Chip Filson
“There are some serious disconnects going on, ones that imperil the safety and soundness of credit unions. One is the disconnect between members and their credit unions. The other is between credit unions and their regulators. . . Regulatory systems are bureaucratic and not market driven. The regulators are not so cognizant of just how rapid the changes in the real world are. They are focused on a bookkeeper’s definition of safety and soundness.”
Ed Callahan, Callahan Report, May 1999
Maine’s first credit union, Telephone Workers, founded in 1921, is now Infinity FCU with $341 million in assets. Since 2019, the credit union has been pursuing an out-of-state merger. Its latest effort is to combine with the $1.2 billion Deere Employees CU in Moline, IL, over 1,300 miles away. The reasons for this unusual combination were explained by Elizabeth Hayes, CEO, in an interview reported by CUToday on January 31, 2021.
Among her comments in the article are the following:
Hayes said when local credit unions merge there is often “overlap” that can reduce the effectiveness of the combination.
“Merging with a credit union out-of-state gives you advantages,” Hayes stated. “One is the increase in intellectual capital. I can’t stress that enough.”
Hayes said with the out-of-state combination there is going to be no reduction in offices, no reduction in staff, and the chance for her existing 90-person team to be part of a larger organization with greater opportunities to grow and remain with the credit union.
Infinity FCU will keep its name and local control. Hayes will stay on as Maine market president.
Hayes said keeping the credit union’s name was important to Infinity. “We can keep our brand, which is important. There are a lot of members who feel very vested in their credit union and they will continue to feel vested with Infinity.”
Infinity does not need a merger to be successful, said Hayes, “We are financially sound with 9.71% capital. We’re growing and we have a strong, young management team. It’s not like everybody’s retiring. The difference here for us has been it’s a strategic move to find a partner that allows us to compete.”
Increased local competition drove Infinity a few years ago to begin considering a merger as a growth strategy. “And as I said, one of the things we decided on is that we didn’t need to be necessarily the surviving credit union. But we wanted to have local control of our brand and over our products and services.”
Hayes said the fact that Infinity is proposing to merge with another CU in Moline has nothing to do with wanting to become part of the Illinois market.
The themes of independence and local control are repeated on Infinity’s website under merger FAQ’s:
Infinity walked away from the Vibrant 2019 proposed merger, “because it would not have allowed us to maintain local control.” And, “Infinity is in the fortunate position of being independently strong. . .”
“There will be no reduction in the number of employees in Maine. . .Maine’s interest will continue to be represented by senior leadership and board members living in Maine. . .we recognize the importance of local control and maintaining Maine’s distinct character and flavor. All five Infinity FCU branches will remain open.
The products and services you use today will remain unchanged. You will have access to the same online banking and routing number.”
As presented in the merger FAQ’s: “Deere Employees Credit Union serves John Deere’s 60,000 world-wide employees. Membership is an exclusive benefit for current and retired Deere employees, John Deere Dealers, contractors, employees of their wholly owned subsidiaries or joint ventures of John Deere , and the immediate family members.”
Under the credit union’s logo is the phrase: Exclusively for the John Deere Family. The credit union’s nine board members are all current employees of Deere and Company. Kurt Lewin has been President CEO of the credit union since October 1995, or over 25 years.
It is unclear what Deere achieves from this merger. That should be a warning signal.
Deere is a very successful employer-based credit union, still closely integrated in all respects with the sponsor.
Infinity FCU’s official Special Meeting notice calling members to vote on the proposal clearly states that “all assets and liabilities will be merged with and into the Continuing Credit Union”(Deere).
The Notice contains not a single factual example of a better rate, product or service. How Deere’s branch network near the company’s facilities in Illinois, Iowa, Florida and North Carolina benefits Maine’s members is not explained. All of Infinity FCU’s net worth $34.2 million at Dec. 2020 “will be transferred to the continuing credit union” upon merging.
Members are told nothing about what Infinity CEO Hayes means by “a true collaboration.” In fact , just the opposite; the credit union provides repeated assurances that everything about Infinity will remain the same–the employees, branches, leadership, products and services, and Maine “character and flavor” are all unchanged.
Why would a long-standing sponsor-based credit union want to be a “sugar daddy” for a community credit union over 1,000 miles away? Infinity adds no meaningful size to Deere; what does Deere gain by sending dollars to an “affiliate” that states it will remain independent, under local leadership? With a community based FOM?
What areas of “true collaboration” have been explored? Has the Deere team even conducted on site due diligence, and if so, why are none of those supposed opportunities mentioned?
Once Infinity FCU broke off its announced engagement with Vibrant CU in 2019, why did this Deere Employees focused credit union step up so readily to volunteer as the new spouse? What about Illinois is so attractive to Maine credit union folk?
If the documentation Infinity provided its members in the FAQ’s and Meeting Notice were presented as a sound business concept in any college course, it would be graded an F. All rhetoric, no substance, no facts. Ideas without any evidence of reality or relevance to either credit union.
Did the two boards receive more details about this proposal? If not, how can they exercise their fiduciary responsibility of due care? What did the CEO’s tell them? If the directors had more details, why were the member-owners kept in the dark?
However one thing is certain: if Infinity’s members vote to merge with this Illinois credit union, they will no longer have any role in governance, voting, or say in the leadership of the credit union they are being forced to join.
Illinois state charters allow proxy voting in all actions normally voted upon by members. All proxies are signed over to the board of directors who control their use. The board then votes these proxies to fill vacancies or even to approve mergers. Proxy votes are weighted by shares. No more democratic one-member, one-vote as in a FCU charter.
It is clear then why all of the stress on independence, local control. Maine “flavor” and continuity of services. This empty rhetoric is a charade to disguise this loss of member control. Proxies are not allowed in FCU’s.
If this fundamental change in member voting had been explained, might members then ask why they should give up control of their credit union and its $34 million in collective wealth for no specific benefit and no say in the future?
This essential fact has been completely ignored, and that absence raises a more fundamental question of integrity–what else has been left out of the story?
Finally, why would any credit union leader spend three years seeking a merger, while claiming in the same CUToday interview, that one is unnecessary to be successful?
After 100 years of Maine members’ loyalty creating over $34 million of cooperative wealth “paid forward” to benefit future residents, this proposal lacks both coherence and honesty. The 18,200 Infinity members should vote NO on the merger and retain real independence and local control.
A CEO’s March 2021 Comment to the Board:
“Almost daily the mood all around us is improving – not from the messages that the media and our government push on us, but from the fact that teammates announce with beaming faces that they got vaccinated, that they recognize more and more people have gotten vaccinated, and that the momentum for things to improve is local and real (not national, not a mirage of bias).”
A Thought about Future Living Environments (from: Building Back Better, You Say? It’s All About Scale) By James Howard Kunstler
“The good news is there is another way (than big city or suburban life), and it’s a better way: the traditional town, where all kinds of businesses can be integrated healthily and happily with houses and apartments; where most of the things you need from day-to-day are within a five-minute walk; and where everything is at a much more humane scale. There are thousands of towns across the USA that once formed the basis of what we considered most valuable about American life: places worth caring about, places that you could confidently call your home. Most of them are in terrible shape these days, because for most of the past century, Americans have been settling in the big cities and the suburbs. Dis-investment has been savage in small-town America.
But that is the next frontier for redevelopment and should be of special interest to New Urbanists.(and credit unions) Get in early and avoid the rush. These small towns, and even small cities, are sitting there waiting to be reactivated with much of their infrastructure intact and already properly scaled to the more austere conditions we face going forward. The renovations can be accomplished at the small scale, building lot by building lot, without requiring absurd amounts of capital.”
Leadership
A leader without followers is a person out for a walk.
The Federal Government and Money
Spending is the most bipartisan activity. Only in Washington is every question of competence reduced to a budget line item.
Members and Cooperative Democracy
The alternative to active members is passive subjects.
Pandemics and Unmooring
Economic calamity can lead to the search for easy solutions. When unchecked by democratic norms, those in power can default to the illusions of false prophets promising a future without uncertainty.
Revolution versus Democratic Change
Destruction is easy, persuasion is hard.
Regulatory Decisions
Choices made without options are actions lacking accountability.
Crises Are Twice Lived Through
The first time as experienced firsthand be all participants. The second time when the losses are clear, people endeavor to ask what have we learned?
Deregulation
The reconciliation of order and freedom; the union of individual enterprise within a community, pragmatism with idealism, creating multiples paths to a better society.
Covid-The Great Pause
When to “fast” means to go slow, recenter our purpose and continue on the journey to something better.
The Medical Community’s Wisdom
When all else fails, ask the patient.
“People tend to forget that only at the end of Bergengren’s career did he help foster the Federal Credit Union Act. For decades he worked on the local. He did what needed to be done to get people to come together for their mutual benefit, mainly around communities. . . Then came the federal insurance fund. The irony of this idea was that the bureaucrats were suddenly turning into the protectors of the people and hence kind of policeman. Soon the core of what credit unions are, began to get lost. The Federal vision went from one of creativity and growth (of charters) to jittery watchdog.”
Ed Callahan, Callahan Report, October 1995
Last week I printed my boarding pass for NASA for a trip to Mars.
Perseverance has just sent back the first report on the effort to find if life existed on the planet.
“The position of our agency has been that the business decisions of the credit union rest with the management or the board, and not with our agency. The motto outside the Chairman’s door is: We don’t run credit unions.
“Bucky Sebastian, General Counsel and Executive Director, NCUA before the House Committee on Government Operations, Hearing on Federal Supervision and the Failure of Penn Square Bank, Oklahoma City, OK July 16, 1982.
“. . .it seemed as though we would never escape the attitude that the regulator knows best. . .A dramatic change has taken place in the last few years. We now have a federal regulatory agency which openly concedes that credit union people know more about running credit unions than the agency does.”
– Frank Wielga, CEO, Pennsylvania State Employees Credit Union, NCUA 1984 Annual Report, page 14.
I watched the Mars rover landing live. It was exciting, joyous and uplifting.
The first messages back from the rover were just as inspiring. They will be in collections of “memorable quotes” from now on.
Rover texted: “I have found my forever home!”
And this was followed by: “Perseverance and Ingenuity will take you anywhere”–the names of the two AI vehicles which had successfully landed minutes earlier.
So I have decided to join them. Below is my boarding pass from NASA. Mars certainly seems to be a friendly neighborhood planet, especially with so much intelligence already there.
The only question is how am I going to spend my 1.1 billion frequent flyer miles?
