For a future that would get our NCUA leaders focused on comments like Jelena McWilliams

This week, June 19, you will see that CU*Answers is trying to rally NACUSO to help us push CUSOs towards some big projects. My favorite is an effort by CUSOs to impact the selection process for the NCUA board of directors. For ten years, or more we have not seen a NCUA board member step up and rally a single project that was designed for a growth initiative, for a cooperative consumer-owner initiative, or for any initiative that was pointed at the chance to expand our members’ sense of well-being. We simply suffer the government’s assigned “snow fence installation crew” – the people that wrap us in safety and soundness and corral us behind fences designed to stave off storms. We need leaders with new mindsets and sincere intent, because they have felt stifled in their lives too.

We need a counterbalance to the two new directors, and we need it soon, before we all pass away from boredom and the ground hog day effects of “been there, done that.” It is time to select someone that is pro-cooperative business models, understands a CUSO’s drive for cooperatives, and someone that might put some heart into the game to inspire our faith in the heart of the NCUA. Can that start with a person, the next appointee, or will it wait for us to push harder to change the selection process? I say try both. Push for an immediate talent to join the other two, push for someone like Sarah Canepa Bang, or even Sarah Canepa Bang… And prepare for a long process to influence the way the next ten administrations select our directors.

We have work to do if we are to ensure that we might have a chance to match the talent and sentiments of Jelena McWilliams on her best day. Here is to better days ahead.

Read the remarks by FDIC Chairman Jelena McWilliams at the CATO Summit on Financial Regulation, “If You Build It, They Will Come”; Washington, D.C.

Mike Shafer responded to my most recent article and offered a different view of the issue at hand as one in which the NCUA has the unenviable task of performing clean up duty. Firstly, thanks Mike for speaking up on this topic and sharing your opinion!

Thanks also for making my point that the NCUA did what it has always done, and we were all happy to let them off the hook.  We will lightly criticize the NCUA for letting credit unions make this a system issue (raking in CU profits short-term with no plan for the ultimate rainy day), but then just forgive the NCUA when they have to deal with the consequences. Do you sense a pattern here?

Or is it just all part of the game? CUs maximize their independent success for as long as possible and then dump their ultimate failures on the system? Could you imagine if that was the game, and it was stated so directly?  How would people see the design and how would they change it?

One perspective: CUs owe nothing to the system from their independent success year over year. In which case, the NCUA really has no role in assigning some premium or hold back from success against future ultimate failure. Alternatively, credit unions’ ultimate failures are equally divided by the system independent of their successes from the past. In which case, the NCUA really has no role in the end, but to write a check and tell the system about the bad news. (This is the opportunity to improve.)

After you gotten the bad news over and over, and you went back to the design statement over and over, do you think it reasonable to let everyone off the hook without trying to improve it? (Chip sure does not think that way.) What if we all pushed hard to stop getting the bad news and made the design work better.

• What happened to the $ represented by the extreme Net Worth? Were they extreme or should they have been seen as mandatory per the RISK? (This is a tough thing to size up – I am not a fan of RBC.)
• How did the system benefit from the independent success of these credit unions (direct sourcing CUs and the participating CUs)? Is there a reason to rejoice in the net returns to the system even after the failure?
• Who made the call it was time to declare Ultimate Failure? Here is my bone to pick with the current culture of the NCUA: they did.
• Who decided to end the CU work out, and stop working with the members? Here is my bone to pick with the current culture of the NCUA: they did.
• Who decided that writing a check was better than pushing through as owners of the situation with the members? Here is my bone to pick with the current culture of the NCUA: they did.
• Who likes to benefit from calling it a crisis and being the white knight? Here is my bone to pick with the current culture of the NCUA: they did.
• Who accepts the design and even justifies the writing of checks, the increasing budgets of the NCUA, and the liquidators profile? The industry does, because it can’t and won’t work to change the design.

Now don’t get me wrong, I have no simple fix to this design. Frankly, I am not sure I need one because I am ok with the net return to the system over the life of member economies (years of gains less the shut down costs model). But what I hate is the posturing of everything as a crisis and that the NCUA is doing a good job, instead of a mediocre one at best.

I am sure that Chip sees the design a bit differently. Perhaps he does not believe in this statement:  The NCUA really has no role in the end but to write a check and tell the system about the bad news.

Maybe he believes and we should too that:

• The NCUA should do everything in its power to see that the independent credit union completes the work out directly with the members and delays the Ultimate Failure declaration until all is lost.
• The NCUA should write checks and ensure the ability of the system to complete the work out with the members, not just pay for the problem to be transferred out of the system without care or concern for the impact on credit union owners, their communities, and the sense of our independence as cooperatives.
• And in doing all of that the NCUA should be accountable for the situation of both success wasted, and failures not managed to the minimal loss.
• We all should look for more than convenience in dealing with failure, we should look to the pride of helping CU with their independent management of success and failures via a system that pushes them and us not to quit on customer-owners at the drop of a hat.

Tell Me Why I’m Wrong

Read Chip Filson’s response to Randy

Is it possible that Chip Filson is the last NCUA critical thinker of his generation or just a one-trick pony?

Read this most recent posting from Chip Filson on CreditUnions.com. Within just a few seconds you will pause and think “Oh, Chip, are you ever going to give up on kicking this dog? Does anyone really think it matters if we critique the NCUA’s action anymore? Does it make a difference?” But then you will read on—I always do. Chip Filson is a friend of mine and I believe his opinions on the system and the NCUA are valuable on many levels.

First, they remind me that the NCUA is not just an insurance firm or a regulator – they were designed to be more. They were designed to foster and separate the concept of a consumer-owned financial system that saw the world through a community lens and with bigger goals than just banking.  Chip might be the last true commentator who had a pulpit focused on wanting the NCUA to be more than just a government agency.

Second, they remind me that you have to look further than today’s headlines to ADD it all up. And while the numbers are getting so large that we round to the nearest billion these days, Chip reminds us that the NCUA only rounds numbers up or down based on their own internal goals to look good. The NCUA is no longer balanced by anything other than its own sense of importance. And board members are no longer the voice of reason, they are simply the promoters of a bureaucrat’s reputation. Chip might be the last true historian with enough perseverance to audit, research, and painstakingly try to sum up the NCUA’s actions in totals to paint stories as lessons for the future, not just sound bites without conscience.  

Third, they remind me that counting on the central planners of Washington and all those that see our business, credit unions, as some fine-tuned social model for justice is becoming more and more fool’s folly. For those who make up the industry have lost much of their fire over injustice, lost much of their indignation of those who would tread on consumers that act to be owners of community businesses, and have lost faith in political structures that cannot see a reason to separate a cooperative system from the evaluations and constructs of for-profit designs for banking and community action. Chip might be the last CU leader that truly reminds me to maintain hope that the NCUA could be more, and that counting on our system to heal itself is still worth the effort.

Today, the article strikes out against the way 8,000 member-borrowers were discounted and forgotten. Yesterday, there were dozens of moments Chip reminded us that the NCUA was off track. But what I am the most dismayed about in thinking about all of these articles is that they never rallied my generation of CU leaders and CU organizations to any recognizable effort to change anything at the NCUA. We have yet to mount any effort that showed us that any administration’s intent for the credit union industry was greater than a quid quo pro nod to a third level constituent owed a favor. We never got anyone’s attention for the effort to build a better NCUA, a better insurance fund, or a better machine to improve our own solutions.

We are capable community, small business builders, but we might be little else if Chip will be the last commentator to try to rally our ire and hopes for bigger things. Tell Me Why I’m Wrong.

A CU industry ICON reaches out to the Washington Post for more light on credit union regulatory agency’s disrespect for 100M American citizen-owners of credit unions

Many of us have long become accustomed to Chip Filson’s warnings related to NCUA excesses and lack of respect for process expectations or rules.  He constantly lets us know that the current administration at the NCUA and ineffective board cares little about due process, transparency, or even the hint of propriety in the use of their power to just wipe out credit union owners’ capital and the future it represents. So when he published his most recent article on the NCUA’s spending $1.5B of member funds, many of us might have just sighed “there he goes again”, and way too many of us might have given up trying to connect the dots with all of the numbers, acronyms, and references to the NCUA’s shenanigans. It is news, but it is just expected news these days.

What was surprising to me was when I read this email from Chip to the Washington Post, because his indictment of the NCUA in his email was much easier to consume, to engage with, and to “feel” as an industry supporter. I have always been able to feel Chip’s passion for the system, and even his hopes that the NCUA would play up. But when I put this article, our industry apathy to the details, and this reach out to the real world together I knew things were changing. Keep going Chip, and keep pushing for people to pay attention.

For now is the time to push harder. With the recent announcement of Rodney Hood for another round at the NCUA as a board member, the recent push to fill the other empty seat, and the pending need to replace McWatters, there could be no bigger reason to try to get the attention of all of the people who might care about those 100 million citizens. Now is the time to push for a different type of leader on the board. Rodney Hood shows no signal, from his past or current activities, that he will change a thing for the better as a future board member. I predict that he will be recycling the agency’s disrespect for all of us with his passive, quiet demeanor of a bureaucrat without the skills to lead.

Now is the time to push the President to actually have a “project” for the NCUA Board. Something that calls for leaders. Now is the time for the administration to do more than dole out appointments as an afterthought. Now is the time for the administration to give the NCUA Board a job! Change the path of the CU industry by actually caring about the owners of credit unions as much as they care about the owners of for profit financial service models. Now is time to push for a new day.

I hate to see icons of the credit union industry (e.g. Chip) pushed to calling on the Washington Post, but now is the time to reach out and demand somebody shines a light on the need for a better NCUA Board with a real agenda. Tell Me Why I’m Wrong.

Be careful not to dismiss ownership as some inconsequential detail on the path to success

I received a comment from Gregg Stockdale on my last piece, “The risks of vendor consolidation on the credit union industry“. In it he wrote:

“What disrupter of the credit union industry followed this model?  -“Only ownership can prioritize disruption of the status quo, competitors and the core of innovation. Cooperative ownership of our solutions is the key”  Also, “Protecting the decisions and mechanisms for maintaining our differential is the mandate for the future”  –  What differential?  Other than ownership, how is a cu different from a bank?  Cu’s are very bank-like and banks have become cu-like in their service offerings.  The big disrupters have come from outside the entire industry and many are privately owned.”

I agree whether a CUSO, CU, or any other company is a disrupter can be difficult to identify without close examination. But I contend there are many in the CUSO space as vendors, and in the credit union space, when they are judged locally by their consumer-owners (members) who meet or surpass the bar for disruption. Where I think Gregg was off track is his MACRO EXPECTATIONS from these ideas. He dismisses CU ownership as the DIFFERENTIAL that counts. It does count, and it should. Credit unions represent consumer owners, citizen ownership, and ultimately the best of community ownership model in society. Our economy and government should be more aware of that and be more demanding of that differential. If they were, it would be more than just an internal goal of cooperatives to focus on disrupting, it would be a national goal and mandate that they do. For that reason I judge the NCUA not to be a cooperative regulator, but just a bank regulator hiding under a cooperative banner.

Owners, no matter what their type, can internally mandate that their approach to the marketplace be disruptive to their competitors, for their consumers, and for the status quo. We both can be disappointed when their efforts are not STUNNING and APPARENT to the outside world, but their efforts can be real. They can be real one consumer at a time. So when he mentions the “big disrupters” he is scaling disruption with a MACRO EXPECTATION again. Why?

That is the point of my blog – vendor mergers like Fiserv and First Data are based on the MACRO EXPECTATIONS that scale is all that matters. And that when scale wipes out the nuance of niche approaches by simple rolling over the needs of those niche players we lose something, and in our case (CU supporters and believers) we might lose everything when we buy from these vendors.

I do believe that CU*Answers is a disruptive force, but not one that will move the world or even vendor analysts. I believe the force mandated by our ownership will move our industry to respect itself via our intent. I believe the force mandated by our ownership will move our industry to see that the cooperative inherent win-win model with consumers is powerful because consumers are the owner. And I believe that that is a disruptive idea for the ages when highlighted, amplified, and sincere in its efforts. So I focus on the micro-disruption of the owner’s intent, the owner’s heart to move things given a chance. Every community’s heart given a chance. I believe that our industry should be concerned when the vendor marketplace consolidations take that chance away.

Thanks to Gregg for commenting and pushing the conversation further.

NCUA Board approves amendments to 2015 risk-based capital final rule, delay until 2020

The NCUA recently adjourned from their October board meeting and with respect to the impending RBC rule has approved action to raise the minimum impacted asset size from $100M to $500M. More importantly, however, they have delayed implementation from January 2019 to January 2020. Vic Pantea provided his thoughts on this decision:

“This action, in my humble opinion, will kill the entire RBC rule for the immediate future. I see a purely political compromise here that allows both McWatters and Metsger to gain satisfaction. McWatters who argued strongly, back in 2015, that the board did not have the authority to implement RBC, cannot reverse implementation as long as Metsger, who voted along with Matz, is the other vote on a 2-person board. But by getting the delay to 2020, we can assume that Rodney Hood will supply a 2^nd vote sometime during 2019 to eliminate the final rule, regardless of Metsger’s disposition as an expired board member or if his eventual replacement has been appointed. Metsger, as a consolation, can continue to say that for as long as he held office, he was a supporter of RBC and excessive agency overreach in the name of “protecting the NCUSIF.”

Got to love politics… The pendulum between rules and tools swings back and forth based more on who has the last word than what is right. Always being last to the party on these kinds of things is a good bet. Picture all the effort and money that has been wasted in debating RBC, CECL, and other regulatory divides in the last 5 years.

How many real issues might have moved forward if we had not stalled so many people in debating the “what if’s” of fluff, risk management overreach, and style points for politicians? Imagine all the CU leaders that were discouraged by the doomsday preached when the predictions of these changes doomed all small CUs. And most of the debate was over late to the party, overreactions to disasters already survived, and the idea that data and measurements can predict the unpredictable, low probability events called life.

My advice: live by the creed of “do valuable things and good things will happen” as CU leaders. Let’s find a way to never be herded into a corner again by those who garner our attention over shuffling paper, debate the inconsequential, and doom us with protection from “it could have been worse” insurance policies.