Category: Observations

Winston Churchill wrote: “The farther backward you can look, the farther forward you are likely to see.”

American credit union history covers almost five generations. The first four “eras” shown below established the modern credit union system. Each had a distinct theme. The amazing growth, and decline, of active charters is described on the bar graph.

What is the Current Era?

If the fourth chapter ended in 2008, credit unions are now halfway through the next part of their story. What will be the dominant theme from this generation of credit union leaders?

Some of the events so far are noted at right. COVID and related social crisis should certainly be added to this list.

How would you characterize the industry’s status at this interim stage? Some ideas might be:

• Consolidation, Concentration and Competition
• Regulatory Backlash
• Membership Passes the Century Mark
• The CUSO Era
• Maturing Coop Model Seeks New Growth Curve
• Etc.

The Value of Perspective

Seeing present day priorities through the lens of the past, can highlight what future outcomes might be.

The outlook of many of today’s leaders has been shaped by the 2008/2009 financial crisis. This interrupted the momentum and confidence from a generation that mined the benefits of deregulation for members.

The current crisis is the second in a decade to engulf members. Can credit unions be masters of their destiny or morph into just another financial option?

Churchill also remarked: “History will be kind to me for I intend to write it.”

Naming the current era is one way credit unions can shape their history. Please send your suggestions for the title of the chapter we are creating now.

“Folks only jump if the oil platform is on fire. In other words, we are all incrementalists unless and only if we feel the flames licking at our backs. Then it is too late. If the small [credit unions] are just small, as most of us are, how do we turn that smallness into a strategic advantage — with real tactics attached? . . . Small connotes attributes other than just small. Small is (or can be) faster. Small is (or can be) more intimate with members. Small is (or can be) more urgent. Small is (or can be) higher risk takers. Small is (or can be) more personal.”

– A CUSO manager, February 2018

How credit unions served members in the 2008/2009 financial crisis and became “a model for others.”

Here is an article from 2002 that I find is still relevant today.

Callahan Wants A ‘Secret’ Shared

(Source: Credit Union Journal. Laura Ortiz, Midwest Correspondent, September 16, 2002)

He’s probably said it a million times: “Credit unions are the best kept secret in the world.”

And Ed Callahan repeated that mantra in a farewell speech, of sorts, to NASCUS during its 37th Annual Convention and Symposium here. Callahan, CEO of Patelco Credit Union in San Francisco, former chairman of NCUA and co- founder of the Washington, D.C.-consulting firm that still carries his name, plans to retire by year-end.

But, in his booming, forthright manner, the message came across with new passion and perhaps, frustration.

“If the membership continues to grow, our jobs are that much more secure,” he said. “Our only goal is to serve Americans.”

Among his suggestions to move the industry along was to expand shared branching to a national level.

“Our members are eternally grateful when they can walk into a branch.”

Wouldn’t it be nice, he said, if they could walk into any branch in the United States and take care of their financial business?

“If cooperatives work together, we can have 30,000-a minimum of 30,000-locations available to them,” he said. “What other financial institution on the planet can do that?”

Callahan added that there is no reason anyone in America shouldn’t belong to a credit union. So, why don’t they?

“They don’t know anything about us,” he shouted. “We’re the best kept secret in the world.”

His advice on how to get the message out:

“Get some butcher paper and put it across the credit union,” he said, recalling his early days when such simple signage was used to advertise such things as “Bread: five cents a loaf.”

“Put your credit union’s rates on common shares and CDs on that butcher paper,” he said. “Underneath that, put Bank of America or Wells Fargo (or the for-profit competition in your area) on there with their rates. And, for God’s sake, put ‘You Can Join.”

Great leaders’ contributions are not always found in the answers they give. Their most important insights may be framing the essential questions to be asked.

In this respect Ruth Bader Ginsburg (1933-2020) provided us a thoughtful legacy. One of her enduring queries was:

“Who will take responsibility for raising the next generation?”

Practicality, dealing with present circumstances, dominates most of America’s economically focused society. The future, well that’s for others to manage. Her question challenges each of us to consider not merely what we do today, but also how our priorities will be viewed 25 years from now. Or in credit union terminology, what are we “paying forward” for future members?

What could be more Italian than boys and girls eating a pasta lunch in the school’s cafeteria? And then adding some live opera.

This is your calming experience for the day!

School kids get surprised by opera singers at their lunch.

The chart below shows that the formation of married families is occurring later in life for both genders. It is a long term generational trend.

One question would be to ask why? And will the trend continue?

If yes, what will be the impact on credit union strategy? Both the impact on member demand for certain loan products and the changing pattern of employees’ career planning?

“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. 

Organizations such as credit unions are market driven. 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 just focused on a bookkeeper’s definition of safety and soundness.”

– Ed Callahan, May 1999

Fire Haze and Stanford University Chapel

“I feel the wind blowing, and it’s blowing in the favor of monopoly. You can feel it in tele-communications; you can feel it in banking. It is an ill wind.

Credit unions are small. Yes, very small. But it is vital that America not say they are too small to be worth the effort of keeping them around. Because if nothing else, credit unions keep alive a principle; that principle is freedom of choice.”

– Ed Callahan, June 1997