Category: NCUA

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December 9, 1984 – A Grand Credit Union Opening Day & An Early Departure

The largest credit union conference ever held to this point in time began gathering on Sunday, December 9, 1984 at the MGM Grand Hotel in Las Vegas.

One of the most amazing aspects was that the entire effort was organized and led by NCUA.   It was an event unique then, and still today, in credit unon history.

The conference had two phases.  In the first two and one half days over 800 state and federal examiners and regulators held meetings to share their learning and expertise.  On Wednesday afernoon they were joined by over 1,500 CEO’s/seniorexecutives, board members and leaders of multiple  league and trade organizations.

An NCUA Led Effort

Two months prior in October, NCUA released a Video Network Edition XI for state and federal examiners  to describe conference logistics: timing, travel arrangments, financial reimbusements and per diem.  And most importantly, a preview of the speakers and conference agenda.

The National Examiners Conference preparation video is 20 minutes and can be viewed here or in the link below. The eight speakers are all NCUA DC staff members responsible for specific areas of the conference.

The details may seem pedestrian by today’s conference attendee.  The room rates were only $35  per night for single or double.   These critical instructions show NCUA staff at its hard working best.

The Agency’s Washington team organized a national industry wide meeting led by only existing personnel.  At the time the Agency employed approximately 600 people.  This special event was in addition to the entire staff’s  day jobs.

According to the NCUA’ 1984 Annual Report  there were 10,547 active federal charthers and 4,657 insured state charters, plus another 1,500 whose share insurance was from a state authorized cooperative fund.  Moreover, all FCU’s were being examined annually, a process implemented in 1982.

The Agenda

Following six short briefs on conference logistics, at minute 14.21 a presentation of the “most important part of any conference” begins.  Joan Pinkerton, NCUA’s Public Information Officer, gives an overview of the conference speakers and over 50 breakout sessions.

Topics include: Is the Regulator Obsolete?, How the Early Warning System (EWS) Rating is Assigned, Recent Industry Scams et. al.  At minute 17 Mark Wolff describes  real case studies that will be discussed in joint examiner-attendee sessions.  The case details of up to 25 pages will be available to read in advance.

What Happened

The conference succeeded beyond all expectations.  It was both a learning and bonding event.  Next Monday I will publish Edition 18 of the NCUA’s Video Network, 55 minutes of live excerpts of the conference highlights.

Even today, some 41 years later, the event is still remembered as a special moment enabled by the collaborative character of the credit union system.

If you would like to share your memory, please send a short post to chipfilson@gmail.com.   I will include these along with the video and photos of the conference.

(https://youtu.be/Tw_JKnheoSk)

Another December 9, 1984 Event

On Saturday October 8 NCUA colleagues Bucky Sebastian and Mary Beth Doyle stopped by the house to drive me  to Dulles where we would fly to Vegas for the conference.

Mary Ann and I had been married for 17 years.  Our first date was my senior year in college at the Harvard-Princeton football game.  I had been expecting to go with her younger sister whose flight from Midland, MI was canceled due to snow  Mary Ann took her place.

We married 18 months later in a service at Merton College Chapel, Oxford, where I was a student and she worked in London for Dow Chemical’s UK office.

We traveled the world together, first courtesy of Uncle Sam who said I owed him some time.  Our first daughter, Lara, was born in Athens, GA while I was at Supply Corps School.  Our second, Alix, was born in Yokosuka, Japan where I served as Supply Officer on the USS Windham Cty (LST-1170) and later at the Supply Depot on shore duty.

After four plus years in the Navy, in December 1973 I joined the International Division of the First National Bank of Chicago expecting a two year rotational training period.  Six months later our family was in Sydney, Australia.  I was in the bank’s rep office and assisted with their wholly-owned finance company FCAL.  It was a time of critical economic turmoil, short term rates were over 20%.  They wanted help working through the crisis in FCAL’s loan portfolio.

After three years, we returned to Chicago.  I left the bank to work with Bucky Sebastian and Ed Callahan in the Illinois Department of Financial Institutions (DFI) where I was credit union supervisor.  Five years later we moved to Bethesda as the three of us  joined NCUA.

In these 17 years Mary Ann was critical to everything that life brings to a family.  She not only had the primary care roles with our two girls, but also worked a full time job where possible.

Her talents for  maintaining home life while I was traveling, expanding her interests in photography, design and working with her hands in the kitchen or the sewing room are habits both girls adopted.  She was disciplined, but in a very soft way, always sensitive to others’ needs.

I am grateful our two children inherited all the good she gave them which they express every day.

She had an adventurous streak as well.  Once we pulled into Hong Kong harbor on R&R. Mary Ann and several other wives flew from Japan to see us.  Our LST anchored in the harbor.  The city was still under British rule. The Navy purchasing office would first send out local supply boats  to refill our fresh water tanks and order fresh food supplies.

As I stood on the deck  waiting to give our purchase order to the local vendor, I saw the small harbor craft had an extra passenger.  Mary Ann didn’t wait for us to come ashore via the harbor’s water taxis. She came out, on her own, in the middle of the harbor to welcome the whole ship.  It was just plain joy as she came on deck. The Captain was a little uneasy with this protocol breach, but never said a thing.

In the picture below, Mary Ann with Lara and Alix are on on the beach in Hayama, Japan.  Fuji is faint in the distance. It is the fall of 1971.

Mary Ann’s mother had flown in to help while I spent the week at NCUA’s Examiner Conference. Early Sunday morning I got a call from her mother that Mary Ann had gone to the hospital that night and died.  Her five year fight with breast cancer was over.   I flew home that morning.  Our 17 year journey together was over.

Now go back to the 14th minute of the video above and see Joan Pinkerton.  For in 1987 we were married.  She knew Mary Ann and had even babysat our girls when we traveled together.  Life is full of possibilities even when some hopes end.  Joy can still be found.

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Animal Farm Becomes the Credit Union Jungle

From Aesop’s fables to the present day, writers have used animals to portray the failings of human society.

Animal Farm by George Orwell in 1945 used the  metaphor of animals living together in a farmyard to illustrate a political point.  HIs thesis is that power inevitably corrupts.

This inescapable temptation leads to the betrayal of democratic ideals and the re-establishment of totalitarian rule. An outcome enabled by a naive and accepting working class.

Orwell’s story is an allegory of the 1917 Russian Revolution and the rise of Stalinism.  Putting his dialogue in the mouths of animals was an inventive way to show how authoritarians manipulate language to justify their ends.

Ten years ago a credit union observer/CEO used this political satire to describe  deeply troubling trends in the coperatie system.

The blog’s title: Down on the Farm.(Be sure to click read more for the writer’s ending challenge, Who Let the Pigs In?)

An Updated Animal Story–On Film

In these prior stories the pigs are the bad guys.  The credit union commentator and Orwell hoped their literary skills would motivate readers to address  threats both foresaw to democratic societies.

But human nature doesn’t always respond to  danger until it arrives on their doorsteps.

Today’s retelling is not on the farm, but in the jungle. Here the wild animals have no fences or guardrails. They can only be viewed at a safe distance by safari tours.  It is nature in its most natural state.

In this film metaphor, those who feast on other living kindred are the lions.  Their prey are large herds of water buffaloes living on grass plains, at peace with their kin. They do not kill to live.  The game wardens and tourists who witnessed these scenes are observers or, in this parable, clear stand ins for regulators and the public.

The Attack

Part one is just over four minutes. The stealth approach, the pack attacks and captures a small defenseless youngster.  The helpless calf is thrown into a river, where two crocodiles decide the prey should be theirs, not this land bound pride’s.

The action is quick. The situation dire.  The calf’s fate seems sealed.  All the onlookers agree this is a hopeless situation.  Another successful kill.  Moral outrage, anger and even sympathy provide no recourse. This is the law of the jungle in full view.

(https://youtu.be/WXJmvlIckfI)

The Outcome

The calve’s life is over.   The lions lay down to savor their feast.  No help can come now.  It is far too late and certainly life-dangerous to interfere. The end has come. . . or has it?

Here is part two.  Also just four minues.

(https://youtu.be/u1Rt17QglXY)

The adults in the herd, those who cared about their offspring and know the ways of the jungle acted-on the spot

After initially running away, they regrouped, collectively, and attacked. They first circle and then  go after the  herd’s predators one at a time. Angry bulls leading the charge.  They then  cleared the killing field of any stragglers.

The onlookers are amazed.   Even the safari wardens say they have only seen this on film. While unusual the response is not unknown.  It’s instinctive when one’s entire future is at stake.

The Moral or Just an Animal Act?

The response of the water buffalo herd, is what Orwell and Jim Blaine hoped to arouse with their Animal Farm prose imagery.

In this film allegory, these animals understand  how to deal with their stronger predatory jungle inhabitants. If they can work to protect each other, it would seem credit union leaders should be able to turn back their avaricious members feasting on their coop peers via mergers.

In most credit unions, mergers are a matter of life and death of the organization.   If you don’t think so, just ask any of the 41 credit union leaders merged in the third quarter of 2025.  Oh, you can’t because they are now under someone else’s control.

It’s time for the cooperative herd to act.  If not, only the pigs and lions will be the future of the movement.

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Government Protecting Us From… Government

by Will Rogers, Jr.

It takes a special kind of Washington brilliance for a regulator to decide the greatest threat to the republic is its own discretion and then propose a rule to rescue us from itself. But here we are.

The NCUA has unveiled a proposal that essentially says:  “We hereby forbid ourselves from misbehaving. We don’t trust ourselves either.”

In a normal world, regulators create guardrails for the people they regulate. Only in our nation’s capital does an agency build guardrails to keep itself from driving off the road.

The Rule’s Premise: Reputation Risk Isn’t Real

This proposal seems to assume that reputation risk is some imaginary creature—like Bigfoot, or a cheerful airline fee.

One wonders whether the drafters have heard of a quaint little story called Wells Fargo, where an institution spent years rebuilding trust after opening millions of fake accounts.  But perhaps NCUA thinks that was all just a marketing misunderstanding.

If the agency truly believes reputation risk is fictional, one hopes they never Google “NCUA failures” or, heaven forbid, read their own Inspector General reports.

Who Exactly Is Being Protected Here?

The proposed rule claims to stop NCUA from pressuring a credit union to decline accounts for certain businesses: liquor stores, cannabis operations, burlesque venues, adult-film producers, and so forth.

One might ask:  Has this ever happened? Even once? Anywhere?

No.
This is Washington’s favorite sport: solving imaginary problems so it can avoid the real ones.

Meanwhile, the real harm that does exist: merger-driven CEO enrichment, member disenfranchisement, sham elections, and sending member savings to buy bank shareholders’ at premiums, goes unaddressed because someone must ensure the men’s club dancers of America are free to open checking accounts. The republic is safe.

The Greatest Burden: Fixing What Isn’t Broken

Fixing real problems is difficult. Fixing imaginary ones is far easier, and far more wasteful.

Rules like this drain time, staff attention, and credibility. Worst of all, they distract the agency from the issues actually hurting members:

  • selling strong, local credit unions to distant ones,
  • conducting board elections with all the transparency of a papal conclave,
  • and using member capital to fund bank-acquisition premiums.

But at least NCUA has now protected the nation from the nonexistent threat of ideological debanking.

Reputation Risk: It Exists (Even if NCUA Pretends Otherwise)

Reputation isn’t a theoretical construct. It is the currency of leadership.
It evaporates when leaders substitute ideology for competence.
It collapses when institutions forget who they serve.
It disappears when regulators look the other way, or worse, when they look inward and pass rules to restrain what they themselves might do.

If NCUA doubts that reputation risk is real, a previous post about NCUA’s morally incompetent General Counsel and Chief Ethics Officer has already written the case study for them: A Culture of Impunity, a chapter the agency should revisit with a box of tissues handy.

The Real Absurdity

This proposal doesn’t make the agency strong. It makes it look frightened. afraid of its own staff, its own judgment, and its own shadow.   It solves a problem that does not exist, while ignoring several that are eating the system alive.

Proposing this in order to curry favor with ideological overseers does not enhance NCUA’s standing. It diminishes it. It invites laughter in all the wrong places.

A Modest Suggestion

If NCUA wants to improve its reputation, there is a simpler way than pretending reputation risk doesn’t exist: Let this rule die quietly.  Slip it into a drawer. Close the drawer. Lose the key.

As Will Rogers, senior advised: “Never miss a good chance to shut up.” 

 

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A Merger Explained Simply

Yesterday I posted a 3,000 word analysis of the proposed merger of Spirit Financial in Levittown, PA with Credit Union 1 headquartered in Lombard, IL.

Included in the analysis are the reactions of two Spirit members from NCUA’s website:

Member Brian Stuart comment:   I am voting against the proposed merger of Spirit Financial Credit Union with Credit Union 1. Credit Union 1 is based in Lombard, Illinois. All of its branches are in Illinois. There is no advantage to the Spirit Credit Union member to merge with Credit Union 1. Merging with Credit Union 1 would take away the local Bucks County focus of Spirit Financial Credit Union, which should be its mission. . .

Member Joann Glasson:  As a long-time member of Spirit Financial Credit Union, I am sad to see this merger occur when the CD rates are so much lower at Credit Union 1 and the loan rates are so much higher at Credit Union 1.

We are retirees with large deposits at Spirit that we will be forced to move if the merger is approved. This merger is not a service to the members of Spirit Financial Credit Union

Due to the article’s length,  I sent the following summary  to  the press:

$9 MILLION IN LEVITTOWN COMMUNITY WEALTH TO BE GIVEN AWAY – CREDIT UNION CEO WOULD RECEIVE $4.4 MILLION

Spirit Financial Credit Union, a strong and profitable 72-year-old community institution, is being absorbed by Credit Union 1 of Illinois (pending a member vote) and in the process, Levittown’s families will lose nearly $9 million in community-built capital, while Spirit’s CEO personally will walk away with more than $4.4 million in payouts and benefits. Member balloting on this proposal ends Dec. 22.

Spirit Financial isn’t struggling — it is thriving:

  • highly capitalized,
  • financially stable,
  • outperforming peers,
  • and the only locally headquartered depository institution serving Levittown.

Yet in a quiet, opaque merger, every dollar of the members’ accumulated equity of approximately $9 million will be transferred to an out-of-state institution for free:

  • No payouts to Spirit Financial member-owners
  • No equity retention
  • No bonus dividend
  • No local control
  • No sole ownership

Levittown’s families built this wealth, and now it’s about to go away.

Meanwhile, the Spirit CEO who championed the merger receives:

  • A massive cash bonus at closing
  • A guaranteed five-year employment contract
  • Incentive packages to solicit more mergers
  • A fully vested multimillion-dollar retirement package, all totaling more than $4.4 million in personal enrichment.

Community wealth will be removed, assimilated, and relocated, while ordinary member-owners will be left with nothing.

Control of Levittown’s financial legacy will shift to a board in Illinois that is unreachable, unelected, and governed by mechanisms that dramatically limit member democracy.

This is not an isolated incident. Credit Union 1 has initiated over 20 such mergers in just 3½ years, importing hundreds of millions in community assets and capital and using merger accounting to mask weak operating earnings while expanding its asset base by taking over independent, strong local credit unions.

This development raises urgent public questions:

  • How can a member-owned institution be sold without any benefit to its owners?
  • Should executives be allowed to personally profit from the liquidation of community capital?
  • Where is regulatory oversight when cooperative ownership is silently dissolved?
  • Which Pennsylvania credit union will be targeted next?

If this were a stock corporation or public company, shareholders would be compensated, and regulators would not tolerate uncompensated transfer of equity. But cooperative members will receive no payout, no recourse, and diminished legal standing.

 

 

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A Cooperative System Vision Gap & Learning from our Past

Whether one calls the current period a time of transitions, transformation or just multiple uncertainties, there is a sense that national and credit union futures seem to be nearing a precipice.

Washington’s political divisions are heightened by increasing consumer anxiety.  Economic uncertainty is created  by the federal government’s policy shifts and attacks on opponents, ending key social programs and assaults on leading private institutions.

Trump 2.0 is not the same as the first term.  He is turning the entire executive branch into his personal fiefdom installing loyalists in every department and  agency of the federal  bureaucracy.  That is, when their functions are not being downsized to feebleness.

NCUA is no exception to Trump’s government onslaught. The lone republican board member became Chair on January 20th.   His two democratic colleagues were subsequently fired so the White House could directly control NCUA actions.  This ending of an independent agency’s leadership is now in the hands of the Trump dominated Supreme Court.

Chairman Hauptman’s term expired in August.  At the same time the agency initiated a reduction in force that led to at least 20% of staff leaving.   The agency now holds no regular board meetings.   Regulation is by rote or reptition rather than design or intent. The role of NCUA is at best cloudy and at worst, irrelevant to credit unions’ future.

The largest trade association ACU  has a new CEO, Scott Simpson, a veteran of the league system.  He is introducing himself to credit unions speaking of unity, advocacy and defending the status quo.   The credit union Defense Council (DCUC) is trying to position itself as a new national voice for the industry with daily press release postings.

With the economy and consumers both showing contradictory signals, the momentum for America’s economic outlook seems fuzzy even with record stock market highs.

In this period of transition in both public policy and AI generated business disruptions, credit unions third quarter results showed stability and resilience.  However there are multiple concerns rippling across cooperative waters as the industry’s new national leaders take over.

Symptoms of Growing Coop Fissures

  • The absence of a vision for credit unions’ unique capacity and purpose to address urgent member needs:
  • The merger frenzy based on a faulty premise, which is that  mergers are growing the movement’s  market share. Rather it is simply consolidation largely fueled by CEO ambition and in a number of instances personal greed.
  • The absence of new coop startups and the steady decline in credit union charters and local presence;
  • The exclusion of member-owners from any meaningful governance role or even awareness of democratic coop design.
  • The use of member funds to purchase whole banks often at premiums to prior market valuations.
  • The lack of credit union initiated and controlled innovations and instead relying on third party vendors for both operational orginations and enhanced member value creation.

Hope For  a Cooperative Future Vision

Those in leadership  can wait and watch.  Try to keep pace by doing more of the same.

And, hold tight until market forces or political challenges force a change of direction.

Or, create a new cooperative vision that becomes a rallying point for those concerned about current trends,

 A Lesson From the Past

Credit unions have been mired in uncertainty before.  Sometimes the confluence of external events; other times by internal shortcomings marked by grasping for false advantage.  For example the effort to convert to mutual bank charters in the first decade of this century—an option taken by over 30 credit union CEO’s, of which only one survives today.

History suggests the gift of cooperative hope is more likely to come from the passion of insiders rather than the hired experience of other industries.  These Insiders should  know cooperative history, its multiple strengths, proclaimed values and commitment to member and community wellbeing.

Moreover any “updated” vision must be fought for, not just proclaimed.   It wil require repeated articulation and conversation to define a better direction than following the status quo crowd.

Last week I posted the final video, Edition XX from NCUA’s Video Network created during the Callahan era from Oct 1981 through May 1985.   The 30 minutes is a summing up of the major internal changes that took lace during this initial period of deregulation.  Three themes stand out:  change requires will, teamwork and documented results.

But the real foundation for the successes in this final video was laid in the first film the network distributed  in cooperation with the Illinois Credit Union League: Deregulation-What Does it Really Mean?

This initial communication presented a new regulatory policy and the approach for how it would be pursued—cooperatively and in dialogue.   The panel includes the NCUA Chair and General Counsel, three credit union CEO’s and Jim Barr who was CUNA’s Washington spokesperson.

This video portrays what is required to state and implement a path of hope and progress in an era marked by uncertainty, rapid change and new leadership.

The video is an example of leadership in a cooperative system.  It is as relevant today, as when it was created over forty years ago.

Here is the link.

https://youtu.be/S09QkeNYgBU

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An NCUA Camelot Era

Everyone has highs and lows in their personal and professional endeavors.

Some  of my most fulfilling moments were the ten years Ed, Bucky and I worked together in credit union regulation.  First in Illinois, and then at NCUA for three and a half years (October 1981-May 1985).

One of the educational communication efforts we launched was the NCUA Video Network.  The initial film was in partnership with the Illinois Credit Union League, What is Deregulation?, periodic productions chronicle NCUA’s priorities and information vital for credit unions to be aware of.

The final Edition XX was called The Callahan Years.  It is a live, unscripted interview by a moderator with Ed, Bucky and me.  It responds to criticisms, some voiced about our leaving two plus years before Ed’s term expired.  More importantly, it is a discussion of the many ways the agency changed to meet the new era of open competition versus government assigned charter franchises.

This 30-minute review captures the joy and learning that happens when people work well together.  I was fortunate to be a part of a team that stayed together even as we went our separate ways after founding Callahan & Associates in 1985.

The ten years we spent learning from each other  and from movement leaders was a Credit Union Camelot experience for me.

Listen to this summary of this pivotal period in NCUA and credit union history.  It is a moment of remembrance and thanks for this special professional interlude.

(https://www.youtube.com/watch?v=DrfG5PiObB0)

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At a Merger Inflection Point-What Should Credit Unions Be Asking?

The ordinary human being does not live long enough to draw any substantial benefit from his own experience.  And no one can benefit by the experience of others. . . each (generation) must learn its lessons anew.  (Albert Einstein) October 26, 1929)

On October 20, 2025 Callahan published an analysis with multiple charts showing how mergers are changing the institutional character of the credit union system.   The graphs have ten and twenty year time lines documenting the number, size and source by peer group of this consolidation.

The analysis, Credit Union Mergers on the Rise, provides essential macro trends to track how this consolidation is affecting the institutional structure of the credit union system.  One example is that over the past ten years the average credit union asset size has increased from $188 million to $538 million.

There are many other data points one might take from the article to help frame critical questions that should be considered, but are often overlooked.  For  many view this consolidation as inevitable or even necessary.

Several Important Questions that Need Answers

The basic financial math of credit union mergers is simple:  1 + 1 = 1.  There are no added members, shares, loans, employees or outlets.  Instead in most cases a financially strong long-standing coop has turned over all of its members’ assets, equity and future direction to another organization. One whose leadership they had no role in evaluating or choosing.  Sometimes the new management’s head office is hundreds or even thousands of miles distant with no connection to the merging  credit union’s members and community.

Credit unions are built on relationships/bonds and generations of member-owner loyalty.  That commitment was their initial, “sweat equity” capital and the foundation for much of their public reputational goodwill today.

So it is important to consider whether these trends and sometimes questionable activity are helping or hurting the system’s future.  Are mergers a symptom of a system’s weakness, an inability to sustain organic growth,  or a strength?

The Need for an Industry Conversation

Other questions that could help member-owners and cu leaders better understand and evaluate what is occurring could include:

Is consolidation resulting in fewer charters inevitable?

How has the coop system’s approach to merger changed over the past decades? 

What role and benefits are third parties gaining in promoting these combinations?

What are options for credit unions who feel the need to merge?

What should member-owners know when asked to approve the transfer of their entire coop’s assets and legacy about the performance, business priorities, and  leadership of the continuing credit union?

What is the fiduciary duty to the member-owners when leadership decides to seek a merger? How should the conflicts of interest be addressed when CEO’s negotiate their own merger benefits? 

What is the regulator’s role when reviewing merger applications?  What is their obligation to the member-owners?  Are they responsible for the information owners receive when approving the Member Special Meeting Notice announcing members’ required voting approval?

Has there been any multi-year studies of well capitalized credit union mergers and the before and after performance trends over a five year period?  How did member value change? What happened to the community relationships and employees?  What are the additional immediate costs incurred by mergers?

Who Will Lead These Dialogues?

How one introduces an issue will often determine what outcomes will be proposed. With mergers occurring  at an average of three to four per week, there has been no industry discussion of the  implications and the benefit or harm to the members-owners.

Now, not later is the tme to understand the consequences of these i mergers, espcially with the dramatic increase in scale. Billions of member wealth is now being transferred for free with minimal information provided the owners who must approve.

Individual examples of multi-billion dollar cross- country combinations or of a credit union completing four merger approvals in  one month (and ten in one year) are routinely announced.  But these separate, individual events, will have significant consequences for every other credit union.

For no credit union stands alone.  All are part of an interdependent  system which creates individual  opportunities and vulnerabilities.

Merger activities are having  lasting consequences for the member-owners, their communities, and the shape of financial options in America.

The future of the coop system will be different.  These concens are not an effort to go back to what was.  Rather it is a necessary examination, as Einstein suggests, to gain our wisdom now and not wait for future generations to assess what went right or wrong.

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The Big 3 Credit Unions and Member-Owner Democratic Practice

In a January 2024 blog, I described NCUA’s approval of bylaw changes for Navy and Pentagon FCU’s that effectively eliminated the ability of member-owners to nominate directors for board openings.  (link)

In the post Who is Responsible for Credit Union Democracy, I summarized these changes:

The two largest FCU’s quietly changed the required number of signatures for member nominations for the board.  In both situations the change removed the 500-signature standard bylaw and replaced it with a percentage of members.  For Navy this new signature requirement was 26,000 and for PenFed 5,800 based on their latest reported member counts.

Now the trifecta for the three largest credit unions is complete.  In 2023 and 2024 SECU NC had contested board elecrtions.  In the first year, member nominated candidates defeated the board selected ones.  The next year the board nominated candidates won with tens of thousands members casting ballots.

In 2025 there was no contested election at SECU.  The board chosen candidates were seated by acclamation.  In this post Jim Blaine, a member and former CEO, gives a summary of this voting process (link) titled The SECU Annual Meeting:  Isn’t this a Losing Struggle?

It is not just the Big 3 who have shut down member elections. It has become the standard operating practice for all but a few credit unions.   So does it matter?  Why worry if everything seems to be going OK?

Why Voting Matters for the Future of Credit Unions in America

  • It empowers members in their role as owners. You are more than a customer.
  • It implements the democratic design of cooperative governance via member oversight.
  • It opens director leadership positions to the widest possible selection of candidates.
  • Voting gives current and potential candidates a chance to state their visions for the credit union.
  • Without a vote, the director nomination and selection becomes a “closed loop” that perpetuates existing leaders and their self-chosen adherents.
  • The Board’s standing to carry out its oversight and policy roles is not presented to members and increasingly makes directors totally dependent on management.
  • Without elected board leadership, the default arbiter of vital decisions about credit union activity is the regulator-e.g. bank purchases, mergers and even operational priorities.
  • With voting negated, there is an accountability gap that isolates credit union leaders from the consequences of their operational decisions and performance outcomes.

Voting determines who holds the political power in the credit union.  Without choice, power is concentrated in directors and CEO’s who assert responsibility but not answerability to the owners.   The credit union model becomes compromised, and leaders gravitate away from member needs and value to their views of organizational success.

Absent proper governance via director elections, the cooperative model descends into a system of autonomous, independent financial oligarchies.   They take generations of member-generated collective wealth to run their personal private organization.  Credit unions are increasingly financial islands protected by seawalls from taxation and the traditional market indicators or measures of accountability.

Managing financial wealth is an intoxicating and addictive activity.  It symbolizes and enables the exercise of power in every sector of society.   For many individuals, it is the ultimate indicator of personal success and meaning.

What was once common wealth has become privatized.  The cooperative model is merely a veneer from a prior era of innovation.  And to keep the critical advantage of no taxation.

Ultimately the perversion of this primary check and balance by coop owners will lead to safety and soundness issues where credit unions combine out of fear or greed. The public perception will be that multi-billion dollar credit unions no longer serve a unique public purpose or need.

For some this is the inevitable outcome n a society that worships capitalism and wealth accumulation.  For others, it will be an opportunity to innovate and find new ways to bring the common good to areas of personal needs.

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Federal Government Shuts Down-The Importance of Options

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

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

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

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

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

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

When Options Matter

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

The opening paragraphs:

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

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

Energizing the Options-NOW

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

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

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

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

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

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

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

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

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

 

 

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NCUA Turns to Exit Stage Right in Examinations

At the NCUA’s September single board member meeting the acting CFO announced the  agency had conducted four liquidations through the first two quarters.  The YTD loss allowance was increased by $17.6 million versus $2.0 million in 2024. $12 million was expensed as an insurance loss for June without any details (Unilever FCU?).

NCUSIF trends are not going in the right direction.

The most important efforts limiting NCUSIF losses are NCUA’s  annual examination program.

The problem  is that it is no longer annual except for selected cases.  After the Agency’s April layoffs of 20% of staff, the exam cycle was extended further for apparently stable credit unions.

But it is not just the frequency of contact, but the quality of the work and the interaction with management and board on important issues.

Against this recent NCUSIF update, yesterday’s NCUA press release was especially unsettling.  On the surface, the single board member Kyle Hauptman announced NCUA’s goal to conform agency policy with the political ideology of the current administration.

The Headline read: NCUA Eliminates Use of Reputational Risk, (link).  But the change was much more extensive as described by Ancin Cooley in a  post in which he  focuses on this paragraph:

In addition to eliminating reputation risk, NCUA has discontinued the practice of assigning ratings to the Risk Categories (also referred to as Risk Areas) for the examination and supervision program. Historically, examiners assessed the amount and direction of risk exposure in seven Risk Categories: Credit, Interest Rate, Liquidity, Transaction, Compliance, Reputation, and Strategic. 

This brief excerpt does not specify what this change means.  Will the 1-5 CAMELS ratings be affected? Will the “high, moderate, or low” summary comment on risk areas be ended?

With credit union failures and NCUSIF losses trending higher, reduced examination efforts, and continuing economic uncertainty,  is now the time to muzzle examiner judgements? Here is Cooley’s reaction:

We live in odd times.

CEOs, I know you’ve had frustrating encounters with auditors and regulators. They can feel burdensome, even annoying. But this latest move from National Credit Union Administration (NCUA) isn’t a win for the reduction of “regulatory burden”—it’s something far more concerning.

Although the headlines highlight the elimination of reputation risk, please read further. In addition to eliminating reputation risk as a rating, NCUA has discontinued assigning ratings to all seven risk categories:

• Credit
• Interest Rate
• Liquidity
• Transaction
• Compliance
• Reputation
• Strategic

Imagine someone removing all the smoke detectors from your building and telling you, “Don’t worry, we’ll let you know when we see fire.”

The purpose of these risk ratings was never busywork. At the aggregate level, they provided field offices, regions, and national leadership with a top-down view of where risk was accumulating. From a staffing standpoint, if a credit union’s liquidity risk was rated high, it signaled the need for additional expertise at the next examination.

Examiners and ERM professionals assess each category based on quantity, direction, and the quality of risk management. The point was never to penalize higher-risk profiles. It was to ensure that if you accepted a higher risk, your management practices were robust enough to handle it.

America’s Credit Unions, NASCUS, and American Association of Credit Union Leagues

How is this a win for the members and the safety and soundness of credit unions? Why do we only hear about tax status, and none of these moves requested are discussed with the same intensity?

A couple of foot notes: NCUA Credit Risk Webinar

On July 15, 2025, in an NCUA (https://lnkd.in/ednAJjCE) credit risk webinar, an examiner (Min 13:49) discussed the benefits of key concepts like risk appetite, risk tolerance, and risk capacity. Those are excellent tools for boards and executives. They’re the backbone of modern ERM.

But here’s the contradiction: NCUA is now saying those concepts are helpful for credit unions to adopt, while simultaneously discontinuing examiner use of risk ratings for the seven categories (credit, liquidity, interest rate, compliance, transaction, reputation, and strategic).

National Credit Union Administration:
Additional Actions Needed to Strengthen Oversight

On Sept. 23, 2021, the Government Accountability Office issued a report stating NCUA has opportunities to improve its use of supervisory information to address deteriorating credit unions. By more fully leveraging the additional predictive value of the CAMEL component ratings, NCUA could take earlier, targeted supervisory action to help address credit union risks and mitigate losses to the NCUSIF. As of today, one of the recommendations is still open, and another is partially addressed.

END

As Hauptman tries to burnish his reputation with the administration’s anti-government ideology, the dangers of a single political point of view determining regulatory priorities in a so-called independent agency becomes clear.

This press release is not about ensuring the safety and soundness of members’ funds or enhancing the cooperative systems critical roles.  It is simply posturing for another assignment in an administration bent on governmental disruption.

The financial and institutional integrity of the cooperative system requires a competent, active regulatory oversight. Institutions that manage financial assets for others are especially vulnerable to self-dealing.  That is why almost every form of money lending, transfer, safe-keeping and advice is subject to governmental licensing and oversight.

Without effective supervision not only will credit unions continue to be lost, the playing field will become crowded with internal and external predators trying to cash in on the abdication of, and disrespect for, regulatory oversight.