I have an excuse for not knowing much about the credit union movement for the first 8 or so years I was involved in working with it; I was never an employee of a credit union. I was just a vendor; and the credit union was just a client. I enjoyed working for the credit union because it was something I could believe in from a marketing point-of-view; I wasn’t schlepping potato chips or anything else that was bad for you. Credit unions really help people, and the more I got know these curious entities and the incredible people that worked within them, the more I grew to appreciate what a very special and marvelous movement it is.
That is why I remain stunned that so few people in the movement have a real understanding about what credit unions are or represent. Certainly, the folks at the NCUA don’t get it. Have we hired a bunch of laid-off bankers to fill the leadership roles there?
I will try to more calmly explain what has got me riled up.
Yesterday, the NCUA held a webinar to explain more about their recently announced Corporate Stab Program, and to answer questions from the attendees. More than 3500 people joined the call. The first 30 minutes was presentation from the NCUA, and the last 60 minutes were spent fielding a constant stream of excellent questions from the audience. I don’t blame the NCUA for the Corporate Stab Program; that’s a mess created primarily by US Central FCU. But a number of the NCUA’s answers yesterday rubbed me the wrong way, and I’ll address the grievances I caught from least important to most important.
First, can someone please buy the NCUA a technology clue? They said that an archived webinar would be available in two weeks. Are you SERIOUS? Anyone in on the call could have recorded it and made it available INSTANTLY or, at the very least, later that SAME DAY. Oh well, moving on…
At one point, one of the NCUA presenters (I forget who) talked about how important it was for credit unions to answer the request for comment on the APNR- about how to restructure the Corporate Credit Union System- because, after all, “you’re going to own it.”
GOING TO? REALLY? Did I hear that right? The credit union movement is “GOING TO” own the corporate credit union network? UMM, EXCUSE ME, the credit union movement ALREADY owns the corporate credit union system BECAUSE THEY CREATED IT in the first place! Perhaps it’s exactly this kind of us versus them mentality that led to problems in the first place? This notion that somehow the corporates, by virtue of their size, are somehow doing regular credit unions a favor by the nature of their existence instead of the other way around? Well, I can forgive this mis-statement as just “one of those things” that happens on a live call with the pressure of 3500 people listening, that he didn’t really mean to say, and would likely retract upon further reflection.
But the number one statement from the NCUA that concerned me was that they have “no position, one way or another” as to whether they should be pursuing TARP money from the federal government. That they don’t know how credit unions feel about it, because they’ve heard threatening statements (“we’ll leave the trade organizations”) from credit unions, on both sides of the issue.
First of all, the statement that the NCUA has no opinion in the matter is false, as evidenced by NCUA Chairman Michael Fryzel’s request for TARP funds dating back at least to November 2008, here, here, and here.
Second of all, the fact that the NCUA doesn’t have a handle on where credit unions stand is inexcusable. Ummmm, I think it’s been pretty clearly established that we live in the information age. It’s not like the pony express era when we had to wait weeks for the horses to ride across the rocky mountains and great plains states. At least they’ve set up (four months too late as Jeffry Pilcher points out) an online survey. (But they are not showing the results! Credit Union members deserve to know WHO is voting for WHAT! Christian Mullins analyzes this poll on his blog)
But most galling of all, is the inexcusable lack of understanding about what a credit union IS. (A credit union is a member-owned, cooperative, not-for-profit financial institution.) What really makes me sad is that whether or not to pursue taxpayer TARP money is being framed in terms of political EXPEDIENCY AND RAMIFICATION. Will it or won’t it affect credit union tax-exemption? Is it or is it not the least costly option to the bottom line?
What happened to principles?
Why is it that I had been working to serve the credit union movement for more than ten years before I ever heard of the seven cooperative principles that are part of all cooperatives, including credit unions? (And I heard about them from a Canadian, no less? Are they given merely lip-service in the U.S.?)
One of the principles that the credit union cooperative movement is founded on is AUTONOMY and INDEPENDENCE. During the height of the Great Depression, the credit union movement blossomed as part of the SOLUTION, not part of the PROBLEM. Why would we start being part of the problem now? Why is no one voicing the point that we should be distancing ourselves as far as possible from the TARP bailout money because it would be the WRONG THING TO DO ON PRINCIPLE?
Why is the credit union movement worth working in and fighting for? Is it for the lower pay that can be expected as compared to working for a bank? I dare say no. It’s because we have principles, principles that put PEOPLE BEFORE PROFIT. Principles that self-sufficiency and education are our goals and our purpose. If we take TARP money, or even ask for it as “backup”, we are violating our own principles and may as well close up shop anyway.
After all, as Jon Stewart of the Daily Show said a few weeks ago,
“If you don’t stick to your values when they’re being tested– [then] they’re not values, they’re hobbies!”
Can someone please get the NCUA some Credit Union Development Education (CUDE) training please, before it’s too late? (P.S. Why isn’t CUDE or equivalent training mandatory for the NCUA, Corporate Credit Unions, credit union management, and everyone else involved in the CU movement, most especially new credit union employees?)
It’s EXACTLY this bank-like “get the most money at all costs” thinking that got credit unions INTO this mess. We need to DROP that bank-like mentality in order to get out of it. Getting out of the TARP line is the correct next step to getting our own house back in order. Getting CUDE-type education to everyone at all levels involved with credit unions is the correct next step after that.
Tags: Michael Fryzel, NCUA, NCUA Corporate Stabilization Program, TARP
EverythingCU.com World 2.0 Adventure 
February 13, 2009 at 4:17 pm |
Update: I’ve been informed that at least one of the NCUA’s Board Members, Gigi Hyland has gone through the CUDE training program, as has her chief of staff. I don’t know the excuse for the NCUA members who answered questions during their webinar yesterday.
February 13, 2009 at 4:28 pm |
I give NCUA a lot of credit for conducting the webinar and taking so much time to answer questions. A few of their responses seemed odd to me as well, but that had a lot to do with who they chose to do the presentation. It was crystal clear we were hearing from incredibly talented accountants…not public relations types. That was an error in planning, certainly, but I’m not convinced the NCUA has ever really had (outside of Rodney Hood) a representative that could have done a better job.
Outside of those points, I totally agree with you. Fryzel has been lobbying for TARP since day one. The claim that they haven’t taken a stance is, at best, dishonest. While I realize that NCUA is our regulator, not our trade association, it’s baffling why such a monumental and historic pursuit of taxpayer money would be considered without figuring out where credit unions stood on the issue. It’s absolutely inexcusable for CUNA and NAFCU, who are actually charged to speak on our behalf, to do so without some semblance of an effort to understand consensus opinion from their members first. Regardless of what the survey results show (I hope they make these public), I maintain that this should have been step one…not step twelve.
Great post, Morriss….I think you share in our frustration. I remain optimistic that we can solve US Central’s problems and maintain our autonomy.
February 13, 2009 at 4:43 pm |
Morriss, thank you for capturing the frustration a lot of credit union people are feeling.
We look to these organizations for support and, sometimes, guidance. The Corporate Stab Program is a tough pill to swallow, but one we can do without asking for TARP, placing the future of the CU movement at risk.
February 13, 2009 at 4:47 pm |
I agree with the CU Warrior it is all so frustating. I am seekng tranparency, truthfulness and for natural person CUs to be able to decide how this goes down. CUs are the Corporate’s customers after all. Aren’t we all here to serve our “members”? – whether they be consumers or Credit Unions?
February 13, 2009 at 5:52 pm |
The introduction to the CUNA survey states that if there are any questions about the survey they should be addressed to Mr. Paul Ledin, Senior Data Analyst. His email address is pledin@cuna.com. I have just emailed him and asked him how the results of the survey will be published. It will be interesting to see if there is a response.
February 13, 2009 at 5:55 pm |
“It’s absolutely inexcusable for CUNA and NAFCU, who are actually charged to speak on our behalf, to do so without some semblance of an effort to understand consensus opinion from their members first.”
Perhaps most folks don’t understand how trade associations run. I can’t speak for all of them, but I can speak for NAFCU. We have a board of directors, who now are all credit union CEOs. They are elected in a vote by the NAFCU membership. They in turn hire a president, who is Fred Becker. Fred hires his support staff. We have regular board meetings, where our board gives our management team feedback. Do we get our members opinion? Absolutely. Fred sends out emails constantly giving them updates and seeking their thoughts. Since this hit, his phone has been ringing non-stop from member CEOs and member directors. Not to mention the emails.
We held a member call-in on this Wednesday, and we took questions and comments from members for roughly 75 minutes.
I hope that no one thinks that we’re simply throwing darts at a wall, without a thought to what our members want or need. That isn’t how NAFCU works.
February 13, 2009 at 9:33 pm |
@Anthony That’s the frustrating thing here. It’s not until now that (seemingly) such feedback has been fielded. NAFCU has been lobbying for TARP for many months now. If the consensus opinion of federal credit unions is to pursue TARP, then I stand corrected… That data, if NAFCU has been collecting it, has not been made available. Having a member call-in just last week seems a little late in the cycle, doesn’t it?
Looking at the credit unions that are represented on NAFCU’s board, I wonder how well a small FCU’s voice is heard.
Navy FCU – $35.7 billion
Nevada FCU – $800 million
Webster First FCU – $430 million
First Source FCU – $216 million
SRP – $481 million
Mid-Atlantic FCU – $210 million
Coastal FCU – $2 billion
Members 1st FCU – $1.5 billion
Goldenwest FCU – $636 million
Randolph-Brooks FCU – $3 billion
Visions FCU – $1.1 billion
Elections have consequences, no doubt. But the fact that the smallest credit union represented on the NAFCU board is $210 million and the average size represented is nearly $4.2 billion (if you take out Navy FCU and Mid-Atlantic, the average is still $1.1 billion) is more indicative of aristocracy than populism. If the pursuit of TARP was considered by your Board to be in the best interest of the majority of your members, my point about asset size is completely moot. I’m curious, though, how such a determination was made. Were there any formal surveys conducted to get a feel for NAFCU members’ stance on TARP?
I have always had great respect for both NAFCU and CUNA…I have simply not seen any evidence that indicates even close to a majority of credit unions welcome a taxpayer-funded bailout of US Central. When that data is presented, I will publicly apologize to both organizations for claiming they jumped the gun. Until then, I will maintain my stance. It’s quite possible that there is a silent majority out there willing to put our founding philosophies aside and accept TARP funds. I continue to be optimistic that this is not the case.
PS… I also have great respect for you, Anthony. You have always been willing to give your side of the story, and have always done so honestly and boldly.
February 13, 2009 at 10:05 pm |
Thank you for writing this. We have to be different, and follow our values, or what’s the point?
February 14, 2009 at 11:27 am |
Excellent post, Morriss! I did see one point where you and I had a different interpretation… When the “you’re going to own it” comment was made, I did not think he was talking about the network, I thought he was talking about the overall solution that the CU movement is developing.
I guess I’ll have to wait a few weeks for the replay.
::snickers::
February 14, 2009 at 11:37 am |
If I might speak up in defense of the trade organizations — and this is only a guess on my part — the squeaky wheel principle may be in play here. When housing collapsed in FL and some of the western states last year and the collateral impacts started hitting credit unions (including the corporates), the trades probably heard a lot from CUs and Leagues in those particular states about what the issues were … and by extension, what some of the remedies might be.
Then last fall, Lehman was allowed to fail, the credit markets froze up and the government began to intervene in the markets to help get credit flowing again. TARP evolved out of this environment, and I am imagining that the squeaky wheel principle was still in play – only with a now rapidly deteriorating situation, especially in those same areas that were previously under stress.
Now that we have the benefit of 3-4 months time, the people who are opposed to government bailout for credit unions are emerging as the new “squeaky wheels.” Hence, there is now an effort by the trades to get a fuller understanding and picture of where people stand.
I think you can criticize the initially announced positions quite easily – but I also have a sense that these positions were crafted in a truly frightening environment by people who were working exhaustive hours over many days and weeks. So I tend to cut them some slack on how they got to where they got initially.
As for where I stand on the idea of a bailout …
I do not like the idea of credit unions getting taxpayer money since it is an important differentiator. However, I do think it is wise to pursue a mechanism by which we *could* gain access to TARP in the future.
Why? Well, my reasoning is complex but it essentially comes down to this –
1. We don’t know where the bottom truly lies in terms of damage to the housing market and overall economy. But the TARP train (and the mechanism for credit unions to access it) is leaving the station right now. If we let this opportunity pass us by, we may not be able to get access to funding later if we discover the bottom of this crisis looks a lot worse than what we see today.
2. In general, I am a “let the market decide” kind of person. But I do think this crisis has precipitated huge (and potentially fatal) collateral damage to some NP credit unions that did not behave badly. I’m not sure getting a loan from the government to stabilize the situation is worse than letting a significant percentage of the movement fail in some key states (and has anyone thought — REALLY THOUGHT — about the ramifications [PR and otherwise] of a such a failure were it to happen?)
And to be sure, mistakes have been made in the industry – but credit unions clearly did not cause this crisis.
These are all complex issues we face, but this is what defines us as a people – as a movement. Credit unions had so many visionary and inspirational pioneers a century ago – and I do believe this is now the time for us to step up honor their memory in bold and imaginative ways.
So please do engage in this process constructively and let your voice be heard. Suggest solutions.
Finally, and at the risk of sounding self-righteous (which is not my intention) … if your credit union is in fairly good shape, please try to remember your CU counterparts who work in areas where housing has dropped 40-50% off the market top through no fault of their own. The decisions we make, and our approach as a movement to solving these problems, will impact their lives and livelihoods most of all (not to mention the millions of members they work for).
Thank you for reading this novel!
February 14, 2009 at 12:31 pm |
WHAT WE HAVE HERE IS A FAILURE TO COMMUNICATE. No steps were taken by credit union leadership to communicate to the industry. Most people learned about the leadership’s position the same way Joe Public did: the news. That’s just wrong…
A FAILURE OF INCLUSION. The wider body of credit unions on the whole should have been asked before any organization took action on their behalf — squeaky wheels or none. Simply listening to your board or the input of a vocal few may work for lesser issues, but not this one. This is the single biggest thing to affect the credit union industry in decades, if not ever.
A FAILURE OF RESPONSIBILITY. Hasty decisions lead to crappy outcomes. I understand that the situation felt “dire,” but making spur-of-the-moment decisions is how you go around flushing $850 billion down the toilet. Look before you leap. Inadequate due diligence was performed prior to asking for TARP money. If any due diligence was done, it certainly wasn’t shared with the broader community.
February 14, 2009 at 12:40 pm |
Jeffry: I agree with your three main points – but I do think in a fast-moving environment, what was being advocated was not a bailout (actual, physical $$) – but a mechanism for *inclusion in the process* in case it was/is needed later.
As an industry, if you decide you don’t want or need it, great. But if you don’t get included in the process when it’s set up, you may not be able to get it later if things deteriorate significantly and you change your mind.
And that’s a pretty important distinction in my book.
February 14, 2009 at 2:41 pm |
History has proven that once a “mechanism” like this becomes available, it will be exploited to its fullest extent.
It’s seems that the difference between “asking for a mechanism to access to TARP money” and “actually accessing TARP money” is only a matter of semantics.
I would accept a promise from Obama and Congress that if the money is needed, it will be given.
February 15, 2009 at 10:14 am |
Jeffry: Your point about mechanisms designed being utilized is well-taken, but on the other hand look at how swiftly Lehman Brothers came crashing down last September when the government refused to intervene – and consider also the collateral damage that was done to the financial system and other institutions (not to mention our 401-Ks) as a result.
A “promise” without a mechanism supposes that in the case of a sudden, systemic threat to the corporate or NPCU system that government will have the time, inclination and willingness to deal with an issue that could metastasize in a matter of a few days or hours (see Lehman Brothers). What if they’re out of town?
While I would again like to strongly re-state my hope that credit unions will work together to solve their own problems without benefit of government/taxpayer solution … I think those who are adamantly opposed to any form of government intervention (even asking for a mechanism) based on “our values” – should read and consider cooperative principle #4.
Four: Autonomy and Independence
“Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.”
I might add that some cooperatives, including some credit unions, have sentence two of #4 reading this way …
“If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operatives autonomy.”
If someone has a fuller knowledge of the intent & original wording of the seven principles (by the “framers of our constitution”), I would love to hear what #4 is getting at.
Because as I read it present-day, it makes this whole government bailout question a lot murkier to me.
February 15, 2009 at 11:37 am |
@CU_Communicator – Seems to me that accepting taxpayer money, especially when you consider that not all taxpayers are credit union members, violates principle #4 any way you read it. As those banks who accepted TARP money will attest, internal democratic control is relinquished the day you accept taxpayer money.
As for solutions, one has been offered. NCUA’s Corporate Stability Program. An industry with over 11% capital can stomach a 58-basis point hit. It’ll suck in the short-term, no doubt, but it will have a far better outcome than taking money from taxpayers.
Let the “TARP train” leave the station…that’s a country song that won’t make me cry.
February 15, 2009 at 12:04 pm |
@Warrior: Well, is #4 speaking to the industry – or the single credit union as an autonomous entity capable of entering into its own agreements? And if a credit union accepts government funding (in lieu of death or severe operational impairment) and let’s say yours does not, how does that affect the democratic control of your credit union? Seems like the money comes with conditions for the institutions that receive it.
How democratic is the Stabilization Plan, if you think about it?
To be sure, there would be a PR issue surrounding taxation if anyone took $$ – but this assumes that this PR issue is worse than CU systemic stress or the failure of significant segments of the credit union industry. My guess is that in the case of the latter, the banks would still argue that this is yet another sign that CUs have morphed and helped cause the financial crisis, blah blah blah. Only in that scenario ALL remaining credit unions would be weaker, since there would be fewer left … and would be on the hook for cleaning up the losses.
And I have great confidence that the stabilization plan will work if things do not significantly worsen, and if NPCU boards stay invested in the corporate system.
This plan has a chance to succeed only if credit unions stay with the program.
February 15, 2009 at 12:31 pm |
@CU_Communicator If you are suggesting that individual credit unions should be allowed to elect for themselves whether or not to accept TARP funds, that’s entirely more acceptable than having our trade organizations, who seemingly speak for ALL credit unions, to publicly campaign for it. That’s the rub. When you ask for something as the voice for the movement, the consequences of those actions affect everyone.
February 15, 2009 at 12:51 pm |
@Warrior – well, that is the essential problem, since there is no legal mechanism for such a direct transfer of capital to happen that I am aware of.
It’s a sticky wicket all the way around, that much is for sure … and this discussion is really not about one issue – but several for our industry to contemplate.
No rest for the weary these days. 🙂
February 15, 2009 at 3:15 pm |
Please note: I am not categorically opposed to TARP money for credit unions. I am not among those who dogmatically reject government assistance based on principles alone. In fact, none of my issues with TARP money have to do with principles.
If the industry does indeed need the money in order to survive, I can accept it. However, as a taxpayer, I have grave concerns about how my money has been spent thus far, and am equally concerned about future spending. It is appropriate to question and scrutinize any government expenditure (especially those with 9+ zeroes), even those that seemingly serve our own interests. Indeed, it is our responsibility.
My position is fiscally conservative. I’ll assume the government never needs to spend money (in any situation), and a thorough, logical case needs to be established to prove otherwise.
@CU_Communicator: If the *credit union industry* (of all things) faces a 11th-hour crisis like Lehman, then our economy — in fact, the world as we know it — will probably come crashing to the ground… utter chaos, in which case no amount of government spending will make a difference.
Again, we’re arguing about theoretical possibilities. As far as I know, the only thing that could trigger a hyper-urgent need for capital would be a massive blow to the balance sheets of America’s credit unions. This can happen only one of two ways: (1) a run on deposits, or (2) total loan destruction — e.g., astronomical defaults. If either of those things happen… to credit unions (!!!!)… we won’t be arguing about TARP bailouts. We’ll be arguing about what kind of new financial system we’ll build from the apocalyptic ruins.
Bottom Line: If credit unions all of a sudden become so broke and broken they need a massive, hyper-immediate bailout, we’re screwed. Totally. All of us… as in “human kind.”
February 15, 2009 at 5:33 pm |
@Jeffry – I hear you, and it’s fundamentally hard to know at this point … literally trillions of dollars into the process whether a dime of it has done or will do any good. I certainly hope it will – but there are no guarantees.
As for the CU industry, I share what I think is your overall optimism, because in the end I think NPCUs will stay invested in the corporate system and let the bonds stay on the books, which as you know is our best chance at minimizing losses.
But I do worry about where things could go from here and the impacts on credit unions – there are so many moving parts to this story. For now, let’s hope for the best and prepare for something that is less than optimum.
February 24, 2009 at 9:31 am |
What bothers me most is that the NCUA created a plan to fund U.S. Central’s losses on the shoulders of natural person credit uninos before they even know the full extent of how much money is needed to solve the problem. How could they justify this?
For all we know the amount of money needed to solve U.S. Central’s problems could be much more than what has been projected. What happens then, do they come back to credit unions for more? Or, will they need a government bailout anyway despite the $1.2 billion that CUs already gave them.
Let’s hope that neither of these scenarios play out. However, if they do my guess is that credit unions will be more vocal in expressing their outrage with NCUA.
February 24, 2009 at 11:30 am |
No one knows jack.
February 24, 2009 at 11:39 am |
@M.Shafer – If requiring all 8000 natural-person CU’s to fork over pretty much a year’s worth of earnings isn’t enough to get vocal with outrage, I don’t know what is. It takes more than that to get riled up?