Category: NCUA

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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.

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Disrupting Credit Unions to Again Become a Movement

(Following are excerpts from exchanges between several CEO’s and a person, quoted below, interested in NCUA board openings)

Yesterday I was reminded about the fever of the small business entrepreneur to state their case in the wrong way that is,  the market capitalization (valuation)  of their firm.  

Their need is to be seen as an initiative or startup with the vision of selling the firm.  The goal of inflating the value not for the motivation of living the journey forward, but for being accepted by an audience handicapping their firm’s success and relevance to attract outside observers.

This is not a good look for cooperatives. Their “worth” was never meant as one ready to be traded, abandoned, or evaluated for observers who have no role building the firm.

The Market’s View

Once our industry started to be valued through the eyes of outsiders as a financial marketplace commodity, we were on the path to attracting all the trappings (inside and out) of those who think like commodity brokers.  These market driven criteria have a hard time with the ideals of community ownership (virtual) where acting and living the purpose is far different from cashing in.  

We sold out the magic of financial cooperatives not for the sake of being understood for our contribution and confidence in people acting together.  Rather the goal became putting a number on who we are.  Cash in, pay me, liquidation values, what was the other guy worth?  We strived to be evaluated and on par with ideals that are not the drivers of our member-owners’ success.

This transformation in outcomes is overseen by an out of touch NCUA and professional agents using criteria and motivation that will distort cooperative advantage for decades to come.

We need to hone the collective lens through which we set our vision for a new generation of leaders and oversight which will inspire cooperative entrepreneurs and the vesting and enthusiasm of American citizen owners.  

The Next Steps

  1. Call for the end of the NCUA – start a movement to highlight the fact that CU’s are not a government burden but an independent system wishing for autonomy.

1.a Separate the deposit insurance fund from government regulation and supervisory oversight.

  1. Take the newly separated cooperative insurance fund administration and refocus it on credit union success and nurturing innovation and leadership.

2 a.  Support a public initiative to prioritize league/trade organizational formats to return to advocacy and away from prostituting for commissions!

  1. Start a movement for cooperative entrepreneurial skills and measures that support CU differentials – in accounting, human resource., asset management, and network infrastructure and execution.  Surge collaborative business design initiatives.

Start something worth calling a MOVEMENT again.

On Mergers

  1. Reclassify merger into two transparent market types.

– rescues (with specific criteria)

– mergers for operational gain

  1. Announce a moratorium on mergers coming in 6 months.
  2. Publish an immediate effort for new rules in merger processes and due diligence by members and boards.  Announce new guidelines for explicit tactics around cooperative entrepreneurial ship, consumer-owner engagement goals, and programs for professional compensation over asset enrichment and gains.
  3. Moratorium in place for 12 months.  
  4. After 12 months – implement the new processes.

Your thoughts?  Ideas that certainly fit the times, not the status quo.

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An NCUA Board Agenda To Meet the Times?

When announcing the three agenda items for July’s solo board meeting, Chairman Hauptman closed with this affirmation: As always our mission is to protect the safety and soundness of the credit union system and we are best equipped to do this when we understand how credit unions interact with new technology and products.” 

While “new technology and products” may make interesting topics, the key to knowing if the agency is best equipped would be updates on the following issues:

  1. What is the status of the staff downsizing? The final number of departures?  Who fills the primary roles in the Chairman’s office and in agency critical responsibilities? What are the top priorities? What organizational changes have been made?
  2. What is the status of the examination cycle? How many credit unions will receive an annual exam?  How many will be deferred?  Exams are the primary tool that protects the safety and soundness of the system.
  3. Chairman Hauptmann expressed concern about increased credit risk. The first quarter data suggested improvement in most areas of financial performance. Can the E&I staff update the industry with specific trends or examples that the industry should be aware of?

This update would also be an opportunity to discuss the recent increase in liquidations including the abrupt closure of Unilever FCU on April 30.  Why is this occurring versus mergers or workouts?

  1. In the area of supervision policy, it would be helpful for updates from Regional Directors about their process for approving, or not approving, credit union purchases of banks. Several announcements of “definitive acquisition agreements” have been made by credit unions, only to have the initiative quietly dropped months later.  See Sabine Bank and TDECU’s announcement in June.  What are the criteria that credit unions must meet for purchase of a bank?

The Announced Agenda for Thursday’s Meeting

The NCUA’s three topics are briefings on the Central Liquidity Fund, NCUA’s Ombudsman, and artificial intelligence.  The first two would seem to be remote from any current issues.

The CLF has not made a loan since 2009.  In the liquidity challenges caused by the Fed rate runup in 2023-2024, all credit union borrowing went elsewhere.   The CLF continues to pay a below market rate to shareholders and to add to its retained earnings even though it has no risk.

The key to any future role is not a change by Congressional legislation (a repeated board excuse for inactivity) but rather the CLF’s willingness to work with its credit union shareholders on projects for member benefit.

As for the ombudsman briefing, I don’t recall this ever being a board agenda item.  Is this just to demonstrate an activity that DOGE missed?

Artificial Intelligence is a wide open topic.  Many credit unions are using bots for chat.  Some are using AI applications for internal edits and communication efficiency.  Several credit unions have announced investments in fintech AI initiatives.

It might be helpful to know how NCUA has used AI with specific cases and its effectiveness.  If the board topic is just a general presentation, that approach can be found at any credit union conference today by experts in the field.

The Role of Board Meetings

Public NCUA board meetings are an opportunity for accountability, agency management priorities and presenting a vision for how the agency and credit unions can work together.

It feels somewhat incongruous for a single chair, who is supposed to be overseeing the staff, to lead a dialogue to present different ways of thinking on topics that would arise from a full board.

In this time of government downsizing, unresolved NCUA Board status, and continuing economic uncertainty, a dialogue on the state of the Agency would be helpful and encouraging.

Will these topics meet that goal?  If the meeting falls short of this task, it might be helpful to ask credit unions about their issues for future meetings.

The Chairman recently took this approach on  crypto custody via  LinkedIn post.  It might be a way to stay relevant and supportive in NCUA’s mission of protecting credit union safety and soundness.

 

 

 

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A Past and Present Story to Make Every CU Member Proud

A three year old credit union with just 8,000 members received the movement’s highest honor for “Outstanding Achievement” in the 2003 Herb Wegner annual award dinner.

Chartered in February of 2000, in three years the credit union had only $11.0 million in assets. But it was powered by passion, vision and a vital mission.

This excerpt from the Night of Stars video is Chairman John Herrera’s acceptance speech.

In just eleven minutes it is a timeless and powerful message for the difference credit unions make for members, communities and the country.

Several moments to note:

  • The size of the credit union’s “family”on stage with him;
  • His gratitude to the many credit union supporters in North Carolina who helped the startup–at one point he asks those in the audience to stand.
  • Two iconic credit union leaders on stage with his board and staff, Martin Eakes and Jim Blaine (around minute 5:00) who played special roles in this new charter’s progress.
  • His comments on the needs of the country’s 28 million new immigrants: “there are no illegal humans.” (around minute 9:00).  A message for today.

(https://www.youtube.com/watch?v=T9UfOhtljws)

This talk is as relevant now as it was in 2003. It shows the collaborative capability of credit unions to respond to critical human needs.  Service was an essential factor–the staff speaks five languages and although when hours are from 7:00am to 7:00 pm on Mondays and Fridays, the credit union doesn’t close till everyone in line is served.

Latino Community’s Example Today

For the next two decades, Latino Community has been one of the fastest growing credit unions in America.

At March 2025, Latino reported 133,000 members served by 320 employees in 15 branches.   It has a loan to share ratio of 114% with 75% of the portfolio in real estate loans.  Its net worth ratio is 22% augmented by $99 million of subordinated debt.  Without the debt, the equity ratio would be 13.5%.

New credit unions are rare.  Soul Community FCU, chartered by NCUA in December 2024, was closed six months later by the agency.

The capacity to begin new credit unions still exists.  The needs of individuals and communities is as great or maybe even greater in terms of the nation’s wealth inequality.

What is lacking is the spirit at many levels in the coop system to join with and support the passions of the approximately 100 new charter applicants and/or inquiries resting at NCUA.

One of the persons who assisted the Latino start up was Jim Blaine, then CEO at SECU.  He describes the reason this effort succeeded as follows:

In 2000, SECU joined with a host of community activists, churches (the local Catholic Bishop), state/federal regulators (especially NCUA’s RD Alonzo Swann), and numerous other credit unions to help charter Latino Community Credit Union. It was a remarkable cooperative effort. Our unserved and financially at-risk Latino neighbors were the challenge, community was the answer. 

Each group brought a unique expertise but shared the same purpose. SECU provided the operational systems and “back office” support which gave the staff time to learn and grow – time to focus on their community – without the threat of failure.

SECU also sought low-cost deposits for lending from credit unions nationwide; the credit union community responded with over $10 million. Folks often miss what’s most important about LCCU.  Latino yes, but  a credit union community most! 

Would it be so today!  Go back and listen to the last two minutes again for a message that should  be close to everyone’s heart now.

 

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Public Hearings to Correct the Merger Free-for-All

The credit union system faces a major challenge to its values and identity in the capitalist-inspired takeovers via merger of financially strong, long-serving credit unions.

The process has been distorted by leaders with member-owners having no meaningful role at any step.  The so-called member vote is a charade.  But regulators are scared, intimidated or just simply impotent to stop the self-dealing, self-enrichment  and sometimes, outright corrupt practices.  They hold a fig leaf, well the members voted for it,  to hide their private unexamined approvals of the official disclosures required in the Member Notice.

What is to be done?  There is one very simple step in the process that would both address the lack of transparency and the absence of any real member-owner say.

The Broken Merger Process

When the updated voluntary merger rule was passed in2017, disclosures of special payments was supposed to fix the outright self-dealing by senior managers used to induce combinations of strong charters.  See The Art of the Steal.

But the process was fundamentally flawed.  When implementing the rule, NCUA placed itself in the sole role of protecting the members’ “best interests.” It gives final approval to the required disclosure in the members’ official meeting Notice. This is before members have any input let alone facts about the reasons and plans for the transaction.

Today, two healthy credit union CEO’s announce their intent to combine for a brighter future, but then the process goes backstage.  Occasionally there is a general  update  or two several months in, saying the credit unions are working on it.  The IT in reality is getting regulatory sign off on what to tell the members when calling for their vote to approve.

The  NCUA is  acting as an  in loco parentis position about what members should know to approve their charter transfer.  The minimal mostly marketing information in the official Member Notice, will be  the first and only time members learn any official details.  But the CEO’s now have the OK to proceed with the vote knowing this content is all they have to p;rovide as the regulators have already signed-off on the transaction.

These Notice disclosures are proforma generalizations, a listing of locations and  with merger reasons sometimes copied from a previous application.  There is no meaningful financial or business content that a concerned owner might need to have for an informed decision.

If members are upset when the required self-dealing information is presented, they are effectively powerless to do anything about it.  They are just individuals fighting an entrenched leadership with all the resources needing only a margin of one vote and the deed is done.  99% of mergers that go to a vote are approved.

These are not votes about a choice. Rather they are presented as a mere administrative act to ratify  decisions already made and approved by those in authority.  Decisions made without any owner input or options in the matter.

There is no secret about the lack of any member role or benefit in the majority of these ;privately negotiated deals.  The credit union merger arena has become a Roman amphitheater where  lions and beasts prey on unarmed Christians.

But there is one simple event  that if added to the merger steps could change the entire process, restore opportunity for member participation, and make the member voting process more informed and democratic.

Resolving the Merger Madness with Public Hearings

The solution: require that within 10 days of mailing the Member Notice, the credit union must hold a public hearing open to all members in person and online.  The CEO and board initiating the merger could present their plan and attendees could ask questions.  Members, the press, community organizations, sponsors and other interested parties would have a right to participate.

The hearing would be led by a hearing officer appointed by the regulator who would moderate the agenda and make a record of the meeting, to be available for all. This public step would be required for all credit unions that have at least 7% net worth.

Whose idea is this?  It’s NCUA’s.   On July 3rd the agency posted a notice of a public hearing for an FOM request.  The notice outlines very elaborate procedures, registrations, deadlines etc.  However a merger hearing need not be this bureaucratic. Credit unions are used to holding member meetings as a standard bylaw annual requirement.  The only difference is that this event would have a neutral moderator and be open to all members and the public.

Public meetings with those in positions of leadership is part of America’s democratic tradition.

NCUA’s Pioneering Example

NCUA initiated the practice of open meetings, not just in DC, but across the country.

On May 20, 1982 the NCUA broad met in Boston’s Faneuil Hall marking the first NCUA meeting held outside DC.  This was part of Chairman Callahan’s grass roots effort to bring the agency closer to the credit unions and members it supervises.

Left to right  at board table:  Chip Filson, Director Office of Programs, Rosemary Hardiman, Board Secretary,  Chairman Callahan, Vice Chair P.A. Mack, and John Otsby, General Counsel

These on the road meetings continued throughout Callahan’s tenure.  The second meeting was in July 1982 in conjunction with NAFCU’s Annual Members Meeting in Chicago, Ill.  It also was the week after the largest bank failure, Penn Square, to that point in FDIC history.

NCUA staff not only participated in this monthly board meeting but also held an open press conference following to answer questions on credit union’s exposure to  uninsured CD’s placed with the bank.

I can still remember the first press question:   Does the Penn Square failure  mean NCUA will propose a rule to limited credit union investments to the $100,000 insured limit?  It was a directed at the deregulation policy of the NCUA.  The answer was no.  But we also outlined the help that would be provided by the CLF and NCUSIF 208 assistance if necessary.

These public board meetings were held in each of the six regions on a rotating basis.  They often coincided with League Annual Meetings or other national industry conferences.  Regional senior staff were part of the presentations.  The local press was notified. Sometimes a new charter would be presented by NCUA in person to the organizers.

The effort was to promote the democratic, member owned system in all of its multiple  capacities.   It  introduced NCUA and the credit union option to the public press in cities across America. For many members, it was their only chance to meet and chat with NCUA senior staff in open dialogue.

Credit Unions:  Made in America

Public meetings are part of America’s democratic character and practice.  Norman Rockwell captured this town hall spirit in his Freedom of Speech, a part of the Four Freedom’s WW II poster.

Public hearings enable public accountability.   The “member special meeting” that wraps up the merger process on the last day of voting is anything but a public event.  The votes are mostly by mail ballot sent along with the initial Meeting Notice—urging a Yes vote.  There is no way for persons to learn or hear the details that would make the process meaningful with different points of view.

Public hearings are the easiest, most immediate and democratic way for members-owners have a say about whether their charter and relationships should be sold to a third party.  The hearings require no NCUA board approval.

Members should have the chance to play a real role in mergers  and not merely  be passive ratifiers of decisions by those in authority.

Whether a credit union believes that mergers are  inevitable or harmful to the future because of the shenanigans  now occurring, everyone should be in favor of giving the owners a real voice in this live or die decision.  Let the Regions get on with it.