Credit Unions and Public Banks  

On September 18, 2023 an organizing group Friends of the Public Bank of the East Bay  (PBEB) announced the hiring of a its start-up CEO, Scott Waite.   This is a brief announcement by Waite on YouTube.

Waite is a credit union veteran having served over 20 years as Patelco Credit Union’s  CEO.  More recently he had turned around Central State Credit Union which had been operating for four years under regulatory constraints.

PBEB has raised $1 million and is undertaking further fund raising.  Four local jurisdictions – Alameda County and the cities of Richmond, Oakland and Berkeley – are supporting the effort contributing financially to the bank’s groundwork and business plan.

The intent is to seek a bank charter with FDIC insurance to open by 2024 or early 2025. The goal is to facilitate local governments’ reinvestments back into their communities. As a wholesale bank, PBEB will partner with community banks, credit unions and CDFIs to finance affordable housing development, small businesses, the renovation and electrification of existing buildings, and the ability of cities and counties to refinance their municipal debt locally.

More Efforts Underway

On September 29, the online reporting site, Next City, posted a summary of the history of public banking and the growing interest in major cities across the US.

A Victory For Public Banking

A public bank in California’s East Bay is gaining more momentum to become one of the first public banks to start operating since the state-owned Bank of North Dakota got established in 1919. It is the first public bank to hire a CEO in the last 100 years.  Interest in establishing public banks has grown significantly in the last decade but many organizers continue the long push to get one created in their cities.

In an earlier article Next City described efforts of mayoral candidates in Chicago and Philadelphia to make public banks part of their electoral initiatives.

Organizers in New York also want to create a city-owned wholesale bank which was the subject on an article in Credit Union Times, Public Banks: An Important Idea Whose time is Overdue. 

The author, Melissa Marquez, CEO of the $37.7 million CDFI Genesee Co-op FCU, pointed out the public banks are not competition but “would partner with us to increase our capacity to lend, grow and meet our communities’ needs. This partnership model is effective precisely because it leverages the proven expertise of local lenders and the scale of public deposits.”

She pointed to the century long record of the Bank of North Dakota, a public bank with over $10 billion in assets.   From its 2022 Annual Report:

BND had “a record $5.4 billion in loans to the state’s farmers and ranchers, business owners and students in North Dakota and record profit  of $191.2 million in 2022, up $47 million from 2021.”

Her article  cited statistics from the Institute for Local Self Reliance that  “the Bank of North Dakota has fostered the highest rate of community banks and credit unions per capita in the country.

She added: The New York Public Banking Act (S.1754/A.3352) would create an appropriate regulatory framework for enabling localities, such as Rochester or New York City, to apply for a special purpose charter for a municipal public bank. They will be charter-bound to reinvest in equitable economic development in low-income communities.“

The article also cites the history of the CDFI programs as a model for a new, locally focused financial institution system:

“30 years ago, the federal CDFI Fund was established during the Clinton Administration as a part of the U.S. Treasury. There were naysayers and name-callers then as well. But three decades later, thousands of successful CDFIs are operating in urban, rural and native communities across the country, and CDFIs enjoy broad public support across political and other divides.”

Why Public Banking Could Take Off

Scott Waite explained his decision to lead the PBEB as a “grass roots movement meeting the moment.”  The bank will partner with other institutions to ensure public funds are reinvested locally.  His three areas of initial support are affordable housing, renewable energy and small business lending.

PBEB cannot be a retail bank.   As a wholesale firm they will rely on other community financial institutions and firms to initiate projects for joint financing.

I believe there are two factors that suggest public banks could succeed.

The first is that the increasing consolidation of financial institutions.  This means that locally owned and directed firms are becoming less and less prominent in major American cities.

When I worked at the First National Bank of Chicago ( 1974-1977), the city had three major local banks:  First, Continental and Harris Bank plus dozens of correspondent banks under Illinois unit banking charter limits.  Today I know of no major locally owned bank that calls Chicago its headquarters.

Yet municipal and country governments manage hundreds of millions of dollars that are all deposited in for-profit institutions, whose priorities may not align with how local governments might see funds used.

Just as credit unions were formed by tapping into the steady flow of wages for military and public employees in earlier generations, public governments and authorities are now focused on the wholesale use of funds with local partners.

Secondly. government today is big business.  Public contracts for roads, health care, schools involve overseeing hundreds of millions of dollars in dedicated public spending.   Some of these same skills will be required in overseeing new institutions for local financing. In many cases the expertise is already there or readily available such as Scott Waite’s hire.

In one instance, credit unions have already chosen a public banking option. The Midwest Corporate Credit Union serving North Dakota voluntarily dissolved in 2011 after the multiple uncertainties driving the new corporate regulations. They did so because “North Dakota credit unions had access to the Bank of North Dakota that provided many of the services of a corporate credit union without having to maintain a capital share.”

Just as the FHLB system has become the preferred liquidity lender for the credit union system not the CLF, public banks may accelerate their role in local financing projects that are now too large for one institution to undertake.

Scott Waite believes credit unions should embrace these efforts as it will facilitate a greater local role for their members’ funds.  And just as important, the underserved needs are growing in cities across the country, so that innovative initiatives will be critical.

We’ll know the concept has taken hold when there is a public banking support organization such as Inclusiv for CDFI’s.



The Value of a Critic-Even a Dishonest One

Yesterday Politico published an article on credit unions written by a Brookings-based economist.

The title and subhead give his  message:

Credit Unions are Making Money off People Living Paycheck to Paycheck

The subhead:  There’s a new predator making money off overdraft fees: Credit unions.

The article was prompted by a new report required of all California state chartered banks and credit unions beginning with 2022 data.  The first report is 17 pages and lists in data tables the total overdraft and NSF fees collected by each firm the year.  The final column shows these dollar amounts as a percentage of net income and total revenue.

The author’s academic and /Congressional staff credentials suggest an objective study of an important topic: the  sources and importance of non interest income.

However as I read the article Mark Twain’s observation came to mind:  “Figures don’t lie, but liers do figure.”  But this shortcoming should not cause readers to overlook lessons from even a biased report.

In addition to the headline, the author’s target shows early on: And the first report of that data reveals that many California credit unions are taking millions from their most vulnerable customers and spending it on perks and bonuses for executives that resemble those of big banks more than nonprofits.

He uses one ratio from the study, total fees as a percentage of net income and then prepares a brief table listing the ratios for 12 credit unions (out of 114) with highest combined $ fees.

However this single ratio  can fluctuate dramatically depending on net income, independent of the numerator being studied-combined OD/NSF fees.   

To suggest  a credit union like FrontWave is abusing members because its ratio is 140% ignores the  study’s second ratio which is 12% of total income.  This ranking would give a very different listing.

FrontWave’s net income in 2022 declined by 33% from $8.4 to $5.6 million (.44 ROA) thus making the fee/net income ratio appear much higher than a “normal ROA” might present. 

Whereas Dow Great Western’s ratio was a negative -200% and only 1.32% of total income.  Was the credit union giving back more fees than they collected?  No, the credit union reported a negative net income.   Perhaps it should charge more fees?

Predetermined Conclusions

But the author has made up his mind, and now wants to condemn a practice without  examining other relevant details, such as the actual fee charged per transaction.  He downplays the other ratio of fees as a percentage of total revenue, which would show each firm’s  dependence on this one area of income.  These ratios range from 0% to 15%.

He makes no attempt to understand the data by calculating mean or the average fee-to-income ratio.  His conclusions  were formed before he knows what the data might mean:

Let’s be clear: Overdraft fees can be predatory. Every overdraft by definition turns money from someone who has run out of it into nearly pure profit for the bank or credit union that charged it because they get paid back immediately when the next deposit hits. Eighty percent of overdraft fees come from just 9 percent of account holders, highlighting that this product is targeted at people living paycheck to paycheck who run out of money from time to time.

Even given his limited analysis, the situation is dire:

The full picture among California’s 114 state-chartered credit unions is alarming.   And not just in California.  One suspects similar trends across the country. Several of Michigan’s largest credit unions have been sued for abusive overdraft practices and research from the Consumer Financial Protection Bureau shows credit unions averaging similar overdraft fees as banks.

A Political Lens

Near the end the author’s political bias comes out as he talks about democratic congressional members’ rhetoric against junk fees, and then this sentence:  Todd Harper, chair of the National Credit Union Administration (NCUA) has spoken out against abusive overdraft practices, but the NCUA Board has a Trump-appointed, Republican majority that is continuing to deregulate.

All three board members are Trump-appointed.   I’m not aware of any reg, rule or guidance letter that Harper has issued on this topic or that the other two board members opposed.  The singling out of Harper’s alleged views (no links) raises the question whether this is just a comrade in arms fronting for someone.

The Benefit of a Critic’s View

The author is a sceptic of credit union business practices:

California’s data shows that some credit unions are making a lot of money from overdraft fees. California’s largest state-chartered credit union, Golden 1, took $24 million in overdraft from their members, while spending $6 million a year for naming rights for an NBA stadium in Sacramento. North Island Credit Union bought naming rights for a famed music venue in Chula Vista and created an exclusive entrance, ticket discounts and other perks for some of its members while taking over $10 million last year in overdraft and non-sufficient funds charges from its members.

Do these business practices sound like those of nonprofits designed to provide basic banking services to people who share what the law calls a “common bond,” such as a workplace or other connection required for membership? Or are they what would expect from for-profit banks?

A Wakeup Call

The author asserts this not a single state issue:  California’s data is a wake-up call for the nation as a whole.

Even though he critiques mutiple credit union activities through his very limited NSF/OD lens, the article is a wake up call for those who believe credit unions are not banks in sheep’s clothing.

The article has all the indicators of a planned “hit piece” on credit unions.  But to try to kill the messenger or discount all the data is to miss the point.

Even when a public critic may be wrong, the better approach is to engage on the issue with facts and logic that show a grasp of the issue.  More rhetoric just makes the issue burn hotter but with no more light.

The need for fee transparency at the individual and macro levels is valid.  Credit unions, consumers and analysts/regulators can all better understand the role these fees have in a firm’s business model.

Comparisons between credit unions can be valuable, if all the data is known. How do some have very low fees and others relatively higher?

Members can more easily learn as they seek information on fees as they do now about loan and savings rates.

The author believes the only solution to his alarming “problem”  is more regulation.

But what kind of regulation would be relevant and consistent with one’s views on government’s role for coops and in markets? Should government regulate the fees somehow, mandate more disclosures, or control business practices as he hints by limiting fees to a percentage of net income.

More regulation will not stop credit unions tempted to put institutional priorities ahead of member-owner interests.

Regulators should ensure members have the tools to hold their repesentatives  to account-with the information and the ability to openly raise these topics in the traditional annual meeting and director election format.

What is missing is not regulation but the ability of members to play an effective governance role as owners in their credit union.   Enabling members to be more aware and active is critical to any credit union’s long term success.

No regulation, no matter how well intended, can replace members exercising their rights as owners.  That’s how markets are supposed to work.

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

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

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

To Cash a Check

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

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

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

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

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

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

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

Why a Financial Metaphor?

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

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

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

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

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

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

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


Spring’s Abundance & Credit Union Bouquets

Cherry tree

Cupid keeps watch over his beauty.


Cherokee Dogwood


Plox with pansies, carnation and daffodils.

Redbud flowers growing on tree trunk.

Easter Lilly transplanted after church.

Spring Flowers from Government

On Monday April 10  U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced over $1.73 billion in grants to 603 Community Development Financial Institutions (CDFIs) across the country.

CDFI Equitable Recovery Program (CDFI ERP) grants are intended to strengthen the ability of CDFIs to help low- and moderate-income communities recover from the COVID-19 pandemic and invest in long-term prosperity.

The release said 203 credit unions received $590.3 million in awards.  Peoples Advantage FCU in Petersburg, VA and four Puerto Rican Cooperativas were  each awarded $6,197,097, the largest single amount to a credit union.

Also getting in on springtime action the NCUA on April 5, announced it would take applications in five categories to award a total of $3.5 million from its Community Development Revolving Loan Fund (CDRLF).  Amounts will range from $5,000 for training to $50,000 “Underserved Outreach and MDI Capacity Building.”

Cooperatives, Credit Cards and Wealth Redistribution

Who pays for your rewards?  That was the question posed by a Federal Reserve study released in December 2022.

Their short answer is “sophisticated individuals profit from reward credit cards at the expense of naive consumers.”

The Federal Reserve study describes this outcome as a redistribution of wealth.  They calculate the result as an “aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing disparities.”

The full study is 84 pages, but the Conclusion is on pages 30-31.

“Those Who Know the Least”

How this happens is a replay of the long-standing practice that in American those that have the least, or know he least, pay the most for financial services.

The reason for this redistribution is differences in consumers’ financial management savvy.  The data “show that reward cards induce more spending, leaving naive consumers with higher unpaid balances. Naive consumers also follow a sub-optimal balance-matching heuristic when repaying their credit cards, incurring higher costs.”

The academic work supporting this documented result is summarized in this initial summary:

Consumers lacking financial sophistication often make costly mistakes.  In the consumer credit card market, such behavior can entail over indebtedness and sub-optimal repayments.

“Banks, in response, can design financial products to exploit these mistakes, combining salient benefits with shrouded payments. Naïve consumers might underestimate these payments and incur costs from usage.

“Sophisticated consumers, in contrast, might rake in the benefits while avoiding the payments and thus profit from usage. Such products can therefore generate an implicit redistribution from naïve to sophisticated consumers and thereby contribute to inequality.”

The Cooperative Challenge

Members need credit and/or debit cards for most routine transactions today.  The study documents the move away from cash payments. Credit cards are the most common way consumers transact daily and then  pay one bill at the end of the charge period.  A credit card is as important as a checking account for every consumer.

Most consumers are attracted by card rewards.  A card with only a low cost line of credit, is a difficult sale against the highly promoted barrage of reward programs.

These reward offers are not just from major banks.  The most popular cards partner with retail, travel and other services or products  to entice users to accumulate points that can be used to pay future purchases.

Cash back “immediate rewards” offer a 1-3% discount on purchases if points are not a consumer’s goal.

The Federal Reserve study shows that these benefit and rewards programs are paid for by consumers who are less adept at managing their finances.  For this user group the card becomes a loan with interest rates in double digits.  This interest income augments interchange fees and is the dominate source of bank card profits.

The Federal reserves describes these differing consumer card management habits as an income  “redistribution from less to more educated, poorer to richer, and high to low minority areas.”

Should Credit Union Card Programs Be Different?

What is a credit union’s responsibility in this wealth transfer process?   Should it not offer any rewards card and just maintain a low, universal borrowing rate for all users?

Members want rewards.  Is the response to develop multiple card programs to appeal to different segments?  Can credit unions really beat the best card offerings by highly visible national programs targeting high income individuals?

The Federal Reserve study documents what issuers implement as the universal profitability model for credit cards–borrowers pay for the benefits of those who do not carry balances.

With rare exceptions, most credit unions in their credit card offerings follow this banking model. Is this redistribution outcome consistent with cooperative purpose?

This is not a question of legality or even equity.   Rather it involves both strategic and values decisions.

If the intent is to serve all members with their diverse needs and circumstances, then marketing efforts will inevitably focus on the largest, strongest and most financially  attractive members.  They have bigger cars, larger mortgages, and higher family incomes.   This tier is every financial institution’s top priority.

To compete for this wealthier segment’s business with competitive loan and savings rates, the rest of the member base must pay more for loans and earn less on savings.  Risk based pricing is one tool used to implement this redistribution.

But is this the card model coops were intended to provide?   I don’t know the answer.  Credit unions were originally formed to serve different segments.   Today the goal for many is to serve the “whole market.”

The wealthy tend to be excellent rate shoppers. The less well-off tend to take what is offered. Is the result of an open-ended market ambition that no segment is served really well?  If so, is such a cooperative strategy sustainable?







A Compensation Revolution Started by a CEO

Credit unions, corporations and multiple organizations are finding it difficult to fill vacancies. One response is to raise pay for both existing and prospective employees-especially at the lower end of the wage scale.

Some credit unions have announced increases to a $15 minimum starting wage; others have used hiring bonuses or payments for employee referrals.

The majority of these adjustments are at the entry level or bottom of the pay scale.   But is there another way to think about compensation that would start at the top?

What if credit unions were to emulate the example of CEO Dan Price and rethink their approach to pay starting with the CEO?

Reducing the CEO’s Pay from over $1 million to $70,000

Gravity is a  credit card processing and financial services company founded in 2004 by brothers Lucas and Dan Price. The company is headquartered in the Ballard neighborhood of Seattle, Washington and employs 100-200 people, including a branch in Boise, ID. It is a private company and plans to stay that way.

In 2015 CEO Price, now the sole owner, reduced his salary to $70,000 and made that amount the starting annual pay for any employee in the company.   The story went nationwide.   Inc magazine reported the action immediately; there have been follow ups to see the results  into 2021.

The company’s efforts were converted to a Harvard Business School case study.   This January 2018 article summarizes the case and concludes with a link to a 27 minute video in which Price and the Harvard professor discuss the underlying reasons at a Young Presidents Organization meeting.

In an April 13, 2021 twitter post, Price summarized the company’s results since the 2015 change as follows:

Since our $70k min wage was announced 6 years ago today:

 *Our revenue tripled

 *Head count grew 70%

 *Customer base doubled

 *Babies had by staff grew 10x

 *70% of employees paid down debt

 *Homes bought by employees grew 10x

 *401(k) contributions grew 155%

 *Turnover dropped in half

Price says a number of employees earn more than this minimum.  As the sole owner, this aspect of Price’s wealth grows as the company value increases.   He explains his approach and why it upsets many in the private sector:

“I did this as a private business owner. It affected no one but myself (I cut my salary from $1.1M to $70k) – the definition of private enterprise. But what I did was very threatening to them because it disrupts the narrative of “CEOs must be paid 1,000x more than their employee.”

Is there a Credit Union Lesson in This Spirit?

The increase in CEO salaries has continued across credit unions even during the pandemic.  Numerous consulting and trade firms provide data and peer comparisons to ensure CEO’s compensation remain competitive and growing.

What would happen if the whole salary paradigm were turned upside down as Price did at his company?  Gravity is a customer service firm where relationships matter. Price is very important.  Success depends on sales and every employee being an entrepreneur and accountable.

Price acknowledges this approach to compensation is contrary to most economic theory and business models.

He believes that once an employee’s concerns over money worries becomes only the fifth or sixth priority in their lives, more powerful intrinsic motivators will become dominant.  These include mastery of a craft, serving a bigger purpose, and autonomy.

When these characteristics spark employee behavior, then the business outcomes he cites can happen.

What Would Happen If?

Critics point out that the majority of Price’s wealth is in his ownership of the company.  So he can call the play Warren Buffett uses.   Buffett has been paid the same annual salary for the last 40 years-$100,000.

Credit union CEO’s do not have Price’s “stock” appreciation—although a small number have cashed out their positions by negotiating significant special merger payments as their credit union’s final act.

Skeptics point out this model would not work in low pay, low margin, slow growth industries such as food service and mass retail. In these industries robotic solutions and customer self-service are replacing traditional low wage employees converting variable salary expenses to a fixed capital investment.

Price’s response is automation makes the need for creativity, marketing and initiative in the remaining jobs even more critical.

Today a number of credit unions share their success with employees through various gain sharing programs.  These do not change the basic structure of the salary scale.

What would be a cooperative equivalent of this approach to employee motivation, accountability, compensation and organizational success?  Or as Price alluded, would this change be too disruptive of the existing narrative about how credit union CEO’s are compensated?

What would  be credit union member-owners reaction?   How might such a plan influence the way employees talk about the cooperative advantage with members?

Are there examples of credit unions  aligning compensation at all levels following a cooperative approach to this challenge?

I would be glad to share any examples incorporating this innovative spirit.

A Much Needed Message for today—From 2003

John Herrera’s Wegner award acceptance speech as Chair of the Latino Community Credit Union is as moving and thoughtful today as it was that evening.

In 2003 Latino Community was only $11 million in assets, relying on credit union deposits and just ramping up its loan operations.   But its initial success and impact were already noteworthy.

Herrera’s speech touches a number of important themes:

  • The “family” of supporters-over 20 on stage with him;
  • The Movement has developed an “accent”-an accent on people and community;
  • His staff: they speak five languages, are from 16 countries and routinely work beyond closing hours until everyone is served.

But his two most vital messages, more relevant than ever, start at:

5:00- “Our story is your story”- a shared vision for all persons to have access to affordable financial services;

8:45- “Immigration and the treatment of immigrants”- There are “no illegal human beings.” Immigrants are a critical aspect of America’s democratic enterprise.  The first credit union was created by and for immigrants, who couldn’t speak English.

Here is the full speech, just over 10 minutes with the family of supporters on stage beside him.

Questions for Today

When was the last time you heard a credit union leader speak this movingly about their credit union’s addressing critical economic issues for its members?

When have you witnessed a more concrete example of the movement gathered around a common vision?

Which credit union leader has spoken recently or more eloquently about the role of the immigrant community for America?

Can you identify another time such as this evening, when you were proud to be a part of the credit union movement?

Hopefully this speech reminds us of who credit unions can be at their best;  and whether we are building on the legacy we have been given.

Jim Blaine’s “Inaugural” Address

As the CEO of America’s second largest credit union for 37 years, Jim Blaine had the unusual skill of translating simple cooperative concepts into profoundly valuable benefits for members.

Every member received the same rate for the same kind of loan.  Believing home ownership was vital to members’ financial security, he designed a 100%, non-conforming first real estate loan for any member with a simple explanation: “Why compete with the government?” (Fannie/Freddie conforming products)

He railed against FICO-determined lending decisions and risk-based loan pricing. This early use of “artificial intelligence” offended his belief in the uniqueness of each person.  Character and judgment, not computer algorithms, should be the basis for granting credit to members.

Words Matter

In addition to steering State Employees North Carolina Credit Union, Jim was a wordsmith.  His blog, and his talks, were audacious, controversial, fun to read and based on core principles.  “Sometimes wrong, but never in doubt” was his tagline. His writing style and graphics were intended so that a reader immediately got the message.

He understood that a leader’s influence was in direct proportion to one’s ability to communicate. To the entire crowd: fellow-believers, opponents, the uninterested and the unwashed, meaning those who corrupted cooperative values for self-interest.

Some of his most scathing and widely read observations were about NCUA, a government agency which believed that its core purpose was to tell credit unions what to do, or not do.  Examiners would constantly challenge Jim’s traditional implementation of credit union purpose.  He would use the agency’s own words and facts to demonstrate the lunacy of their demands.   When he dared to break the code of silence NCUA imposed on examiner ratings and publish his credit union’s score, the regulator wreaked vengeance on the entire North Carolina state-chartered system.

Jim’s most enduring gift to the “movement” may be his writings.  As Churchill stated: “Words are the only thing that lasts forever.”

The Course to Be Pursued

In an inaugural address more than 157 years ago, the speaker gave “a statement of a course to be pursued.” That course concluded with this purpose:  “with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds. . .to do all which may achieve and cherish a just and a lasting peace among ourselves. . .”

Lincoln used 722 words in 1864.  Jim’s 503 words address the legacy Lincoln hoped the civil war would resolve.

Jim speaks to the goal of a “lasting peace among ourselves” based on economic fairness and justice, core principles of the cooperative ideal. Diversity, equity, and inclusiveness are matters of the heart, much more than policy; something to practice in your life, rather than just preach.

Jim followed his own drummer when leading his credit union.  I believe these latest words will inspire all and even provoke some to answer his closing call for individual acts of rebellion!

Blaine’s “Inaugural” Address

(March 18, 2021)

“I am truly grateful to the African American Credit Union Coalition for this honor. The organization is remarkably successful and on the rise! I have known many of its leaders for a lifetime and have often sought, and even heeded, their advice! We shared a common bond – a belief in credit unions.

My life has been centered around my family, my wife Jean, and credit unions. Why credit unions? Because I could never accept that in America those who had the least and knew the least should pay the most for financial services. I believe that credit unions were created to correct that injustice. In the words of Thomas Paine – a true revolutionary in all respects – “I have always objected to wealth achieved through the misery and misfortune of others”.

That economic injustice continues to thrive in our financial system today. Credit unions remain the alternative, the best hope, the answer.

We all confront an uncertain future, and many folks would like to rewrite the past. You and I know we cannot change the past. But if we have credit union leaders with integrity, courage and character; we most certainly can reshape the future…but changing the future is very hard work. Arthur Ashe, the great American tennis player, described the credit union leaders we need. Ashe said: “True leadership is not the urge to surpass all others at whatever cost, true leadership is the urge to serve all others at whatever cost.”

One  word of caution as we look to the future and choose our new leaders; let’s make sure that diversity, equity, and inclusion is not a false guide, a false prophet. Can we really tell how diverse a credit union is by looking at the faces of our boards and leaders? Choosing our leaders by their race, their gender or their age is the old way – more of the same. We need a new way for credit unions.

And, the new way is to judge people not by how they look, but by how they think. As a famous preacher – I believe his name was King – said over fifty years ago: “Hopefully my children will be judged by the content of their character.”  Yes, let’s truly diversify and choose leaders based upon the content of their character. That is a more difficult, complex task, but our future depends upon it.

By the way, if you want to get a jump on reshaping the future, try starting a little personal revolution of your own. Next time you are filling out a form and come to the question of “Race?”, drop down to “Other” and write “Human”. When you reach the ethnicity question, drop down to “Other” and write “American”. And of course when you reach the question on “Sex”, drop down to “Other” and simply write in “Yes!”….and the world will begin to change!

Onward and upward – for all!… With the African American Credit Union Coalition leading the way!

Thank you again for this honor.”



Are Credit Unions Still Needed? A Chart Worth Many Words

Visual Capitalist is a website ( that several times a week publishes graphs illustrating current or long-term trends covering many areas of economic, political and human activity.

This week they printed the graph below comparing the economic recovery of high versus low wage earners in America. (

Their full analysis about this “unequal recession” had two conclusions:

  • The economic recession caused by COVID-19 has been especially devastating for low wage workers
  • While the recession is nearly over for high income earners, fewer than half the jobs lost this spring are back for those making under $20/hr

The Credit Union Opportunity

Within current members and in every credit union’s FOM, this divergence in recovery occurs. How can your credit union reach these members and serve them best as we wait for the pandemic to recede?

When Vision is Lost: Difficile Est Bonum Esse

America’s character has been forged by both idealism (doing good) and entrepreneurial capitalism (doing well).

Jim Blaine captures these two aspects in his portrait of the Amana Colonies in central Iowa. This Utopian experiment did not last past the second generation. Today the community’s vision is divided into The Amana Society Corporation which controls and manages the businesses. The Amana Church Society now deals with spiritual matters. His blog posed the question whether today’s credit union generation still believes in the movement’s unique purpose.

Stories of Business Idealism

For 40 years USC Business School Professor James O’Toole has studied the ever present challenge of “doing good while doing well” in a capitalist economy. His latest book, number 19, is The Enlightened Capitalists.

It is a collection of stories of business leaders who built success in the market and also shared their firm’s financial gains with their employees and communities. He leads off with Robert Owen (1771-1850> proceeding to current examples such as Ben Cohen (Ben and Jerry’s) and Patagonia. Each is a story of a leader with a vision broader than financial success. These goals include shared ownership, employee education and well-being, environmental consciousness, and community investments.

I looked to see if cooperatives were part of this historical account. Late in the book he summarizes newer forms of organizations designed for more than financial success: benefit corporations, cooperative businesses, employee shared ownership plans (ESOPs), and mutuals. Credit unions get two short paragraphs. The first begins with this sentence, “Then there are credit unions, the most visible and successful form of cooperatives,” and the second ends with, “Again no organizational form is perfect: some credit union executives have taken advantage of their federal charters, accentuating the practical over the idealistic aspects of their businesses by paying themselves egregiously high salaries and even converting their organizations into regular banks to treat themselves to financial windfalls.” (pg. 419) Even credit unions illustrate his theme of vision overtaken by self-interest.

Difficile Est Bonum Esse

O’Toole’s conclusion after reviewing two centuries of multiple organizational efforts to combine financial success and social benefits is: doing good is very hard.

He concludes: “It would require a prodigious degree of optimism that I am incapable of mustering to conclude that the behavior of corporate leaders will change appreciably in the near future. . . my head will not allow my heart to disregard or discount the historical behavior of investors. . . I also find it ethically unacceptable to discourage corporate executives from attempting to buck the odds by adopting enlightened practices.” (pg. 472) He is especially concerned that the ever expanding patterns of outsourcing jobs and the gig economy model will further erode a fair allocation of financial gains for this growing class of “contingent” employees.

Lessons for Credit Unions

Both authors document the challenge of sustaining a reform effort’s original purpose. Innovative design and dedicated leadership can be a foundation. But vision can also be quickly shrunken by the realities of market competition or leadership failure. The factor that can help keep the vision alive is how the beneficiaries of the vision are incorporated in the oversight (governance) process. Is there a sense of us, not me? A bond of common values? Relationships, not just transactional events? Transparency empowering informed choice about the future?

Vision requires interdependence, not just the pursuit of self-interested independence. Both doing well and doing good entail documented plans. It is this joining together, this unity, that keeps credit unions from being sucked into the vortex of market capitalism, the system for which co-ops are to be the antidote.

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