Just a Member

This week I asked my good friend Randy Karnes for his perspective  on the upcoming NCUA board meeting (12/16/21). Here’s what he had to say:

Chip hoped that I might inspire the NCUA board to consider its agenda differently; to move away from the agenda’s details and towards activities that would craft a new expectation for us all.   

NCUA and its governance needs to focus on bigger issues. Issues that inspired owners. Issues that made business fun for those who derive  meaning from their efforts. Issues that extended value so that the everyday owners, and professionals reporting to them, would care about board meetings and NCUA’s  oversight functions.

He hoped the three politically selected directors would consider that we need more from the regulator.  We want a group that cares about our professions, our ideas for governance,  and our safety nets.  That the credit union-funded institutions at NCUA are still there to back our plays, our efforts, and our belief in the work ahead.

So I read Chip’s 12/13 blog as the inspiration for my comments, but only found the inspiration to declare I understand why no one gives a sh*t anymore.

Here’s what we’re looking at for Thursday; an agenda that claims we should be paying attention:  Got to wonder?

Multiple issues with the RBC/CCULR capital regulation, a topic of great concern that will affect the CU industry for years to come – a bureaucratic press headline and a staff that cries wolf.

1. 1. Lots of numbers (NCUA/FDIC) – far from any consequence for those locally looking for numbers that will sustain them.
   2. CU’s have already maintained enough dollars for last few “so called crises” – but who would waste a crisis yet to come?
   3. Is it credit unions  or the NCUA Board  who is focused on “change for change” to their own ends – we see no need for any capital change.
   4. Why trust their “ends” at all, no wonder we all are bored with NCUA board meetings, they are not for us and we hear no mention of us in their words or declarations.
   5. More reg burden for the sake of burden. Another option for NCUA to leverage their situational control of our members’ futures. These new tools are ineffective and simply clutter other work that screams for action.
   6. Confusing stats for the sake of stats, oil and water displays, confusion just to take our eyes off the ball – member value.
   7. Member faith in NCUA thinking is muddled by over wrought academic complexity.  No workman’s simplicity in this group, that would take experience; a care for the work.

Now shift to the budget item.

The next budget is just another edition off  an assembly line of budgets – cranking out ugly babies with no mirrors in sight. More spending wanted, when less would send a message of hope and clarity.

1. 1. Planners who expect a rising  curve of more money in this to the next year, to every year – void of awareness from past exploits or value adds.
   2. More people to pad our importance, to enhance processes now un-manned, and with no plans for when needed. We need more people without recognizing there are none to be had.
   3. The budget is not about the flow of our industry and the requirements for its sustainability.  It is simply to ensure the NCUA outlasts its ward, that the NCUA is the last group standing.
   4. The industry’s funds are always there to direct, and NCUA will always be  quicker, slicker, and quietly positioned to direct those funds from members’ activities to a bureaucratic engine fueled by money.
   5. Just give us more, we are hungry.

These are the “minutes” for the 12/16 NCUA Board meeting,  ahead of time, a template of expectations from a bored audience of the industry’s CU members – customer-owners who wonder why the value of ownership has lost its punch.

But the funny thing is we all really do still give a sh*t! We are hungry to believe, follow, and to give homage to the NCUA’s efforts if they would simply find the heart to sell us that they still have the will to deliver value to our members. The heart to simply believe in the work of cooperatives. The heart to inspire us with the simplicity of a local community’s effort to lift itself up by work well done.

I know that Chip wants me to declare that 12/16 is a day for us to rally our voices and take on these tactics from the agenda – to shout we give a damn about RBC/CCULR or the board’s broken budget processes, but I can’t.

The only goal I have for the NCUA’s board and bureaucrats is to work harder, and work smarter to bring back those days when we waited in earnest to read the press reports of an NCUA board meeting. To read the reports ready to smile with the effort and the intent that made us believe we had a valuable ally for our futures.

It’s not that America has given up on its institutions that ensure our success; rather we simply forgot how to promote  leaders for these institutions whose roles are to guard and foster our efforts. We need to change how NCUA board members rise to the occasions ahead.

Too many times these directors have started out as lame ducks….and it has nothing to do with their terms. Lame work is becoming the standard.

Tell Me Why I’m Wrong.

 

Most individuals and organizations  realize at some point in their journeys,  that money does not guarantee success.  Nor happiness.

Thursday’s NCUA Board is, at first glance, all about money.  Tens of millions.  And how it is to be raised, allocated and spent.

Since all NCUA’s funds are from credit union members, it behooves we all pay attention. For NCUA has no other revenue. It is the steward of almost $400 million in annual costs paid by members.

The Board’s financial decisions on Thursday  include:

• The size of NCUA’s annual and capital budget spending;
• How these costs are allocated (OTR) between the CLF, NCUSIF and Operating Fee;
• The limit, or cap, on the maximum relative size of the NCUSIF via the NOL, after which a dividend must be paid;
• The disposition of the approximately $100 million in surplus retained in the Operating Fund from excess FCU annual fees collected over recent years.
• Even the proposed CCULR/RBC rule is about money, not just burden. It would require credit unions to retain from revenue initially as much as $26 billion more in reserves that would otherwise be available for greater  member value and service.

All About Money, or Is It?

The justifications for the amounts NCUA is seeking, is that the regulator’s financial resources are what sustains a safe and sound movement.  More financial resources enables more effective supervision.

This leadership approach is a fallacy.  It is often used to explain NCUA’s and even many  credit union decisions.  Institutional strength or capability is measured by asset size, by net worth ratio or for NCUA, the annual spend or dollars on hand.

Resilience Not Resources

However, over and over again especially this year, events have shown that resilience is a leadership characteristic, not the amount of resource an organization controls.   Credit unions with double digit net worth, managing hundreds of millions, even billions, are routinely merging saying they lack the resources to cope with future challenges.  That is a leadership failing, not a resource gap.

Every credit union in existence today was started with no financial capital.  They survived, prospered, and thrived because of volunteer sweat equity, sponsor support, member self-help and shared belief in their purpose.  In other words, leadership.

These critical intrinsic motivations are being replaced with an assumption that more and more dollars are the key to survival.   The thought that resilience depends on more dollars cuts against the grain of what a coop financial system is and can be.

This reasoning is used by some CEO’s who end their tenure with mergers accompanied with large added retirement or financial bonuses.  Greed not gratitude becomes the hallmark career-end.

Who Will Credit Unions Become?

How the Board decides the issues before it tomorrow will send a clear message who they believe credit unions are today and what they will become in the future.  Will it be about more money for NCUA or an effort to inspire credit unions through careful stewardship of their resources and decisions based on objective data?

During the past two years of the pandemic credit unions have shown their best side.  Waving fees, making loan adjustments, lowering charges, and being with members or in person no matter the severity of the epidemic.   The growth in member savings and bottom lines have resulted in back-to-back record setting outcomes and zero NCUSIF insurance losses.

Daily credit unions are announcing bonus dividends to members to share their success in the millions.

The board’s decisions on resources will communicate their view of whether credit unions are special kind of financial service provider that warrants further inspiration, or just a minor-league version of banking.

Will the board present made up worries and projects lacking outcomes to support funding?  Will it succumb to temptation to offer unknowable future risks to retain unneeded reserves?  Will it affirm the idea that every credit union must stand on its own bottom—no system safety nets or mutual support in the event of problems?

All for One and One for All?

Credit union’s manage people’s money to promote other member’s financial opportunity. The well-being of one is linked to the well-being of all.   The same approach has, in the past, applied to credit union’s intra-dependent cooperative system design.

The result is credit unions are much stronger than individual numbers alone would ever indicate.  The member relationships, based on a premise that this financial community will help ones neighbors, creates goodwill and loyalty creating value that far exceeds  financial ratios.

Credit unions are a classic example of American innovation with leaders that have attracted  tens of millions of adherents or fans, called members.  It is self-help, self-financed and self- governed, formed from the grass roots and built on community respect.

A Contradictory Stance On Credit Union’s Role

The NCUA board has represented a different portrait of the system.  In the past decade, NCUA’s priorities suggest credit union’s meaning and value is measured primarily by how many dollars are on the  balance sheet and in net worth.

The whole theme is to get more.  There is no underlying recognition about the practical life of the members or their credit union’s role.  Such a world view cannot inspire the movement let alone feed the soul of  members.

NCUA’s increasingly dystopian views augmented by faulty analysis and misleading numbers blinds them to see what they can’t see.  NCUA no longer see credit unions as they are, because NCUA see things as they are.  They no longer seek information that would change their approach;  rather they look for a story that confirms what they already have in mind.

NCUA’s decisions rest on a simple falsehood that more is necessary rather than a more  complex reality.  Resilience and credit union success is not built on financial performance, but by leaders imbued with purpose and community well-being.

Inverting Common Sense

Even worse is the proposed RBC/CCULR rule.  It inverts the legal maxim that bad cases make bad law. In NCUA’s  view a bad loss requires an ever more complex rule.

When NCUA approves a generally applicable rule like RBC to counter an extreme outcome or circumstance, the risk is that all credit unions’ freedoms are now restricted by the behavior of a very few.

The burden of the RBC/CCULR rule will fall directly on the membership, in the initial proposal by at least $26 billion.

Will the NCUA board respond to the incredible credit union performance during the pandemic for members.  Will it say, “Job well done?”  Or now is our time to get more funds?  Will they respect and recognize the documented track record of the industry since 2008 (reported yesterday) or will they continue to present misleading analysis and mythical future outlooks?

Whatever the outcome, it will set the tone and direction for years to come.  It is unlikely there will be a better time or circumstance for the NCUA board to affirm its faith in the credit union system, the performance of cu leadership during COVID,  and to restrain the never ending instinct  to acquire more resources.