you can, may indeed continue.  The animal spirits of capitalism, the drive for monopoly power may infect credit unions so thoroughly that the industry goes the way of the S&L’s.  The big go away.  The small and traditional, still around, but humble, toothless in all except a few communities and a charter neither sought by individuals or desired by the public

But change could also come in the form of a backlash–public, political or regulator.    New coop regulatory  leadership might start asking questions such as,  what is the public duty credit unions owe in return for their federal tax exemption?  What is the common good member-ownership is supposed to inspire?  Are credit unions following their own principles of governance and historical values?  Has cooperative leadership been usurped by self-interested individuals oblivious to their inherted legacy, current members’ welfare and their future generations?

The credit union system knows full well what this period of merger manipulation and self-dealing entails.  For at the same time credit unions are actively buying whole banks as part of their “external growth” strategies.   And in these events, the owners get paid out for their common equity interest and then a premium on top as credit unions can only pay cash, not stock to bank owners.

Certainly, one potential path to the future is the Dollar model.  The firm claims 400 success points to prove it can get the job done.  Cash out now, forget the past legacy, take the money and let someone else worry about the future of your members.

Will That Be With Large of Small Fries?

I may just be like Garrison Keillor surveying the loss of the family farms to the industrial agriculture industry today.   I would prefer a different, more diverse set of credit union options and leadership voices drivng the future.   But sometimes the next generation’s responsibility may be to clean up past excesses before creating something that inspires again.

 

 

 

 

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A 1982 Credit Union Leader’s Video “To All the Girls I’ve Loved Before”

I just received this video of six credit union state league Presidents recording a song in a studio.

The six state CEOs will be familiar to many CU veterans.  From left to right they are: Tony Schumacher , Gene Farley. Carroll Beach, Brad Murphy,  David Dinning and Bob Biancini. 

Note: Skip ahead to 17 seconds to begin the video.

To All the Girls

The Video’s Story (from a participant)

I thought you might get a kick out of this . The video was shot in 1982 I was at a meeting in New Orleans with a number of Credit Union League CEO’s . I do remember our gang walking from our hotel to a restaurant, “The Court of 2 Sisters” (still in business!) On our way we passed this recording facility where you could watch people making mostly silly videos.  The general consensus was, why would anyone embarrass themselves like that ?

On the way back from the restaurant after consuming about a bottle of wine each, this was the result.

The Significance of 1982 and State League Directors

The song’s lyrics might not pass muster today, but you have to admit they put on an excellent show.  But I think it tells a lot more about credit union leadership than the changing culture attitudes on relationships.

In this year of credit union history, the state league system was at its peak strength.  In some states credit unions were so numerous that there were even competing state level  organizations.

Leagues were vital pillars of the movement in this formative decade as credit union entered deregulation.  State charters were the only option until 1934.  Leagues were the driving force in the federal law pasage providing proof that credit union could be run by ordinary people.  State leagues were the vital organizers of  both federal and state charters.

At this moment there were 16 state insurance options along with the NCUSIF.  States were the incubators for change, innovation and creativity. These included activities off limits to FCU’s such as field of membership flexibility, share drafts, home mortgage loans, ATMS and  regulatory oversight and access. NCUA had become a three-person independent agency only in 1977.  The Agency was on its second chair, whereas some of these local leaders had served decades.

The state leaders founded CUNA at Estes Park.  CUNA was headquartered in Madison with a regulatory office in Washington DC.   Through ACULE these leaders coordinated legislative priorities and national leadership.  The corporate network was supported by the leagues initially with cross board membership which NCUA ultimately banned.

The system also spawned other organizational support groups with credit unions of similar fields of membership.  For example the League of IBM credit unions, Educational. Credit Union Council, the Airline Credit Union Association, and many more with like sponsors.

The results were a strong, grass roots state level system rapidly expanding their growing  role in communities in every state.  The movement’s success and the system’s support structure were closely linked and interdependent.

The Illinois Example

Leagues provided support services, education and chapters to promote local social and political interactions.  As a state supervisor from 1977 to 1981, I spoke at chapter meetings, annual meetings and worked with the league when examiners found problems. We would ask if someone from their two dozen or more field representatives might help out as we pursuded the shared the goal of a sound system.  For in 1977 there was no mandatory share insurance requirement for state charters.

Illinois had the largest number of credit unions of any state with over 1,100 active charters.  We wanted the Illinois system to be a national leader in serving Illinois residents. When the Suburban Bank Group sought a charter for  its employees, we granted the new charter. Then we hired the energetic person who organized the effort, Wanda Mallow,  to promote new charters across the state.

One of those new charters went o Baxter,  the medical services company.   The company then hired Rex Johnson who was deputy supervisof of DFI’s Chicao credit union office, to be its first CEO.

Through NASCUS, we learned  how other state supervisors in Texas, Michigan and California operated. NCUA was rarely present on the ground,

Together the League led by Dick Ensweiller and the Department recodified the Illinois Credit Union Act in 1979 introducing deregulation and flexibility for a changing financial marketplace.

The Cooperative System Today

The shape and character of the movement’s system is very different today.   Leagues have merged,  The number of credit unions has fallen from over 16,00 in 1977 to 4,300 today.   Large credit unions operate on their own, some with national ambitions in multiple states.

CUNA moved its operational leadership to DC and focused on national advocacy withdrawing from many support services often offered through the leagues.

Large credit unions dominate the industry. National issues of technology adoption, CUSO business partnerships and regulatory responsiveness  leave many smaller organizatons feeling left out or  irrelevant.  There is no system support for new charters,  In fact the opposite is happening with mergers of long serving, sound credit unions a seeming priority for leaders.

The strong capital ratios averaging over 11% and with long serving safe   franchises  have caused many credit unions to rely less and less on system support, except as an independent  business decision.  CEO turnover at both credit unions and support organizations has caused the shared efforts from the past to be just memories.  NCUA has been leaderless for over a year.  Since the 2008 financial crisis, it has strived to be “independent” of credit unions or as one board member more bluntly stated, don’t look to Washington for advice.

The critical question facing the movement is whether a support system is even necessary and if so, for what purpose.   The shadows of many of these groups still exist, but there is little to no shared sense of priority or direction.  Advocacy means protecting the status quo.

The sense of purpose and serving the common good are sometimes referenced in local planning, but rarely are part of national conversations.  At a time of increasing shortcomings in many ways and at many levels of political and business activity, credit union identity is becoming more and more market-like.  Coop leaders are playing the merger and growth games they find, rather than defining the game they want to play.

So maybe the nostalgic message of prior relationships recorded by these State League Directors is more prescient than they could have realized.  Is the system that spawned today’s credit union industry just is a nostalgic moment of an era now gone forever?

To all the girls I once caressed
And may I say I’ve held the best
For helping me to grow
I owe a lot I know
To all the girls I’ve loved before
The winds of change are always blowing
And every time I try to stay
The winds of change continue blowing
And they just carry me away

 

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One CEO’s Most Vital Stewardship Attribute

The example of Boeing Employees Credit Union two recent CEO selections proves the adage that most organizations are onlly two transitions from failure.  Not just performance shortfalls, but more importantly the loss or founding purpose and the associated values and culture.

See post: When the Song Fades-Leadership Turnover and the Loss of Cooperative Identity.    (Link)

Newly installed CEO’s espeically from outside an organization assume they have been chosen to give new direction from their external experiences, often without first understanding the resources they now direct.

The failures are not due to lack of talent, skills or knowledge, but rather a more fundamental gap,   an inability to discern the foundation for the success they inherit.  That shortcoming is especially vital in democratically designed organizations such as credit unions:

In democratic organization, It turns out, in the end, there’s only one institutional factor  that actually matters: Good character. Everything else in a democratically governed system follows and relies on that simple foundation.

To put the current BECU leadership culture in perspective (link), here is a summary of the legacy that Gary Oakland created upon his retirement in 2012. From a press release by CUNA.

Gary Oakland Wins Wegner Award for Lifetime Achievement

National Credit Union Foundation to Present Four Awards on February 24, 2014MADISON, WI (September 4, 2013) — In recognition of his visionary approach to leadership and extraordinary commitment to the credit union movement, the National Credit Union Foundation (NCUF) is pleased to announce Gary Oakland, retired President/CEO of BECU in Seattle, Wash., as a winners of the 2014 Herb Wegner Memorial Award for Lifetime Achievement.

“Gary is a slam dunk as a choice to bestow the Wegner Lifetime Achievement Award,” said John Gregoire, Chair of NCUF Wegner Awards Selection Committee. “Gary’s contributions to the credit union movement were so obvious as everything he touches turns to success for the average American consumer. It’s evident in the growth of BECU, the state supervision system, dual credit union chartering, Biz Kid$, NCUF, and much more. It’s also an honor to see Gary receiving the award rather than giving one.

Tireless Supporter of the Credit Union Movement 
Over the course of his career, Oakland has supported the credit union movement in a myriad of ways. Those include serving on the board of the Credit Union National Association and as board chair for the Washington Credit Union League, the National Association of State Credit Union Supervisors (NASCUS), Filene Advisory Council and Board, and the National Credit Union Foundation. In his time as CEO of BECU, he guided the credit union to provide aid for more than a dozen low income credit unions across the country, often single-handedly locating the funds to keep his fellow members-first organizations afloat in times of hardship.

With his leadership, BECU was also able to play key roles in the founding of two low-income designate credit unions: TULIP Credit Union and Express Credit Union. Oakland also oversaw BECU’s creation of Prime Alliance (now Mortgage Cadence), a Credit Union Service Organization that provides mortgage solutions to approximately 600 credit unions.

“Until his recent retirement, [Gary] ably served as an intellectual thought leader on every important issue facing credit unions,” said Mary Martha Fortney, President and CEO of NASCUS. “Of particular note and importance are his dedication and efforts to make supplemental capital a reality for all natural person credit unions. We are seeing the result of Gary’s work on this issue today as supplemental capital in being considered on Capitol Hill.”

High-Impact Commitment to Member Value                                                           Oakland is hailed for his unfaltering dedication to improving value for the credit union member. Exemplifying the effect of this commitment, BECU grew from 108,000 members when he took on the position of CEO in 1986 to over 775,000 members at the time of his retirement in 2012.

Oakland was known for accommodating the needs of Boeing employees and providing guidance in responsible financial practices. He also led the credit union to a statewide field of membership to allow more members of the community to benefit from the credit union advantage: member-focused service with better rates and fewer fees.

While this growth trajectory could have changed the organization’s culture, Oakland held BECU true to its founding principles and the credit union philosophy of People Helping People. In 2006, BECU had an opportunity to return a portion of its reserves to its member base. He instated the Member Advantage account, which reversed the interest rate tiers, providing more return for smaller savings accounts and creating incentive to start saving at a time when U.S. savings rates were at or below 0.

“At the local level, Gary advocated for the member at every turn,” said Rae K. Miles, President of Innovative Resources, LLC. “He changed policy to help Boeing employees when they needed it most and led by example in promoted the importance of thrift to the membership. His ‘people helping people’ efforts went well beyond the membership of BECU.”

Biz Kid$ Spearhead

Among Oakland’s most influential accomplishments was the role he played in the launch of the PBS program, Biz Kid$, an award-winning financial education show for youth. Through leading the production initiative, committing $500,000 initially and $1 million over-all, bringing together a group of credit unions that raised $2.6 million per year, and ultimately making the project a possibility, Oakland has become the face associated with the show’s success.

After five seasons, Biz Kid$ has won 2 Emmy Awards and was nominated for 11 more. It claims nationwide recognition and makes a daily difference in the lives of its youth audiences.

“Had it not been for Gary’s effort, leadership, financial and personal commitment, [Biz Kid$] would never have happened,” said Rudy Hanley, President and CEO of SchoolsFirst FCU. “The result has been overwhelming. After five seasons, 13 Emmy nominations and 2 Emmy awards, the program is being delivered to millions of students through a variety of channels and participating organizations. The stature of the credit union brand has been greatly enhanced thanks to his vision and leadership.”

Steadfast Dedication to Employees

Amidst his countless other commitments and initiatives, Oakland still managed to earn the full respect and gratitude of his employees for his supportive and encouraging approach to leadership. He put his employees before himself and made concerted efforts to urge them to embrace personal and career growth opportunities. As a result of Gary’s compassion and attitude, BECU claims one of the lowest employee turnover rates in the industry and five former BECU employees are now CEOs of other credit unions.

“Gary understands that ‘People Helping People’ begins at home,” said Roger Mauldin, BECU Director. “It was always important to Gary that employees have a healthy work-life balance, be paid a fair wage, receive good benefits and know they are appreciated.”

“Man of Steel” Philanthropist

Described as a “Good Samaritan”, Oakland has left a legacy that extends the credit union philosophy well outside the credit union movement. He is known for his generosity and selflessness as well as a tendency to go above and beyond the call of duty.

In 1995, at a member’s suggestion, he led the establishment of the BECU Foundation, a chartered foundation that provides college scholarships to students who excel in academics, leadership and community service. Since its creation, the BECU Foundation has awarded more than $1.5 million to 715 students.

Oakland served on the Board of Seattle’s Neighborhood Children’s Club, helping many children get on the right track to a productive future, and has guided BECU to support a number of non-profit organizations that provide affordable housing, including Habitat for Humanity, Rebuilding Together, Impact Capital and Plymouth Housing.

“Gary has been a trailblazer and a most generous and dedicated philanthropist, both inside and outside of the credit union movement,” said Robert L. Coleman, Director of Northwest Baptist FCU. “Gary Oakland’s career was spent not only ensuring the absolute best for his membership, but also ensuring the success of those surrounding him.”

(emphasis added)

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The Origins of the Cooperative NCUSIF

History matters.  Especially when an institution like the NCUSIF occuoies such a vital role in the integrity of he cooperative system.  Following are important  facts in understanding the unique value of share insurance today.

On April 15, 1983 NCUA sent a Report to Congress on the origins and future of the NCUSIF.  It is required reading for anyone who wants to learn of the unique role of share insurance for the cooperative system and the basis for its restructure in 1984.

While all three federal funds responded to the special  Congress’s request, only the NCUA’s proposals were adopted in the Deficit Reduction Act in 1984 changing the whole approach to cooperative share insurance.

Moreover, only the NCUSIF has continued to function in this financial structure  for 40+ years.  The FSLIC failed and was merged into the FDIC.  The FDIC has reported negative net worth during several subsequent banking crises and experimented with  multiple adjustments in its premium based financial model.

In Chairman Callahan’s April 15 cover letter he made four important points:

  1. All credit unions, including FCU’s should have a choice of share insurance, either state authorized or NCUSIF.
  2. Financially restructure the core design of the NCUSIF with a one-time 1% deposit of insured shares which would be adjusted annually thereafter.
  3. The membership share required of members to join should be uninsured and be part of a credit union’s reserves (net worth).
  4. NCUA opposed consolidation of the three federally managed funds.

The Report was a unique document.  It was based on comments from multiple cooperative organizations, historical facts, operational realities, not academic theory or untried alternatives.

It points out FCU’s operations had grown dramatically without federal insurance from 1934 to 1970.

CUNA and leagues  opposed federal insurance for many years as incompatible with cooperative principles.  Some of the reasons for opposition included:

  • It was unneeded and add to the cost of operations. No credit unions had failed during the bank holiday of 1932 and studies showed minimal losses when liquidations occurred.
  • Federal insurance would not get at the causes of failures and undermine the roles of supervisory and audit committees.
  • Most importantly, federal insurance would reduce the number of credit unions in operation, put an end to new charters and introduce a “federalization” of the dual chartering system.

Why Congress Approved the NCUSIF

When NAFCU and CUNA were able to compromise on a common bill in 1971, the environment was entirely different from the circumstances that led to the creation of the FDIC and FSLIC four decades earlier.  The Congressional Report on the bill noted in part:

Despite the lack of insurance, credit unions have grown to the point where there are now more credit unions than all (other) financial institutions combined. Despite this remarkable and rapid growth, credit unions have maintained an outstanding record of safeguarding member shares.  Your committee wishes to make clear . . .”federal insurance) should be considered as a reward for the outstanding job performed by credit unions.  

The Purpose of Cooperative Insurance

At the time of this 1983 Report, there were a range of options available to credit unions reflecting the multiple efforts to provide system resources in the event of institutional problems.  Several states or Leagues had created “stabilization funds” to assist troubled credit unions.  Central credit unions were used to facilitate mergers and purchase of assets if credit unions failed. The private insurers developed in parallel with NCUSIF’s initial years covered 3,150 state charters with $12.4 billion in assets.

The Role of the NCUSIF Today

The purpose of insurance and its multiple cooperative predecessors was not to facilitate liquidations.  The intent was to have a common pool of credit union capital resources to resolve problem situations both collectively and individually.

This collective role was used in 1982 when almost 100 credit unions that had invested in Penn Square Bank’s CD’s above in FDIC insured limit received non- earning “receiver;s certificates” with an estimated recovery value of 80%.  Both the CLF and NCUSIF stepped in to prevent any institution from becoming insolvent.

NCUSIF capital was injected into multiple large problem credit unions from the turnaround at San Diego Navy FCU (the 9th largest in 1980), to the recovery of San Antonio FCU in 1990.

Because there is no private ownership or capital at risk, unlike the FDIC, credit unions’ collective insurance is more akin to a cooperative hedge fund.  The purpose is always to find the most effective way to continue operations and credit union service, not to liquidate or induce mergers for someone else to figure out solutions.

That ability requires judgment, creativity and concern for the members’ and cooperative system’s future not just problem resolution.

There are other critical aspects of the NCUSIF’s operations versus FDIC’s approach.  These include the safeguards put in legislation to address the concerns credit unions raised about federal insurance which were included in the 1984 redesign.  Those will be in a later post using the latest data from the two federal funds.