Category: NCUA

Posted on

When Leaders Lack Confidence in their Organization

Note:  This reprint of a July 2021 post reminds us of the challenge for new leaders  as the NCUA board evaluates  priorities and course corrections. (cwf)

What would you think if you learned that Warren Buffet was shorting Berkshire stock? Or Elon Musk prefers driving a Lexus?  Or Jeff Bezos doesn’t want to test fly his Blue Origin Space capsule?

None of these situations is true.  And because the opposite is the case, observers’ trust in these leaders and their organizations is sustained.

A Credit Union Example

Seven years ago, in October 2015, NCUA over the objection of board member Mark McWatters, approved a final 424-page RBC rule. This was NCUA’s second attempt to impose this new reg which was as equally unsupportable as the first.  Both attempts were universally opposed by credit unions.

One of the rationales for the rule stated in the 2014 NCUA Annual Report was “the issuance in 2013 of new risk-based capital rules by the FDIC, the office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System.” (page 12)

Certainly, an impressive endorsement by banking regulators.  However, in September 2019 the FDIC with the full concurrence of the Comptroller and Federal Reserve removed RBC requirements for all community banks under $10 billion.  Did NCUA follow its peer’s decision? No, It plodded on, kicking the can down the road even though one of their primary justifications was gone.

What the Rule Says About NCUA’s Self Confidence

But there is another insight, besides bureaucratic obstinacy, to take from the final proposal.

The agency published a two-page summary — Risk Weights At a Glance –as the final summary of absolute and relative risk of every possible balance sheet asset. Three judgments are illuminating.

Credit unions investing in the capital of the CLF have 0 risk.  Since the CLF has not made a loan for over a decade, it suggests how the agency is thinking about the CLF’s role assisting credit unions in the future.

The FHLB’s do make loans to credit unions. To qualify for these, a credit union must buy stock in the bank. NCUA determined these stock purchases should be assigned a 20% risk weighting.

Even though no FHLB organization has ever failed, the agency believes there is still a small risk.  But it is nowhere near the risk of a credit union investing in a CUSO, which requires a 100-150% weighting.

An Earning Asset of four Decades with Zero Value

But the most ominous risk is for credit unions’ 1% capital deposit in the NCUSIF.  According to the chart, the 1% deposit cannot even be counted as an asset.  It must be subtracted in full from the numerator of the credit union’s net worth and from the denominator’s total of all risk weighted assets.

It is counted as having no value despite having been untouched for almost 40 years.  It is an earning asset, withdrawable in a voluntary liquidation or conversion to private insurance. On both credit union and NCUSIF balance sheets it is carried at full value.  Multiple national accounting firms have stated this asset “fairly presents” both aspects of this transaction.

What would subtracting this asset mean for the NCUSIF’s Risk Based Capital ratio!  If credit unions cannot count this as an asset, how can NCUA include these deposits in the NCUSIF’s net worth?

One interpretation is that this is just one of many foolish aspects of the final RBC rule which becomes effective January 1, 2022. But there may be more intention than one might think.

A Scary Thought

This NCUSIF total write-off of the 1%  from net worth, like the hypothetical made up examples first above , points to an uncomfortable reality.  This is an agency whose leaders lack confidence when managing the ever growing resources credit unions provide.  And if they lack the understanding of this cooperative fund’s operations, what message is sent to credit union members?

Today the NCUSIF equity level above the 1% deposit totals over $4.7 billion.  Should a loss of that magnitude or more occur, the primary question will not be about the status of the 1% deposit, but where was the regulator?

The cumulative loss rate for he NCUSIF over the past 12 years and two financial crises, is 1.5 basis points.  To project a loss at least 20 times this recent real world experience, is deeply troubling. (2,000 percent, i.e. 30/1.5)

Is that potential financial catastrophe  why the agency wants to eliminate the 1% from credit unions’ net worth today? And then avoiding accountability for how the agency’s oversight allowed such a situation to develop?  Recall that NCUA had full time examiners onsite in WesCorp and US Central for years before both were conserved and subsequently liquidated.

Now that is a scary thought.

 

 

 

Posted on

LAW LESS NESS & Free Markets

A longstanding virtue hailed by leaders in both the private and public sectors is the power of the free market to adjudicate fair outcomes, especially but not exclusively for economic results.

It is invoked by those in regulatory positions who are charged with protecting the interests of consumers, shareholders or even employees subject to the power of large organizations.  The new NCUA chair has referred to the free market as a mechanism for the evolution of the credit union system.

Credit unions’ cooperative design and purpose were intended to be an antidote to the to excesses of capitalism.  In governance and values, credit unions were to be an alternative to the ambitions of organizations wanting to tap into the opportunities of market driven outcomes.  The crucial skill is to compete but not become the opposition.

ThePolitical Whitewashing of Free Markets

There is no such thing as a “free market.”  Different individuals and firms bring variable skills, resources and historical advantages when specific events unfold.  In numerous instances individuals and even entire communities can be at the mercy of organizations led by persons of differing motives and outlooks.  Not to mention contradictory interpretations of the “common good.”

Free market rhetoric often reflects an incumbent’s relative economic power, For those whose role is regulatory oversight, the phrase market failure is used to divert attention from their public accountability.

The free market advocates can grow to influence both local and larger markets where the legal process and oversight of market participants becomes ineffective. The result is law less ness — the absence of not just transparency, due process and fair play, but no interest protecting  the common good. Consider the explosion of data center construction in communities frequently authorized in private deal making.  And then the public backlash when exposed. (link)

An Historian’s View of the Consequences

Historian Timothy Snyder has studied the power of myths in which superheroes overcome evil doers with revenge killings.  In his listing of social mythology below he recounts the impulse for retribution and revenge when all social norms are gone.  Or, in my interpretation, when the free market is just another justification for private advantage or control.

This superhero solution is a question that troubled the Greek tragedians, the authors of Icelandic sagas, and the founders of the French and English contractarian traditions: how does one seek justice when there is no law? . . . The Greek and the Scandinavian storytellers, like many others, were aware that revenge killings, no matter how apparently justified, could have consequences that spiraled out of control, over communities and over generations. They were also aware that the alternative was law, and that law is not easy and takes orderly work to build.

The critical question when looking at najor events Is whether law less ness, coated with free market verbal camouflage, is  the driving force in the cooperative system today?

 

 

Posted on

Large Bills Coming Due for Credit Unions

The headlines scream about the new reality in NCUA’s regulatory failures.

NCUA Call Report Reveals Stunning $103 million Loss at Jackson Area FCU  (CU Today August 3)

The first paragraph says it all:  New NCUA Call report data shows Jackson Area Federal Credit Union’s financial condition has deteriorated  dramatically  following the agency’s discovery of an alleged $95 million fraud scheme, with the credit union reporting negative net worth of the $88.5 million and a negative net worth ratio of 145.4% as of June 30.  . .

The revised financials show total assets plunged. . .from $162.4 million at yearend 2025 to $60.9 million (at June 30, 2026) . . . The credit union also posted a year to date net loss of $103 million compared with $1.23 million in net income for 2025. . .(this outcome) reflects the financial fallout from what the NCUA has alleged was a years long financial fraud orchestrated by former CEO Leigh Bridges. . .

Or, the August 7 headline in CU Daily:  Just 6 Months After Opening , NCUA Liquidates African Diaspora FCU

In 2024 NCUA had no involuntary liquidations.     Since April 30, 2025 to July 2026 there have been eight. (link)

2026 08/06/2026 African Diaspora Federal Credit Union Missouri Closed
2026 04/30/2026 People Trust Community Federal Credit Union Arkansas Closed
2026 04/01/2026 Copper & Glass Federal Credit Union Pennsylvania Closed
2025 08/29/2025 Members First of Maryland Federal Credit Union Maryland Closed
2025 07/01/2025 Aldersgate Federal Credit Union Illinois Closed
2025 06/30/2025 Butler Heritage Federal Credit Union Ohio Closed
2025 06/20/2025 Soul Community Federal Credit Union Georgia Closed
2025 04/30/2025 Unilever Federal Credit Union New Jersey Closed

The Impact of a Leaderless Credit Union Regulatory Agency

As NCUA inaugurates a new Chair in John Crews, he will inherit an agency that has had no administrative or policy leadership.

Kyle Hauptman’s solo tenure as Chair was notable in its Trumpian implementation of de-governance.  The DOGE initiated practice of downsizing of staff, extended exam schedules, and even the inability to hold regular board meetings for accountability has created an environment of law-less-ness.  That is, NCUA is not able to perform its expected statutory oversight.  In financial services, this is leading to situations  in which one can only ask with the well known phrase, Who Let the Dogs Out?

The industry has taken note and the forces of greed and ambition are running amok.  Hauptman liked to describe NCUA as just a “big insurance agency.”  Now credit union members will be paying the bills for the growing demonstrated failure of government’s fundamental role of protecting members’ funds.  This increasing failure of  oversight through both policy  and practical ineffectiveness  betrays the people’s and the cooperative movement’s trust in government’s basic role of enforcing the rules and regulations.

Growing Deterioration

The April 2025 date in the above table Is significant.   On April 16, 2025 President Trump fired the two democratic board members leaving Kyle Hauptman a solo board Chair.  The agency’s first major initiative was to implement dramatic staff cuts.

May 21–22, 2025: The agency reported that nearly 300 employees initially enrolled, leading to an expected final exit of over 240 staff members.

In public, NCUA stated the workforce cuts were manageable “We’re going to manage this through modest and sensible adjustments,” Executive Director Fazio said, noting the agency is planning to carry out staff reassignments, temporary promotions, and other measures to maintain key functions. (link)

The Precursor: A 26-Year Fraud at a Federal Credit Union

Warning signs had already appeared.  In the second quarter of 2024 Creighton FCU reported a dramatic $13.5 million loss (over 20% of its assets) which  was “resolved” by merging the suddenly  insolvent credit union into Omaha’s Cobalt FCU (now Centris).  (link)

The agency explained the loss was due to decades of financial fraud by the CFO in a December 17, 2024 letter to Congressman Mike Flood from NCUA’s Inspector General. The fraud had gone undetected for 26 years.  And was only discovered after the CFO died in April 2024.  (link)  From the letter:

NCUA officials told us that fraud auditors determined that the CFO hid this $12 million deficit by exploiting the credit union’s weak accounting system that allowed him to back post, forward post, delete transactions, and hide general ledger accounts when generating reports for annual financial statement audits and NCUA examinations. NCUA officials believe the former CFO used the “Unapplied Data Processing” account as a suspense account (a temporary account that holds transactions that are not yet categorized or classified) for all transactions he did not know how to post. In one instance, the former CFO appeared to not want to show high dividend expenses, so he posted the expense to the Unapplied Data Processing account. In another instance, he used the “77777-No Name” account to offset and hide large deficits when he ran financial statements during annual CPA audits and NCUA examinations.

But instead of reviewing NCUA’s examination records the Inspector General shrugged off any responsibility to review how 26 years of federal examinations could have missed this growing sinkhole in Creighton’s balance sheet.

Not Me Worry ( by Alfred E. Neuman)

On NCUA’s examination effectiveness the IG kicks the can down the road, apparently not bothering to look at recent exam history.  In a classic Not My Problem excuse, the IG wrote: To assess the effectiveness of the NCUA’s examination and oversight processes in detecting and preventing financial irregularities, my office would need to conduct an audit. The OIG’s 2025 Annual Work Plan includes a planned audit to review the NCUA’s Total Analysis Process (TAP), which will address the effectiveness of the NCUA’s examination and oversight processes.

On the external CPA audits conducted since 1999:  We are unable to assess the CPA’s performance in this case as we have no access to Creighton’s records or access to the CPA firm’s audit records and workpapers.

The IG who signed this non-responsive letter was one of hudreds of NCUA senior staff members who took an early buyout in 2025.

What Awaits John Crews and the Credit Union Movement

It is no coincidence that each of the above examples has the word FEDERAL in the credit union’s charter.  There are more credit unions whose future financial outlook increasingly looks like they are circling the drain.

For example take this multi-year failure in CEO and board leadership at the recently merged Civic Federal Credit union.  In just one year its net worth has fallen from 8.8% to 5.8% even as assets have fallen another $600 million. The credit union continues to lose members, shares and public credibility.  Its operating loss for the first six months of 2026 grew to $47 million.  This downward financial death spiral has been underway for almost three years.

Here is just one person’s post on this spreading financial forest fire.  Where will it go to next?

https://www.secujustasking.com/2026/08/the-lgfcucivic-saga-revisited-trigger.html

This does not mean that state chartered credit unions do not have real problems as well.  But those regulatory agencies have not been caught up in DOGE like firings.  Many however still take their regulatory lead from NCUA.

The movement is at a turning point.  John Crews inherits a very flawed agency in the throes of a governmental ideology that undercuts the necessary public accountabilities of regulation.

There is a saying that “change doesn’t come from Washington, but to Washington.”  Hopefully Crews’ leadership can be the exception to that rule.  For the sake of over 100 million coop member-owners.

(Note: blog error correction from Global to Centris FCU at 5:00 PM)

 

 

 

 

 

Posted on

A Change at the Top of the Movement

There are a half dozen leadership roles in credit unions that have major implications for the entire movement.  Among these are the leaders of several trade associations,  a significant CUSO or  two, TruStage ( formerly CUNA Mutual), a couple of large credit unions who exercised public roles, and of course the NCUA Chairman.

The CEO position in any of these 6-10 positions does not confer leadership.  That  characteristic depends on the occupant’s’ ability and understanding of his or her leadership aspirations.  Another critical factor is whether the organization led by the CEO is perceived to be well run.

In almost every instance, credit unions expect these leaders to be capable administrators and aware of cooperative design’s unique role in America’s market driven economy.

One of these critical positions, the Chair of NCUA, is being appointed.  That responsibility is even ,more vital as there is no board role under the Trump administration’s view of executive authority over independent agencies.

John Crews, currently serving as the Treasury Department’s Deputy Assistant Secretary for Financial Institutions Policy is expected to be confirmed by the Senate shortly.   In terms of the experience one might like to see from a resume, there is little to indicate what priorities he will bring to the position.

This experience gap need not be a drawback.   Previous NCUA chairs have included recently defeated former members of congress and a variety of intra-governmental transfers from staff roles.

But especially in this administration’s view of presidential leadership, it is important to note what the Project 2025 Playbook states about financial regulation policy.  John Crews has worked directly for Treasury Secretary Bessent who is the key player in overseeing Trump’s policies for depository institution regulation.  It is feasible that he would function as Crew’s de facto boss.

Here are excerpts from the Project 2025 Playbook.

IMPROVED FINANCIAL REGULATION

From page 705: One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency. 

Merging Functions. The new Administration should establish a more streamlined bank and supervision by supporting legislation to merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory functions.

U.S. banking law remains stuck in the 1930s regarding which functions financial companies should perform. It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits. Doing so makes markets less stable. All financial intermediaries function by pooling the financial resources of those who want to save and funneling them to others that are willing and able to pay for additional funds. This underlying principle should guide U.S. financial laws.

Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth.

From page 706: Direct government ownership has worsened the risks that government-sponsored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles:  

  • Fannie Mae and Freddie Mac (both GSEs) must he wound down in an orderly manner.
  • The Common Securitization Platform57 should be privatized and broadly available.
  • Barriers to private investment must be removed to pave the way for a robust private market.
  • The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission.

(End Quote)

.Who Will Lead the Credit Union Movement

To succeed as a movement based on cooperative principles, credit unions require leaders with both vision and practical wisdom.  NCUA is likely to have neither under the Trump administration’s version that all policy is ideological.  Hauptman’s tenure as solo chair certainly followed that direction.

But this challenge of leadership capability is not new.  Credit unions have had major turning points in the past.   Leaders have emerged with energy and ideas that have resulted iln reforms and excitement.   That might happen at NCUA.  It has occurred before.

This time the task would seem more urgent and necessary.  The administration’s approach to policy,  pay to play, may be very attractive for some in credit union land.  For others, there is the ambition to bring new ideas to better align with member needs, not just add more to the balance sheet.

Which approach will credit unions support?

 

Posted on

When the Call Comes, Will you Be Ready?

We live in an era of deep public distrust and overt, transparent corruption-by both public and private organizations and their leaders.

The public has increasingly learned to accept publicly announced wrong doings and self-dealings.  The result is passive acceptance. The logic is these actions can’t really be corrupt because disclosure would result in accountability or at least push back bythose whose duty it is to oversee.

It’s Lonely with a Public Conscience

As these events multiply they become especially hard to oppose openly. Particularly when those in positions of responsibility, public duty and trust, take no action; or worse bless these overt acts of deceit and self-enrichment.

Taking a personal stand is very difficult when we can be accused of just increasing public division with our concerns, opposition or actions.  It is often a lonely stance, takes courage and everyone has a life to get on with.  Why confront organizations or individuals whose conduct is indefensible on any reasonable basis of fact or judgment?

But still some do question, oppose and take a stand.

Two  Communications in this Era of Open Corruption

Yesterday I received an email from a “concerned citizen” I do not know. The person had just received a Notice of Merger.  I will address the pro forma merger notice and disclosures in another post.

This is what the person wrote of his general concerns:

I am writing as a concerned citizen regarding the proposed merger of . . . This transaction warrants public scrutiny due to serious questions about executive accountability, board oversight, and whether members’ interests are being prioritized.

After presenting the details in the Notice that troubled, the writer states:

I believe the following questions warrant independent investigation:

  • What decisions over the past several years led this Federal Credit Union to this position?
  • Did the Board provide adequate oversight of executive leadership?
  • How were the executive retention payments negotiated and approved?
  • Were alternative options considered before recommending a merger?
  • How does the Board justify these compensation arrangements to the member-owners?

The writer closes with this sentence:  I believe these circumstances raise legitimate questions about governance, accountability, and fiduciary responsibility that merit independent reporting before members vote on the proposed merger.

In a calm, thoughtful and factual analysis (not included) this common citizen is saying the system is broken. Members are given no common sense understanding or factual basis to decide on this merger to end their charter and turn over total control to a distant organization

The SAFE-BECU Announcement

The second communication was BECU-SAFE’s joint public announcement of their proposed merger “approval’:   The National Credit Union Administration, the Washington State Department of Financial Institutions and the California Department of Financial Protection and Innovation have approved the proposed transaction.

Those who follow the multiple posts and public comments on this event at SECU-Just Asking know there has not been a single objective fact or specific member benefit presented or documented,  Instead only vague future promies are used to justify the  transfer of this 85 -year, $4.5 billion credit union franchise to the total control of a third party organization with no local standing or organizational commitment.

This is a public robbery,  One  orchestrated by those charged with the duties of care and loyalty and then “approved” by those appointed to protect the public member-owner interest-the state and federal regulators.

This combined private and public leadership abdication is justified by this sentence: The final step is approval by SAFE’s membership, with voting information expected to be distributed in the coming weeks.

Except under California law,  a merger requires the approval of the majority of all members, in this case over 245,000 owners.  That outcome would never happen.  Both credit unions know this.  Therefore they will have negotiated an “understanding” that instead of this specific approval standard, the CDFI will be asked to waive this requirement.  SAFE will request CDFI accept the outcome regardless of how many members vote asserting that the majority of those voting approved the merger.

The reality is that 98% of the vote is by ballot. In that Member Notice mailing the  package of information  will contain pro-merger marketing  generalities previously  issued,  These PR claims will be vacuous in  substance and facts. No contrary opinions provided,  nor the formal legal agreements between the two boards.

What To Do?

The deep stench of overt corruption and the failure of public and private accountabilibty hangs over credit union land. We are living in a time when anything goes.  These self-dealings and outright takings of generations of members’ accumulated wealth is a decade long effort. The stakes are just getting larger.  California will be the next happy hunting ground for bigger and bigger deals.

Citizens are now seeing daily instances of bad behavior, openly proclaimed, overtly defended and without any norms or options as a check and balance. These “concerned citizens” are aware, but where do they turn for an “investigation. “

No Guardrails Exist

One of the most disappointing failures is those in positions of authority to even  acknowledge the facts of these mutually privately organized robberies of members’ accumulated wealth and future direction.  Here is just one of many analyses posted on SECU Just Asking that shows a side by side current financial comparison in which BECU shows lower performance than SAFE on every vital measure.

These predatory plunderings of  the credit union system seem to have free rein. Billions of member assets get transferred to outsiders’ control with no concrete owner benefit or return-except to the dealmakers. The rule of law, the lack of regulatory oversight and missing director accountability demonstrate the absence of any formal or informal.constraints.

The consequences of this system-wide corruption can be ignored until a tomorrow that never seems to come.  Then one day tomorrow comes.   Someone decides not to be silent, speaks up and begins truth telling.

It could be a lawyer who still believes in the ethical norms of the profession versus the political and commercial benefits of going along with public wrong-doing. It could be a director rising above the expected uniformity of the self-selected board culture in which the person belongs.

Or maybe it takes a Senator to ask publicly why the whole member owned cooperative model has become a cesspool of deals that sell out members’ past success and future direction.

For it is not institutions that will save our rights, liberties and properties; rather, it is the individuals within those institutions who decide to stand up for the right and the rights of members.  Or perhaps the members en masse take up their pencils or pitchforks to say we want to take back our credit union.

 

 

Posted on

Credit Unions Using History to Prepare the Future

Following is an introduction to a video lecture by historian Timothy Snyder  titled “What is history?”  (link) 

We speak often about history, but we are careless with the past. When we choose not to know what has happened before, we are also choosing not to influence what will happen after.

If we don’t care about history, we find ourselves in an eternal present, denied any sort of imagination about the future, and nurtured on lies about a past in which we were innocent.

History does not mean these misleading tales; it means a search for knowledge, using a certain set of tools; it means a process that enriches and humanizes, one that allows us to name things by their proper names.

Implications for Credit Unions

Whether you are a student at Western CUNA Management School or elsewhere, one purpose of education  is to understand the road to the present.

These stories are vital for both individual credit union success and for creating system-wide priorities.

For example, beyond the founding stories of committed credit union organizers keeping records in a drawer at the work site, how were future decisions on FOM expansion and leadership changes made in different eras?   What part of the legacy did the credit union preserve and what no longer applied?

Understanding an organization’s past events, both successes and disappointments, provides a perspective for future options. Most major decisions involve assumptions about options-those considered and others overlooked.

How Are National System Priorities Set?

The same benefits are available at the national level for system issues such as regulatory oversight, legislative changes in statutory authority or enhancing the cooperative purpose in American society.

Rarely do we look back to learn from the past.  Regulators do not  conduct postmortems of failures preferring to move on versus evaluate where change might be needed.  For example think of  instances when NCUA has described credit union failure as due to “fraud” or “lack of board oversight” instead of asking why these multi-year deficiencies went undiscovered in exams.  Using fraud or other credit union failure excuse deflects from  regulatory accountability.

How are national legislative priorities determined?  For example, the recently branded Credit Union Board Modernization Act included  in the 21st Century Road to Housing bill, implemented without the President’s signature?

The legislation transitioned federal credit unions to a “risk-based board meeting schedule” giving well-managed institutions the flexibility to meet just six times a year (with at least one meeting per fiscal quarter) instead of the previous blanket monthly requirement.

The legislation also targeted requirements for newer/lower-rated credit unions as follows: New (“de novo”) credit unions and those with lower supervisory soundness ratings (composite or management capability ratings of 3, 4, or 5) must continue to meet at least monthly to ensure proper risk oversight. (AI)

This is modernization?   Allowing boards to meet just six times per year is based on an NCUA process that reduces examination frequency for higher rated credit unions!   How do either regulators or boards  understand the state of risk by less frequent contacts?  And when something untoward happens, the solution is to meet more often?

Do either the volunteers or the regulators believe less frequent contacts are a “modernization” step?   Looking  at the recent and past failures (Jefferson Financial, Creighton, Unilever, etc.) and the two year plus NCUA exam cycle heading into the 1980 financial crisis, suggest the real problems do not arise from too many meetings.  It is just the opposite..

This “modernization” feels like a  PR effort to  convey legislative activity rather than addressing substantive  issues of volunteer and regulatory effectiveness.  Regulatory and board oversight are management and leadership issues, not a regulatory burden to be remediated.

History suggests the potential for real congressional change happens about once a decade.  The three person board (70’s), deregulation (80’s), Member Access Act (90’s),  and the financial crisis (00’s).

There are fundamental issues about the future of cooperatives including the role of the NCUA board (or even a separate coop federal regulatory system), the rights of members, the purchase of banks, the dearth of new charters and the merger payoffs schemes fueling consolidation.

With a knowledge of the past we know there will be an opportunity for major legislative change to further coop purpose and effectiveness.  But is anyone even thinking about that plan?

Could that effort be a topic for students in the final year of their credit union educational experience?  After all, it’s their professional future they would be shaping.

 

Posted on

Freedom and Credit Unions as America Celebrates Her 250th

One of America’s founding ideals is captured in this poem with its familiar and oft-quoted  final lines from her “silent lips:.”

The New Colossus

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

Emma Lazarus, written in 1883, on the Statue of Liberty

Freedom, Liberty and Opportunity

One of many possibilities beyond the  “golden door” was begun some 25 years later during one of America’s earlier progressive reform eras.  St. Mary’s Bank, the first credit union,  was organized in 1909 by a priest to help workers in a factory  with small personal loans.  From that small seed, today’s cooperative financial system has grown to $2.5 trillion serving tens of millions of American consumers.

More than seventy years later, a new era of credit union potential was launched. This new chapter was described  by the Chairman of NCUA in his Three Freedoms speech to the Massachusetts CUNA league’s Annual meeting on November 3, 1984.

Freedom is commonly understood to be free from something that limits or controls an individual’s actions by fear, want, arbitrary rules or sometimes coercion.

But freedom also  enables individuals and society to undertake collective efforts essential for living in communities in which interdependency is crucial for the well being of all. This “empowering” opportunity is how Callahan  described the transforming outcomes of deregulation for the credit union system.

The changes in government’s role had provided a new context where credit unions were enabled to make decisions not previously open to them.  The upshot of these multiple efforts were described as three freedoms

* Freedom of security: credit unions have their own unique cooperatively structured  insurance safety net (NCUSIF) and liquidity fund (CLF).

* Freedom to compete: credit unions could now make their own business decisions on products, services and interest rates for members;

* Freedom to serve: credit unions now decide who their membership will include (FOM choice).

Cooperative  design combines individual choice in an interdependent-cooperative financial system founded on self-help, self-governance and self-reliance. Not private capital or ownership  or government subsidy.

By 1984, the foundation had been set for a quarter century of  deregulatory leadership by cooperatives until the regulatory backlash from the 2008 financial crisis.

With its focus on personal financial opportunity, credit union purpose promotes  the country’s founding pursuits  of life, liberty and happiness.  Cooperative choice is a special American innovation entered though Lazarus’ golden door.

A Sleeping Giant Within the New Colossus

In his many credit union presentations, Ed  Callahan described credit union’s future potential as a “Sleeping Giant” or “America’s best Kept Secret.”

This was also a vision in an American folk and labor protest song written in 1948 by Les Rice.  He was an apple farmer in Newburgh, New York, who also served as president of the Ulster County chapter of the Farmers Union.

He wrote a song out of frustration during the post-WWII years. As small-scale farmers were being squeezed by large agricultural corporations that dictated the prices for produce and overcharged them for supplies.

The lyrics in The Banks Are Made of Marble contrast the  labor of working-class people, including farmers, seamen, and miners, with the vast wealth of the banking and corporate elite.

The repeating chorus points out the stark inequality: the vaults are filled with the wealth that the working class sweated for, while real people struggle.  The last two stanzas predict the rise of banks owned by the people:

I’ve seen my brothers working,
Throughout this mighty land,
l prayed we’d get together,
And together make a stand.

Then we’d own those banks of marble,
With a guard at every door,
And we would share those vaults of silver,
That we have sweated for!

(https://www.youtube.com/watch?v=umMTkHnnJag&t=13s)

 

.

Posted on

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)

 

Posted on

The Limits of Virtual Meetings and Relationships

One of the vital initiatives  Ed Callahan took as Chairman of NCUA was to take the monthly public board meetings “on the road.”  Over a period of two and half years, public  board meetings wewre held in all six regions. Often in locations that coincided with already planned league or national conferences.

For example the July 1982 board meeting was held in Chicago  at the same time as NAFCU’s annual meeting. That was the same weekend that the Penn Square bank failure occurred.  Because of credit union investments with uninsured Penn Square Bank CD’s, the Board meetingt attracted widespread interest.

Constituents Meeting Their Regulators

The purpose of these outside the beltway public events was to give credit unions a chance to attend meetings and see the board at work. In addition the visits often involved credit union conversations, local newspaper interviews, all which raised the profile of the credit union system and  the movements embrace of deregulation. The visit from DC raised the profile of an areas  credit unions and their contributions to their  their communities.

These interactions created awareness of NCUA’s activity and leadership.  It gave senior DC based staff direct conversations with credit union leaders on their home turf and in the various economic circumstances around the country.

Each board meeting was followed by an open press conference where Chairman Callahan and staff would answ questins from the media and credit union attendees.

Today’s Public Meetings

Yesterday’s NCUA board meeting was broadcast live, an effort going back years and accelerated by COVID’s cancellation of inperson events.  It is a practical way for many to watch a distant public meeting live or later by video.  While interaction is not sought, the slides and other presentation data can be downloaded by viewers.

Decades later this board live broadcast have replaced the on-the-road visibility which was discontinued after Chairman Callahan’s tenure ended in 1985.

But does it make a difference whether Board meetings are viewed via digital broadcast or in person in a physical serrting?

Why In-Person Matters

Tim Calkins is a marketing professor at Northwestern University’s Kellog Management School.  He uses remote learning sessions in both his class room lectures and private consulting assignments.

The Covid epidemic nade virtual delivery a necessity.  The use of remote, live virtual meetings has continued as an accepted option for many organizational inernal management meetings as well as public events such as member annual meetings.  Sessions can be  interactive and seemingly similar in content to in-person events with the same purpose.

Moreover, virtual  events can be a more effective use of time by both presenter(s) and participants.  No travel, recordings can be made at once, and AI edit summaries produced.  The reach can be  unlimited by audience size, location, or time zone.  What’s not to like?

Following is Tim Calkins’ assessment of why in-person still brings benefits that virtual sessions cannot duplicate from an article he posted last week:

The Project
Over the past quarter, I’ve had the chance to work with a leading company on a competitive situation. There were new entrants in their industry and the company was formulating a response. This was partly a strategy question and partly a political question: getting the team and the senior people on board.

I did the project remotely. I taught a class session for the team on Zoom, had multiple phone calls and then participated in two team planning sessions in a hybrid format.

The Problem
The project is winding down, and I’m not feeling great about it. I think I made a positive contribution, but not as much as I could have, for a very simple reason: I wasn’t there.

This wasn’t a problem for the class session; I can teach effectively on Zoom. It was definitely a limitation in the work session.

There were lots of problems with being remote. The first issue was that I couldn’t hear much of the conversation; I was picking up about 60% of the discussion. I could follow along but I missed some of the context. Then, it wasn’t easy for me to jump in; I didn’t know how I was showing up in the room, so I found it awkward to make a comment. I also couldn’t read the room. I couldn’t see how my comments were being received. Were people nodding and agreeing? Or rolling their eyes?

Perhaps most important, I wasn’t there for the open times: before the meeting, during the breaks, after the meeting. These liminal times are critical when it comes to influencing and building relationships. During a break one can follow-up on a comment, ask a question to clarify a point or just build a relationship.

In hindsight, I should have insisted that to take on the project, I had to travel to the company for the key meetings.

I didn’t do this because my schedule has been hectic, so travel would not have been easy. And the company didn’t request it; they routinely did hybrid and remote meetings.

The Learning
My takeaway is simple: don’t do a strategic project if you can’t be physically present.

I don’t need to take on company projects; I only accept a new program when I think I can add value and will learn something.

Going forward, I’ll pick and choose with a bit more care. I’ll still teach remotely, but I’ll only do strategy working meetings when I can be in the room.

The Opportunity for NCUA or Any Board with Public Accountablity

Might a new NCUA Chairman revisit the idea of taking Board meetings on the road?  Such events could accelerate relationships, learning about local credit union circumstances and most importantly, building trust that can only be created person to person.

Posted on

Kyle Hauptman’s Final Call as a One-person NCUA Board

If Senate hearings proceed as planned and Trump’s nominee for the next NCUA chair is approved, todays board meeting will be Hauptman’s final time as NCUA’s solo leader.

As he departs,  NCUA situation is like a suitcase without a handle, or wheels.  The agency is being led by a single person, not the prescribed board.  Its operataing capacity has been reduced by a DOGE induced, staff designed elimination of 20% of its workforce.

Flooding the Zone

Hauptman’s major initiative has been to “flood the zone” with over a dozen regulatory revews  addressing such urgent issues as banks purchase of credit unions versus the operational realities of credit unions purchase of banks.

The agency continues to publish  a repeating loop of bureaucratic processes such as banning people from further activity in credit unions or periodic issuance of credit union data.  When the nexr administrator opens the suitcase, he is likely to find little addressing critical cooperative  or administrative management issues, e.g. the effectiveness of agency examinations.  One indicator is the growing list of summary liquidations from sudden discoveries of significant, long term large operating deficits.

Hauptman has held board meetings “only as necessary.”   His solo tenure of almost 15 months is an example of the shortcomings of a single administrator  without either credit union context or regulatory experience.  However that resume gap is not unique to him.

The Knowledge GAAP

Such appointments, especially as Chair,  mean the learning curve for new leadership is extended and  there is total dependence on the bureaucracy’s agenda.  More critically, there is a lack of relationships and knowledge of the credit union system and its different leadership elements.   It narrows the understanding of issues from both an historical perspective as well as key differences about current system priorities.

The result is that the cooperative system’s uniqueness and capacity are underestimated.   Critical issues are viewed from the more familiar perspective of the banking system.  And the siren call of some lobbyists for the false standard of “parity” becomes a basis for decisions.

A Vacuum in Dual Regulatory Oversight

There has been a vacuum in regulatory leadership at both the state and federal levels for some time.  It is hard to think of a comment or action taken in either system that addresses important trends and issues in a considered manner. The issues silently observed include purchases of banks, the merger frenzy driven by CEO payouts, the absence of real member governance rights, and zero transparency in credit union strategy and cooperative accountability to owners.

Leading NCUA is not a one-person job,  It requires  both administrative oversight plus  constant  dialogue and initiatives with credit unions, collectively and individually.

An Empty Suitcase

Right now NCUA’s suitcase is pretty light.  It may be easy to lift without a handle.  But sooner or later the movement will experience the consequences of a regulatory system that  has no cooperative agenda or engaged oversight.

As the regulatory grasp and  staff effectiveness erode, this will  create a series of reactive responses to ideological/political priorities or to inevitable external problems or crisis.  The system will be at the mercy of events without informed and committed regulatory leadership.