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Credit Unions’ Origins versus Their Future Stories

As a state and federal regulator for eight years, credit union directors would sometimes come up during conferences to show me the original membership card in their wallet.  The important part was the number on the card.   Whether it was a single digit or other very low numeral, it validated the owner’s presence and belief at the cooperative’s founding.

Many credit unions summarize their beginning under the About section on their web sites.  The theme is that from a few committed persons and minimal dollars, see how far we have come today.

Jim Blaine presented the SECU (NC) founding story in a recent post.   A few excerpts provide you a flavor of his imitable style as he contrasts the official version with one member’s reality.

Creation stories are intended to provide us with an explanation and some reassurance that “stuff doesn’t just happen”. These stories are often called “creation myths”, or that fancy word “cosmogony”. . .

Folks at SECU for decades have gathered around the campfire to hear our creation story… “On June 4, 1937, 17 state employees and teachers in Raleigh pooled their meager resources of $437 to form State Employees’ Credit Union…” and the rest is history.  Sounds almost like a religion or cult following doesn’t it? Well, for some of us it is… 

But, as with most idealistic ventures, there is usually a back story. Way-back-when, I received an enlightening letter from long-time member Paul Wright. . .which begins:

“Back in 1932 I was a liquidating accountant for the State Banking Department. Mr. Gurney Hood was Commissioner of Banks and we had about 10 accountants and 12 or so bank examiners – all the banks were in trouble back then.”

You can read the specific impetus driving this unusual organizational effort in the full blog which concludes with Jim’s observation:

😎 Well, I did get a “kick” out of the letter and it did not in any way tarnish my belief in those “17 apostles”, with $437 who believed, with great purpose, that they could “capitalize on the character of their coworkers and help each other attain a better economic status.”

Wanted to share the “TRUE STORY” with you because today: 1) many credit unions – and one in particular – seem to have “forgotten” why they were created, 2) seem to have “forgotten” who they were created to serve, and 3) seem to have “forgotten” that most of their member-owners still often live in a “paycheck-to-paycheck”, “lend me $10 ’til payday” world of economic stress….… and of course, wanted to 4) remind the bankers that from its “creation” all SECU was ever trying to do was to save them from themselves… (still trying!)

Future Stories

History matters, whether factual or embellished by time and future events.  It gives perspective on present circumstances and hope for how we might envision future opportunities.

But sometimes the always changing events in which we live cause some to say they have had enough.  The forces driving the profession in which I labor are just too overwhelming.  I’m no longer comfortable and need to get out.

An example is the resignation last week of Harvard’s football coach of 30 years.   He had an extraordinary record as summarized in this article:

He ended his career with 200 wins, and, with a 17-9 victory over Dartmouth on Oct. 28, surpassed Yale’s Carm Cozza to set the record for Ivy League coaching wins. During his tenure, Harvard won 10 Ivy League titles and defeated the archival Yale Bulldogs 19 times, including nine straight from 2007-2015.

He also led the Crimson to three undefeated seasons — in 2001, 2004, and 2014 — leading Harvard to amass the sixth-best winning percentage in all of Division I football since 2000. Throughout his career, he won the New England Coach of the Year award eight times and was named a finalist for the Eddie Robinson Award — awarded to the top coach in the Football Championship Subdivision (FCS) — on five occasions.

So why did he retire, still young and in many ways at the top of his game?  The driving motivation was changes in the college football model, specifically paying players through the “name, image, likeness” opportunity.  Here is his blunt assessment:

“College football is changing dramatically and certainly not for the better,” Murphy said. “When people ask my opinion of what’s going on in college football, I give them a very simple explanation. It absolutely — positively — is professional football, only without any rules whatsoever.”

Some very successful credit union CEO’s and boards are voicing a similar lament about their industry.  The challenges are just too numerous: technology, regulation, changing competition, lack of volunteers, little member loyalty and of course ever pressing competition.

As they look ahead,  these CEO’s and boards give up and retire.  Change has made it too hard to continue even after demonstrated successes of 40, 50 or 80 years—it is time for them AND the credit union to go, in their future outlook.

Tomorrow I will share an example of one credit union’s “future story” after 66 years of stable and focused growth.  It determined  it wouldn’t be able to continue and had to merge to continue to serve members.

The difference between the Harvard football coach’s retirement and these credit union leaders is the credit union leaders decided to withdraw from the game.   Harvard will find a new coach who will want to tackle the challenges of competing in a time “of no rules.”

Also the credit union decided to give up and transfer all of their ample resources to another organization.  It would be similar to the Harvard athletic department confirming Coach Murphy’s insight and declaring, “From now on Harvard is not going to field a football team.  So just root for Yale or whatever school you prefer.  And any young men who might want to play, don’t apply to Harvard.”

The instances of credit union leaders closing up shop is becoming more widely presented as an acceptable strategy.  The decision is oblivious to whatever “creation story” the credit union told its generations of members who created the  bountiful legacy that is given away to outsiders who had no role in its success.  There is not even an effort to find a new coach.

The other disturbing aspect of these “future rationales” is that sometimes the leaders use the closure to enhance their own personal futures.  It would be like Coach Murphy deciding to take all of Harvard’s footballs and memorabilia with him when he leaves saying, I deserve this because I made it all happen.

A college, or for that matter any football team’s future, does not depend on a single coach or even player.   There is an institution, an organization, or even a league that supported the decades of every team’s individual efforts.  I believe it is time for these supporting organizations and their alumni to speak up.  The institutions they built to benefit future generations are being unilaterally shutdown.

 

 

 

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An NCUA Professional and Credit Union Believer Dies

Last Thursday, January 18, 2024 D. Michael Riley a career credit union professional died.  He was 77 years old and is survived by his wife of 41 years, Lori.

After serving in the military, Mike graduated from the University of Alabama joining NCUA as a field examiner in 1972.  A  little more than 13 years later (May 1985) he succeeded me as Director of the Office of Programs.   This responsibility included overseeing the newly capitalized NCUSIF, the CLF and the Agency’s Supervision and Examination programs.

Regional Director Riley speaking at NCUA’s December 1984 National Examiners and Credit Union Conference.

Rising to the Top

His meteoric rise to the highest responsibility in agency reflected his ability to get things done.  In 1982 he was reassigned from NCUA’s Central Office to become Director in Region Six-the Western part of the United States.

California was the epicenter of problem credit unions exacerbated by double digit inflation and unemployment and the number and size of  credit unions.   I believe Mike, at 35,  was the youngest examiner ever promoted to RD at NCUA.

Chairman Callahan believed that effective supervision required the leadership of the six RD’s, not rule-making in Washington.  They were the critical managers of the agency’s most important responsibility—the examination program.  Success was achieved not by cashing out problems with insurance money; but by developing resolution  plans unique to each situation and underwritten by cooperative patience.

Regional Directors Allen Carver, Mike Riley, Lyn Skyles and Executive Director Bucky Sebastian at the December 1984 NCUA Conference.

A Passion for the Movement

Mike’s  progress from new examiner to RD in a decade is a testament to his grasp of credit union operations. Most importantly he bought into the changes Ed Callahan was seeking.  He knew how to get things done, an uncommon trait in a bureaucracy.  He had the ability to work with everyone, but was not a “yes” person.

Last July I wrote a brief article about Ed’s time as a football coach and how that influenced his approach to leadership: The Roots and Legacy of a Credit Union Leader.

Mike responded:  Great article, I know he taught me a lot.  

When Ed left after three years and eight months as NCUA Chair, the small team of five whom he brought from Illinois also left.  Senator Roger Jepsen, the next NCUA Chair, did not have a background in either administration or credit unions.

This is when Mike made his most critical  contribution.  Significant change in a governmental bureaucracy will not last if successors do not believe in the new directions.

It is a bureaucratic reflex that when a Chair leaves, staff reasserts their priorities. This is especially the case when  incoming Board members have little or no prior credit union experience.  Instead Mike insured the fundamental tenets from the Callahan era of deregulation were sustained.

Hitting the Ground Running

When returning to DC in 1985 as Director of the Office of Programs, he testified with Chairman Callahan on the CLF’s annual budget appropriation within his first 30 days.  In September 11 and 12, 1985  he was NCUA’s spokesperson to the House Banking Committee on credit unions’ condition as the new NCUA Chair had yet to take over.

As reported in  NCUA News September 1985, he said “federal credit unions had strong gains and a remarkable track record in an increasingly competitive, deregulated environment.”  He called the capitalization of the NCUIF, “the most significant development since its founding in 1971. It had quadrupled in size solely through the financial support of insured credit unions.”

In the wake of the Ohio and Maryland S&L crises, he stated NCUA supports the dual chartering system and the option of private insurance for state charters.  “This arraignment has served the credit union movement well, providing strength and innovation out of competition.”

For the next ten years (1985-1995) as Director of Programs Mike continued the critical administrative and policy priorities that Callahan had implemented.  These included an annual exam cycle, total transparency of performance, expense control. the CLF’s expansion to every credit union and promoting the uniqueness of the credit union system.

In the years he led the Office, failures caused the downfall of the FSLIC and the separate S&L industry, the initial bankruptcy and refunding of the FDIC and ongoing economic cycles. However credit unions and the funds NCUA managed continued their steady progress. Growth in credit union service and members expanded across the country.

Continued Interest in the Movement

In May 2023 post I wrote about the dangerous goal of NCUA’s goal of seeking parity with other  regulators.  He commented: Outstanding article. Thanks for laying out so clearly. It’s hard to get into the nuts and bolts but somehow NCUA’s operating costs needs to be reduced, fewer administrators and more hands on folks.

He also had a dry sense of humor with an affable southern temperament.

I recall his moderating a GAC panel of two former NCUA Chairs, Ed Callahan and Senator Jepsen.  He led a revealing conversation with charm and wit. If someone has a cassette tape of this session, it would be illuminating to hear how Mike navigated the discussion of these two leaders.

People liked Mike.  His colleagues were family.  Lori and he would hold an open house every Christmas inviting both NCUA and credit union friends.

After leaving NCUA in the mid 1990’s, Mike worked with Callahan and Associates and then on his own as a consultant.  He was a Trustee of the TCU mutual funds family.

His Views on Today’s Trends

Mike wrote about current credit union events  in this  complete post in April 2023. He was concerned about  worrisome trends in credit unions leading to their “creative destruction.”  He draws from his early years as an examiner overseeing 30-40 credit  unions.  He closes with this observation on mergers:

This ongoing march continues. The merger of two sound credit unions without some legitimate reason doesn’t seem to be member oriented. I still think of the members of those small credit unions who received services such as buying a washer that no one else would do.

Bigger is not better if the member does not benefit.  How many of these mergers produce lower loan rates , higher dividends, or distinctly better products at a lower price? Carried to the extreme we will be left with 20 credit unions that are no different than large banks. 

(and on NCUA’s role)

Schumpeter opined “If someone wants to commit suicide, it is a good thing if a doctor is present.”

Memorial Service Details

A service of celebration and resurrection will be held on Saturday, February 10, 2024, at St. Luke’s United Methodist Church (UMC) at 304 South Talbot Street, St. Michaels, MD.

The family will welcome friends and relatives at St. Luke’s UMC from 11:00 AM to 12:00 PM, which will be one hour prior to the service at 12:00 PM.In lieu of flowers, memorial contributions may be made to Habitat for Humanity Choptank, Salvation Army, St. Luke’s UMC, or Talbot Humane.

 

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Will There Be a Credit Union in This Person’s Future?

Photo from a third generation credit union family.

However, will there be an option of a member-owned cooperative in her future?  Her mom and dad and grandparents have worked in credit unions for most of their professional lives.

This week  I will write about some of the internal challenges facing the movement.

Coincidentally,  Jim Blaine is beginning a series-Consider This– of forceful posts on what makes the credit unions unique.  It is a good primer for those who cannot attend a DEI week.

His first “chapter” in the series is called The Difference.  The next is The Difference is Real.  The third discusses “genericide” or The Kleenex Dilemma.  A brief excerpt:

What is “The Kleenex Dilemma” for SECU as a credit union? Like it or not, try as you might, when an SECU member is asked: “Where do you “bank”?, the member will invariably say “At the credit union!”  See the problem? The word “bank” owns the financial institution category in the mind of the public – and that probably is not going to change any time soon.

So, what has SECU done about the kleenex problem?. . .

His target audience is the entire SECU family, especially the board. These posts would be a helpful resource and live case study for any credit union volunteer-paid or unpaid, every industry regulator (especially NCUA) and of course the public.

If we want our children and grand children to  become  “member-owners” I hope Jim’s logic and some examples this week of wayward activity may “steady” the movement on its course.

 

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Taking a Snow Day

First real snowfall in over two years onTuesday.  Continuing this morning.   Silent and cold.

Suppose we did our work
like the snow, quietly, quietly.
Leaving nothing out.
— Wendell Berry, from his collection, Leavings, 2010

My reindeer topiary enjoying winter.

The Christmas wreath with all of its seasonal coloring.

Our black dragon evergreen stands tall in the snow.

An indoors chrysanthemum looks out on the new wintery scene.

A picture to remember next summer.

A Japanese snow lantern fully realized.

Happy sledding or just sitting quietly by the fireplace.

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Credit Unions Top Users of Bank Term Funding Program (BTFP)

At the end of the September quarter, credit union total assets of $2.25 trillion were just 9.7% of total banking assets.  However their participation in the special emergency Federal Reserve lending program equaled 27% of the BEFP’s loans at yearend or three times their share of total assets.

The September 2023 call reports show 307 credit unions with Federal Reserve borrowings  of $34.9 billion, an average of  $114 million.  For these credit unions, the Federal Reserve represents 66% of their total borrowings.  For 112 of this group, the Federal Reserve is their only source.  The largest reported loan is $2.0 billion and two credit unions report draws of just $500,000 each.

In an ironical coincidence with the BTFP participation, this total was also 27% of all credit union borrowings at the quarter end of $130.3 billion.  Moreover this $35 billion was only a small portion of the reported $173.4 billion in total lines these credit unions  had established with  the Federal Reserve.

Most of these loans were drawn following the banking liquidity crisis in March.  The Fed created the  emergency Bank Term Funding Program (BTFP) after the Silicon Valley Bank failure to prevent a system wide run by uninsured depositors on other depository institutions.

This facility was different from traditional Federal Reserve programs.  Eligible collateral security was expanded,  all collateral was valued at par, not market , and draws could go up to one year.  The rate for term advances under the Program is the one-year overnight index swap rate plus 10 basis points. The rate is fixed for the term of the advance on the day the line is drawn down.

What Happens Next?

In a January 9, 2024 speech to Women in Housing the Federal Reserve’s Vice Chairman  for Supervision, Michael Barr, was  asked about the program’s future when the initial one year life is over. Here are portions of his reply:

Moderator: I wanted to ask you about the future of the BTFP. We are rapidly approaching the one-year mark, is this something where the Fed is planning on extensions, or any information to be released to the public on usage?

Vice Chair for Supervision Barr:  So when the funding stress happened in March 2023, over the weekend the Federal Reserve, FDIC and Treasury agreed to a systemic risk exception to least cost resolution for the FDIC. And the Federal Reserve and the Treasury worked together to create an emergency lending program for banks and credit unions, the Bank Term Funding Program that you are referencing. And the Bank Term Funding Program enables banks to use collateral that was in place as of that time – as of March of 2023 – that is, essentially Treasuries and agency mortgage-backed securities, to pledge those, and to be able to get borrowing against that up to a year at the par value of those securities.

That program was really designed in that emergency situation. It was designed to address what in the statute is called unusual and exigent circumstances – you can think of it as an emergency. . .we want to make sure that banks and creditors of banks and depositors of banks understand that banks have the liquidity they need. And that program worked as intended. It dramatically reduced stress in the banking system very, very quickly. And deposit outflows which had been very rapid in that short period of time normalized to what had been going on before and in fact maybe flattened out to some extent a little bit.

So that program was highly effective, banks and credit unions are borrowing under that program today, but it was really set up as an emergency program. It was set up with a one-year timeframe, so banks can continue to borrow now all the way through March 11 of this year. . .a bank could continue to borrow or refinance under the program and in March of this year have a loan that then extends to March 2025. 

I expect continued usage until that end date of March 11, but it really was established as an emergency program for that moment in time.

Arbitrage Opportunity Grows Outstandings

Two days after Barr spoke, the Wall Street Journal published an update on the program: Banks Game Fed Rescue Program.

The article reported that the BTFP pricing, based on the benchmark interest  rates average  plus 10 basis points, was less than the 5.4%  the Fed was paying on overnight excess reserves. This arbitrage opportunity has resulted in an increase of  $12 billion in more drawdowns since yearend even though  no liquidity strains were apparent in either system.

Credit unions can request extensions up to one year until March 11, 2024.   After that date, the statement above and the most recent activity suggest the program will end.  Credit unions should plan to either repay or tap other sources of liquidity.

And the CLF?

It should be noted that the Central Liquidity Facility reports no loans this year as of its November financial statements.   In fact it has initiated no new loans since 2009. The BTFP participation suggests credit unions certainly have liquidity needs. However  the CLF, designed to serve and funded totally by credit unions, is not as responsive as the Federal Reserve Banks.

 

 

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A Lesson from the Latest FDIC Premium Assessments on Banks

Last Friday the four largest banks in American announced their  4th quarter and full year financial results.

All had one new, significant expense in the 4th quarter.  Here are the numbers from the New York Times article: Biggest Banks Earn Billions, Even after Payments to the FDIC Fund-(January 13, 2024)

Bank                         $ FDIC Payment

JP-Morgan                  $2.9 billion

Bank of America        $2.1 billion

Wells Fargo                 $1.9 billion

Citigroup                     $1.7 billion

These premiums are necessary to cover the costs for the FCIC’s losses on bank failures earlier in 2023.   FDIC’s reported  loss expense through the first three quarters of 2023 was $19.7 billion.

The FDIC is collecting approximately $16.3 billion in this fourth quarter assessment. The four largest banks will pay the $8.6 billion shown above  or 53% of the total.

Premiums comprised more than 81% of the FDIC ‘s total revenue through the first three quarters of 2023.  Interest income from the FDIC’s investments, the other revenue source, would cover FDIC ‘s operating expenses.  But the $600 million excess would not even begin to cover the almost $20 billion in estimated  insurance losses.  (all data is through September 30, 2023).

FDIC Premiums and Insured Deposits Not Connected

There is no relationship between premiums and FDIC’s insurance coverage of $250,00 per account.  Instead premiums are calculated on  a bank’s net assets which is called its “assessment base.”  At September 2023 this was $20.7 trillion versus just $10.7 trillion of insured shares.

FDIC’s revenue is no longer based on its stated goal to protect depositors’ savings but rather the FDIC’s  role in stabilizing  the entire industry’s balance sheet.   When banks succeed, shareholders win.  When banks fail, everybody pays.

FDIC’s Complex Pricing Structure

The FDIC may set the premium at whatever level it deems necessary to achieve its minimum ratio goal of 1.35%.  The fund recorded an approximately $10 billion operating loss through the September quarter putting the ratio  at just 1.13%.    The $17 billion new assessment is needed cover this shortfall and grow the fund’s ratio target.

Moreover premium rates can vary from 2.5 to 42 basis points  depending on bank size, that is whether an institution is more or less than $10 billion in assets. The final rate is based on each bank’s CAMELS rating plus, for larger firms, a scorecard which measures  “complexity.”

The assessment rates are so complicated  that the FDIC  posts three different calculators for banks to determine what amount they must pay.

This premium system provides virtually no check and balance on pricing, except the rule making process.  It is frequently “updated” and always open- ended in amount. There is no incentive or check and balance on FDIC effectiveness in its oversight or problem solving roles.  Banks must bear the costs not only from institutional failures but also from FDIC’s supervisory effectiveness, good and bad.

The Cooperative Alternative in the NCUSIF

By comparison the NCUSIF is simple to understand, administer and monitor.  Statements are posted monthly.  Public board  updates on investment returns and overall financial trends are presented at least quarterly so credit unions can track their cooperatively designed fund.

The 1% deposit underwriting means premiums are extremely rare, assessed only four times in 40 years since the 1984 redesign went in effect.   Dividends have been paid out over a dozen times.

When the 1% deposits totals are added to the retained earnings, the investment portfolio remains relative in size to the insured risk at all times.  Investment income has proven adequate to  meet all of the fund’s operating expenses and sustain a stable operating level between 1.2 and 1.3% of insured savings.  Based on the latest November NCUSIF financial report the fund’s equity should be at or above the long-time upper cap of  1.3% at yearend 2023.

With NCUSIF equity at the high end of the .2-.3 range, it means there is over $1.7 billion in additional  reserve for any contingency.  In the October NCUSIF update the CFO reported the five-year loss average since 2017 was only .1 of 1 basis point.  The net actual cash loss so far in 2023  was just $1.0 million in the same update.

With over 40 years of data from all economic cycles, financial crisis and evolving credit union business models, there are decades of real data to validate the NCUSIF’s financial design.  This record shows that to maintain a stable NOL a yield  on investments of 2.5-3.0% would sustain the fund through virtually any growth or economic cycle and any operating contingency.

This historical 1.3 % cap is due for Board review in February based on 2023 yearend earnings.   This decision is an important commitment  of  NCUA  to the credit unions who  underwrite the fund.   Unlike the FDIC’s premium dependency, the NCUSIF’s investment portfolio return has proven to be a reliable,  predictable and sufficient model-in all environments.

Therefore, when net income exceeds the NOL cap, the credit unions are paid a dividend on the excess income recognizing their overall sound performance.  This return is a critical element of the cooperative design.

The FDIC’s premium model is unpredictable, subjective and arbitrary,  and most importantly unrelated to the actual insurance coverage per account.

Why the NCUSIF Design Works

The credit union model is based on the historical operational and cooperative  values on which credit unions are founded.  All participants are treated equally.  Risk and expenses are shared alike for all.  It is democratic and accountable in its structure.

The redesign was accomplished with industry-wide  collaboration and participation.  It required congressional approval. It was based on the oldest of cooperative concepts: self-help.  No government assistance or funding was sought or necessary.

Instead the credit unions put themselves in the law as the underwriters of the fund’s resilience, no matter the circumstance.  This is how they intend to maintain their independence as a separate financial system.  For example the S&L’s were merged with the banks and the FDIC when their system collapsed.   Unlike the for-profit, stockholder owned banking system, the moral hazard examples of excessive risk taking by management are extremely rare in the cooperative model.

Understanding NCUSIF’s unique history and design and why it fits credit unions so well is especially important whenever a new board member comes to NCUA.  It will be especially critical Tanya Otsuka be informed of NCUSIF’s special character and long term performance, as much of her professional background is within the FDIC.

The February NOL setting will be the first of many opportunities she will have to show her understanding of the differences between bank and credit union regulation.  Credit unions should be communicating that distinction now.

 

 

 

 

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“Some things we must do”

Martin Luther King, Jr made many memorable speeches.

One I find most compelling is from December 5, 1957.  In this long address (later transcribed) to the Second Annual Institute on Nonviolence and Social Change at Holt Street Baptist Church, in Montgomery, Alabama are the seeds of much of his later actions and rhetoric.

He combines humor with logic in addressing the assembly.

“I’m grateful to these ministers of the gospel. I look about here and I see them. They are not Baptists; they are not Methodists; they are not Presbyterians; they are not Episcopalians; they are not Lutherans—they are Christians first, and Baptists, Lutherans, Presbyterians and all of that second.

They realize that we are all one in this struggle for freedom, and we have been able to come together and forget about our denominations. You see, these things can so easily divide us. And the thing I like about the God that we worship is that He isn’t a Baptist; I like that about Him. I would be confused if God was a Baptist. I’m happy that God isn’t a Methodist. He would be arguing over whether you should be sprinkled or immersed. I’m glad of that. And we have come to see in our own struggle here, that there is a unity, there is a oneness.”

It Will Be Long

“I don’t want to talk too long tonight, but I want to talk to you about something very practical, nothing profound. . . Don’t look at your watch there, Brother Binion; we’re just getting started. He’s looking at his  watch. I’m just getting started. Give me, give me a little break.”

After more humor describing reactions to other speeches, he goes to his purpose this evening, which I summarize as a primer on self-help:

“This evening, I’m not going to say anything about the role of the church; I’m not going to discuss the role of the federal government; I’m not going to discuss the role of white liberals, North and South. I just want to talk with you about some things that we must do, as Negroes. We must realize that there is something that we can do to bring this new order into being.”

Using Economic Resources Cooperatively

He proceeds for 30-40 paragraphs with concrete examples and explicit statements for what Negroes, or any American, must do to achieve equality.  At one point he talks about money and economic power:

“The average Negro wage earner today makes four times more than the average Negro wage earner of 1940. The annual income of the Negro is now at about seventeen billion dollars a year, more than the annual income of Canada, and more than all of the exports of the United States. We’ve come a long, long way.

“Now, what are we going to do with this? That’s the question. What are we going to spend this money for? Are we going to pool it in cooperative enterprises that will make for economic security for the race? Or are we going to waste it with meaningless things? That’s the question.”

On Leadership

King challenges with words, instances and rhetoric that resonate today.   He closes with what it means to be a leader of a movement.  His description is  relevant to all in current positions of responsibility.

“we must develop intelligent, courageous and dedicated leadership. This is no day for the rabble rouser, whether he be Negro or white. We are grappling now with one of the most pressing and weighty social problems of the generation, and in the midst of such a weighty social problem, there is no place for misguided emotionalism. We must avoid the extremes of hotheadedness and Uncle Tomism, and somewhere develop the type of leadership to see the issues and that will move on calmly in the midst of strife-torn situations.

Leaders are needed all over this South, in every community, all over this nation: intelligent, courageous, dedicated leadership. Not leaders in love with money, but in love with justice. Not leaders in love with publicity, but in love with humanity.

I know if you’re a leader, you’re going to have to have money to live like everybody else. If you’re a leader and you are in a situation that has the spotlight of the world, you will inevitably get some publicity. But these things must be incidental to the greater end. We must have in this hour leaders who are dedicated to the cause of freedom and justice, who have the love of humanity in their hearts.”

This was in 1957.  Many of his ideas are presented with rhetorical phrases we often identify with later and more public occasions.

King’s vision for America was formed by many personal experiences and study.  His gift was presenting it in a way that is both timeless and timely.  That is what leaders do.  It is needed now more than ever.

 

 

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Credit Union Shareholders Receive $16 Million; NCUA Receives Judge’s Reckoning

Yesterday the Dakota Credit Union Association announced that NCUA had agreed to pay more than $11.9 million to the former credit union members of Midwest Corporate Credit Union.  Their pro rata share of US Central’s capital, along with a similar recovery by Iowa credit unions, will bring the total payments to over $16 million.

This outcome culminates efforts commenced in 2021 by the two Leagues and their members.  Ultimately legal suits were filed when NCUA rejected the credit unions’ repeated recovery efforts.

In his October 2023 ruling the Chief Judge of the US District Court District hearing the case wrote: “simple logic and hornbook property law support construing the FCUA as including automatic transfer of assets.  In general, assets do not simply evaporate when the owner is unable to collect; rather the property must go somewhere.

Consequently, a credit union’s asset likewise do not cease to exist come the last day of a wind-up.  Instead, the most logical conclusion is that the assets vest in the credit union’s shareholders.”

A Three-Year Bureaucratic Slog

According to an August 29, 2022 statement by the Dakota League challenging NCUA “To Do the Right Thing”, the Agency had actually been ready to release checks in 2021. NCUA changed its mind when informed that the (federally chartered) corporate had been voluntarily liquidated years earlier.

North Dakota’s two Senators wrote NCUA Chair Harper concerning the nonpayment. He replied on September 2, 2022 that “After careful review and legal consideration, the liquidation agent determined that because Midwest no longer exists no distribution can be made to Midwest or its former shareholders.”

The League tried the administrative claims process. Again NCUA denied the request.   President Olson’s response to this final effort in February 2023 showed his frustration: “This is a clear case of obstruction through bureaucratic hurdles and complicated language where the process is the punishment, and does not provide justice.”

The North Dakota League filed its lawsuit in April 2023.  This was followed in June when 63 of Iowa’s 75 credit unions sued the NCUA for $4.2 million to recover their U.S. Central claims. Joining in the lawsuit was the Iowa Credit Union League, its foundation, political action committee and an employee benefits company.

A Lesson in Bureaucratic Obstinacy and Blindness

These years long efforts included all three branches of government.  The Dakota league attempted to play NCUA’s administrative game in which it learned that “the process was the punishment.” It requested and received support from North Dakota’s  two senators.  Chairman Harper stonewalled the appeal from the legislature.

The last remedy was the judiciary. The judge explicitly rejected NCUA’s logic.  “The fund’s vest in the credit union’s shareholders.”

It is not a comforting example of regulatory judgment when common sense or “doing the right thing” apparently had little role in NCUA’s decision.  When dozens of staff lawyers and three “independent” board members see only one position, this raises concerns about the agency’s deliberative processes and/or the competency of the advice being given.

CooperatIve Action in the Members’ Interest

The good news is that cooperative efforts, especially at the league level, persistence and advocacy did prevail.  It is hard for an individual credit union to counter an NCUA position.  Collective action is a credit union advantage even in regulatory judgments.

The credit union shareholders, the members of Midwest and Iowa corporate, have received their just due.  And that standard, what is in the members’ best interest, should  be the determining one.

Thank you to the cooperative leaders in these two states that stood by their members.

(Editor’s Note:  I first wrote about the situation in February 2023, urging NCUA to do the right thing.

 

 

 

 

 

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“Apres Le Deluge”

You’ve undoubtedly read about the northeaster which dropped a winter rainstorm on our area two days ago.

My trusty high-tech rain gage said it left between 5 and 6 inches in 12 hours.

And so we had to build barriers to keep the garage dry.   It worked, mostly.  Towels recovering outside today.

But the flowers think it is just an early spring rain, especially the daffodils.

The miniature Nandina (heavenly bamboo) continues to produce its bright red winter berries.

And the Scottish heather thinks winter is over and is beginning to bloom.

Just another scene from the global warming play.

Pictures from Brian Fogg, CEO, Credit Union of Vermont of their experience.

“Sailors take warning.”

A foot of white snow later turned to slush.

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Poetic Empathy

In this poem published in 1927,  author A. A. Milne’s words create that special feeling of a child’s trust.

Furry Bear

If I were a bear,
   And a big bear too,
I shouldn’t much care
   If it froze or snew;
I shouldn’t much mind
   If it snowed or friz—
I’d be all fur-lined
   With a coat like his!

For I’d have fur boots and a brown fur wrap,
And brown fur knickers and a big fur cap.
I’d have a fur muffle-ruff to cover my jaws,
And brown fur mittens on my big brown paws.
With a big brown furry-down up to my head,
I’d sleep all the winter in a big fur bed.