Reasons

There is a reason you keep working for credit unions.

That reason has changed with time, no doubt. But there's a reason.

The people who I love working with, and for, in the movement have reasons that sound a lot like these:

"I believe in what we stand for." Or "I like helping people." Or "I want to make a difference." Or "this is fun!"

This group could help consumers from any desk, laptop, or setting in any industry. This group measures success in terms of impact, not in accountant speak. This group doesn't need credit unions. Credit unions need them.

There are other reasons people work for credit unions. Their reasons sound different. Their reasons are sprinkled with descriptors like "trapped," "stuck," "scared," "it's all I know," "the job market" and "I'm the [fill in leadership position of your choice], for crying out loud."

This group has seen new ideas fail, knows how hard change is, and fights like the dickens to avoid it. This group is toxic and all around us.

My reason for working for credit unions has changed dramatically over the years. "I don't know what all of this credit union stuff is, but this job description sounds like fun" quickly turned into "I believe in what we do." Later, my new "I want to make a difference" reason morphed into "I can make a difference."

I think I have a new reason.

Over the past several years, many amazing opportunities have presented themselves to me. In some cases, I created those opportunities with hard work, sacrifices in my personal life, and a naive insistence that I matter. In many other cases, serendipity gets the credit. Still, the major source of opportunity in my career has been the belief others have placed in me.

My latest opportunity was being able to attend the 1 Conference with the Crash the 1 group. The reasons these young adults "crashed" varied, I'd imagine. They came from all over the globe from credit unions large and small. They came from many different disciplines, education levels, and experience. Most important of all, however, was another attribute they brought: naiveté.

I think this struck me the hardest when I heard Tim McAlpine and Gene Blishen close the Crash event. Gene, after all of these years, is still naive enough to think small credit unions can do huge things. Tim is still naive enough to think he can create a youth movement that will add 1,000,000 members to credit unions in his career. They're not just naive...they're right.

The optimism of some of my favorite people in credit unions has been poisoned by cynicism. The lumps of the last several years have jaded even the most impervious credit union spirits. The same folks that used to ask "why can't we?" are telling each other why "that can't be done." The regulatory and economic environment has created a leadership crisis.

The reason I keep working for credit unions is because I don't want to grow up. The people that believe in me haven't provided me opportunity because of experience, or title, or politics. They've given me opportunity because they think I'm crazy and naive enough to do something with it.

"Crashing" has nothing to do with entitlement, or instant gratification, or unfair opportunity. Rather, Crash is a reminder to the old guard that what we need more than anything right now is inexperience, energy, optimism, and a self-assured belief that maybe, just maybe, we can change for the better.

What is the reason you keep working for credit unions?

Open Letter to Fans from This Blog's Owner Matt Davis

Dear Dallas, All Employees of Frito-Lay, Yum Brands, Their Families, and Credit Union Supporters Wherever You May Be Tonight.

As you now know, our former Frito-Lay Credit Union, who grew up thanks to the sweat, investment and love of its members who it despicably deserted, is no longer a credit union.a

This was announced in 2004, after some members voted to overlook the power of mutual self help by converting to a federally chartered mutual savings bank called SharePlus Federal. The narcissistic, self-centered urging of CEO D. Craig Barnes claimed that the move would put the financial institution “on a level playing field in today’s competitive banking market.” At the time, SharePlus had $175 million in assets.

Clearly, that was bitterly disappointing to all of us.

The good news is that the rest of the hard-working, loyal, and driven credit unions that stayed committed to the member-owned, not-for-profit cooperative spirit have not betrayed our members nor NEVER will betray you.

I dig up this story because this week we learn that SharePlus Federal Bank has announced that it wants to raise up to $19.8 million in an initial public offering so it can become a bank holding company. SharePlus, it seems, discovered that their financial problems had little to do with their charter. In the past six years, the turncoat grew less than 5% annually (compared to 6.2% for all federally chartered credit unions during the same period). Through the first three months of 2010, SharePlus found a way to lose $332,000.

You simply didn’t deserve this kind of cowardly betrayal.

You have given so much and deserve so much more.

In the meantime, I want to make one statement to you tonight:

“I PERSONALLY GUARANTEE THAT AMERICA’S CREDIT UNIONS WILL SERVE YOU BETTER THAN ANY PROFIT DRIVEN, MISMANAGED FORMER ‘CREDIT UNION,’ SOON-TO-BE FORMER ‘MUTUAL SAVINGS BANK’”

You can take that to the bank…and your money to a credit union.

If you thought we were a great deal before the financial crisis, dedicated to helping members get access to affordable financial products and services, precious financial guidance, and a service over profit mentality, I can tell you that this shameful reminder of what happens when bankers succumb to short-sighted greed has shifted our “motivation” to previously unknown and previously never experienced levels.

Some people think they should go to heaven but NOT have to die to get there.

Sorry, but that’s not how it works.

This shocking act of disloyalty to the credit union system has not been forgotten, and sends the exact opposite lesson of what we would want other financial institutions to follow. And “what” we would want them to focus on – people or profit?

But the good news is that this heartless and callous action can only serve to remind us of the beauty of the credit union system. The grass isn’t always greener on the other side of the fence, and poor managers are simply poor managers.

The self-declared “customer-owned mutual savings institution” will be taking even more ownership away from its customers with this IPO.

Just watch.

Sleep well, consumers.

Tomorrow is a new and much brighter day…

I PROMISE you that our energy, focus, capital, knowledge and experience will be directed at one thing and one thing only:

DELIVERING YOU the affordable financial services you have long deserved and are long overdue…



Credit Union Warrior
Majority Owner of this Blog

A Penny for Your Thoughts

I read a story today about a woman named La Rosa Carrington, who, stuck in a simultaneous fight with leukemia and unemployment, was informed by Discovery Benefits that her healthcare coverage is being canceled. Her monthly insurance premium, come to find out, had not been paid in full. Rules are rules, I guess. In fact, I'm a pretty big fan of demonstrating consistency in policy application.

This case was different.

Carrington had in fact paid her premium. Only, she had shorted the payment by one cent. That's right, a penny.

In a world where employees are empowered to be empathetic, use personal judgment, and bend rules when necessary, the fix here is easy. A Discovery Benefits representative, upon informing Carrington that her premium was not paid in full could have said:

"Our system shows that you did not pay your last premium in full, so unfortunately we're going to have to... Wait a minute. You were short a penny. Mrs. Carrington, this is silly. Do us a favor and pay an extra penny next time to cover this shortage. I'll leave a note on your account that you accidentally sent in the wrong amount. You can make it up next time. Please remember that the monthly payment is $289.45."

But that's not what happened.

Instead, Carrington was informed that her coverage was getting canceled and that she would be on the hook for the mounting medical bills associated with chemotherapy.

"A penny off? Well, that was stupid!"

"Lost your job? Not our problem."

Instead of dealing with this problem on a human level, Discovery Benefits clearly addressed it as a policy matter. A black and white issue. Instead of being empathetic, Carrington was instructed to send in a check or money order for a penny or face the cancelation of her coverage.

How strict are the policies and procedures at your credit union? Do you give your employees the authority to bend the rules when it is appropriate? Is your staff so concerned about a penny, or a check hold, or a firm credit score requirement that they lose sight of the human element of a situation?

Policies are important. People (and common decency) are more important.

Time to Get Rid of Deposit Insurance

Want to fix safety and soundness concerns at credit unions? Want to make member ownership and the democratic process mean more at credit unions? Eliminate the NCUSIF.

Seriously, get rid of it. Get rid of the FDIC Deposit Insurance Fund (DIF) as well.

I realize this cannot (will not) happen, but it needs to. Here's why:

1) We need an environment of healthy risk. Our regulators are charged with maintaining the health of deposit/share insurance fund pools. Their goal is to minimize risk. But while too much risk is clearly not healthy, zero risk is a problem as well. A financial system that allows for zero risk doesn't help entrepreneurs get ideas off of the ground, doesn't help borrowers that need help the most, and doesn't allow the flexibility necessary to adapt quickly enough to changes in consumer need.

"Dude... Haven't you read about that thing they call the Great Depression?" you're likely wondering. "How about all of the bank and credit union failures in the past couple of years? Consumers need protection."

You're right. There were many lessons to be learned from the Great Depression. The most important one, of course, was that we have an obligation to make sure consumers and investors are provided with reliable information about the financial institutions they do business with. Deposit insurance doesn't improve the reliability or transparency of information, it makes information irrelevant. That brings me to the second reason we need to abolish deposit insurance.

2. Deposit insurance doesn't protect consumers, it harms them. Deposit insurance puts consumers at risk, even if indirectly. It's expensive. Although credit union members have never lost a dime of their insured funds in the history of the NCUSIF, and no taxpayer dollars have ever been used into the fund, its administration and the opportunity cost of maintaining a $20 billion organization (and keeping $10 billion in liquidity from consumers) is significant.

The story is worse for the FDIC's fund. Underwater by $21 billion, and losing on average nearly $2.8 billion/month due to bank closings since July 2008, the FDIC DIF has seen better days. Unfortunately, these aren't simply paper losses.

Where does this money come from? (After all, it is a zero sum game.) Recapitalization of these funds requires some combination of increased money supply (Treasury prints more money), taxpayer funded bailouts, and special assessments charged to financial institutions. The result is a vicious circle of some combination of higher taxes, more expensive financial services, more bank/CU closures, more consolidation (less consumer choice), and inflation.

"Great. So what you're saying is if a depositor's financial institution goes under, it's OK that they lose their life savings?"

Well...yes. That sounds awful, but let me explain with my third reason we should abolish deposit/share insurance.

3. The deposit/share insurance safety net discourages consumer due diligence. You know why people deposit funds at risky financial institutions? It doesn't matter if the bank/credit union fails. Their deposits/shares are covered. What if they weren't? Consumers would be forced to scrutinize the institutions they choose to do business with, be more skeptical of "too good to be true" offers, and take more ownership of their financial decisions (who they bank with, which products they choose, etc.).

The financial literacy crisis in America has been exacerbated by an almost ever-present consumer safety net. Want businesses, consumers, and government to be more cautious with risk? Let them fail. The reality of a poor decision's painful consequences is a great teacher.

"But how do you prevent a potential 'run on the bank'? Sounds like you are begging for the entire system to fail."

Actually, I'm begging for a much less intertwined system. That brings me to my last point.

4. Cooperation and insurance coverage should be opt-in and fair. Unlike in the banking world, where riskier institutions pay a higher premium to the DIF than more conservative banks, the NCUA makes no distinction between the funding requirements for risky credit unions versus more conservative credit unions. What does that mean? It means that conservative credit unions get punished for being responsible stewards of their members' assets, while credit unions that pose a much larger threat to the NCUSIF are not required to compensate for that risk. Risky credit unions do all the drinking and dancing, then ask the designated drivers to split the bill with them. Not cool.

Banks and credit unions should be given the choice to offer insurance or not. Further, they should be allowed to collaborate with any other financial institution or third party to form their own insurance funds with like-minded organizations. Some consumers will refuse to do business with a financial institution that doesn't offer deposit insurance. That's cool. The market will adjust. Some consumers will decide that higher returns, convenience, and innovation are worth a little bit of risk on their end. That's cool, too.

Government should demand financial institution transparency, send financial institution employees to jail for any deposit losses, and let consumers dictate what system develops. The system that crashed in 2008 rewarded ignorance, encouraged unnecessary risk, and placed zero responsibility on consumers or financial institutions to manage the balance of risk and reward. The system I'm proposing is different.

Now that you all think I'm crazy. Let me suggest an alternative fix: reduce the cap on insured shares.

The move to permanently increase deposit insurance from $100,000 to $250,000 flies in the face of reason. If anything, we should reduce that number to $25,000-$50,000. That amount covers most of America. The wealthier segment of the population, then, would be left with three choices: 1) Deposit funds in multiple, diversified financial institutions; 2) Do business with only the most safe and sound financial institution(s); and/or 3) Find an alternative use for those funds.

The sooner we can move away from the ghosts of misunderstood Great Depression lessons, the sooner we can develop a system of personal responsibility, managed risk, and sustainable operations.

Let Your Checkbook Do the Talking

Danielle Chatfield-Beres is one of my favorite people in credit unions. As an amazing credit union marketer, Filene i3er, Partnership Symposium attendee, and all around awesome person, seemingly everything she's ever been involved in has become better as a result. One of my favorite stories about her was a decision not so long ago to leave her position as a rockstar credit union marketer to take a job at another credit union to become...a controller. She had aspirations to be a CEO someday, and that seemed to be the most logical way to position herself to make that happen. I love that.

Anyway, that's a long introduction to the point of this post. On the CUDE listserv the other day Danielle posted her frustration with the way Dick Durbin's interchange amendment has been discussed publicly by merchants. The basic argument on their side is that interchange (or swipe) fees are simply another case of meaningless profiteering by financial institutions.

Danielle has had enough, and posted what I think is a very clever way to fight back:

"My new protest weapon against interchange:  My own checkbook.  Specifically, my ability to give big box retailers precisely what they are purportedly after...a return to the good old days of the expenses of dealing with cash and checks.


I resolve to dig out my checkbook from under the dust bunnies and walk into a big box retailer, select about $10 worth of items to purchase...and proceed to the checkout counter with only my checkbook in my hand and my driver's license buried deep at the bottom of my purse where I'll have to spend a minute or so searching for it.


I'd love to get 25 or 30 of my closest CU friends to join me.  I'd love to have others across the country do the same.  I'd love it even more if we made it such a concerted event in different locales that we could REALLY get our local media to pay attention and bring a camera to watch how much people adore having their checkout lines clogged up with people paying by check.


I've read the interchange compromise summary.  I've watched the hearings.  I know this particular battle may not be won.  But at least we can make a loud enough point about it that when consumers start seeing their account fees rising, we can give them certain legislators' contact information so they know who to thank for it."

 I love this idea. I hope you do as well, and will join us on this.

(Now if I could only find that checkbook...)

Upright and Locked Positions

I'm 5'7". Unless you're blue and live in a little mushroom village, that's not tall. Still, I am almost always cramped and uncomfortable on airplanes. And when the person sitting in front of me reclines his seat (I'm talking about you, Mr. Snoresalot), I have no space at all. I couldn't imagine how horrible flying would be if I had eaten more vegetables as a child.

I know the score. I know that the more seats you can jam into an airplane's cabin, the more revenue each flight can generate. I know that people have learned to expect discomfort on planes. I also know that there's a reason first class seats are more expensive. If you want flying to suck less, you have to have money.

Banking sucks too.

The more transactions a teller can perform in a day, the lower operating costs become. Consumers have learned to expect lines, discomfort, and divided attention. Special lines (or account terms, or phone numbers) are open for special customers. If you want banking to suck less, you have to have money.

I'm not sure what my point is other than to say this: 1) Don't recline your seat on a plane; 2) Efficiency is important, but you need to balance it with service; and 3) Seems like there's an excellent opportunity for planes, banks, and credit unions to redefine first class, and eliminate second class.

We have an obligation as credit unions to be as efficient as we possibly can. I'm in absolute awe of the credit unions who have succeeded at focusing on the training, processes, and strategies necessary to minimize operating expenses. Still, I would have to think there's an appetite out there for premium banking relationships (no waiting in line, no automated phone systems, 24/7 accessibility) open to the masses. Price it right, and you may find that there are people out there who are willing to pay an annual fee to make their lives less miserable.

I Still Dig the Diggers...But We Dug this Hole

We could blame the recession. We could blame regulators. We could blame consumers/bank competition/[insert your legislator/president of choice]/Wall Street/each other.

Whatever we choose to blame, I think we all realize deep down the rut credit unions find themselves in has been largely carved out both by and for credit unions. Lip service to our core cooperative principles, an unwillingness to hire (and pay appropriately) top talent, being way too slow to adapt to changes in the competitive environment, misappropriated budget dollars, gross negligence regarding our corporates (from the elected to the electorate), and a hell-bent determination to follow as opposed to lead in the marketplace have much more to do with the predicament we find ourselves in than any external factor. If we are going to dig out of this rut, we need to make a few things happen:

1) We need to reevaluate our staffs (from top to bottom). Do we have the right talent in place to make the necessary improvements to our operations? Are we willing to pay for it? Are we willing to capitalize on this golden opportunity to gobble up the amazing supply of skill in the job market right now? We have some of the best people in the world working for credit unions. We also have some of the least talented and skilled. If your team isn't cutting the mustard, now is the time to make a change. Don't forget to look in the mirror.

2) Work together. Fighting with each other over 6% of the marketplace is asinine. Cut it the hell out. Collaborate. I don't necessarily care if we grow market share at all. I do care, however, if we refuse to capitalize on ways to lower operating expenses. If you are truly interested in serving your members, then you should be tirelessly searching for ways to cut costs. An easy start to this would be eliminating as many duplicative processes/expenditures as possible between credit unions, trades, and membership organizations.

3) Find new problems to solve. Upper and middle class Americans with good credit have extensive access to affordable transaction, savings, and loan products. Done. Problem solved. Just as the world doesn't need another reality television show, coffee shop, or American Idol, we don't need another run of the mill financial institution. Start by reaching out to the 60 million Americans who are either unbanked or underbanked. Train staff to offer the services members need instead of the ones you want them to have. Put yourself in your members' shoes to uncover day-to-day problems credit unions may be able to help with. Launch.

4) Fix your pricing. We price products like we're banks. We're not banks.

5) Cheer up. We're special organizations trying to do special things. One of the best things we have had going for us over the past 75 years is our optimism. Don't lose that.

The Perfect Game

Jim's day started with him standing in front of thousands of angry people and a chorus of boos. Just the day before, he had committed one of the most notorious workplace blunders of all time. It's one thing for a small time employee in a small time industry to make a mistake. Behind closed doors. With an insignificant project.

This was different.

This screw-up was by one of the best in the business. On national television. In one of the most significant moments in his industry's storied history. In the most important moment of Jim's professional life, he got it wrong.

But there he was the next day, back at work and committed to doing better. As he was handed the Detroit Tigers' lineup card he looked up to see the face of Armando Galarraga and hordes of television cameras. If the news coverage and memories of yesterday weren't enough to drive a man to the breaking point, this moment was. A sea of boos produced a river of tears; Jim Joyce was overcome with emotion.

There have been only 20 perfect games pitched in the history of Major League baseball. Galarraga, a talented, but largely unknown pitcher with only 12 innings pitched all season long, was one out away from becoming the 21st when Jason Donald hit a grounder down the right side of the infield for the 27th consecutive putout.

But it wasn't meant to be.

From Jim Joyce's vantage point, Donald had beaten the throw to first. So, Joyce did what umpires are supposed to do when that happens; he called Donald safe.

No more perfect game.

No more no-hitter.

No more history.

The problem was...Donald was out. He was clearly out. By the time Joyce finally got to see the replay, he agreed.

"I just cost that kid a perfect game," Joyce sulked.

I couldn't imagine the pressure that an umpire is faced with in such a situation. Sure, it's part of the job, but imagine how tempted you must be on the last play of a perfect game to err on the side of the historical moment. Joyce didn't do that. He called it how he saw it. He was wrong, but he was wrong for the right reason.

What I love about this story is Joyce's integrity. He was honest with his call and upfront about being wrong. I also loved Galarraga's classy move today when he tried to console a clearly emotional Joyce at home plate. In an era of prima donna athletes and irrational fans, Galarraga knew that the boos, the threats to Joyce's family, and the media fallout were much more devastating to the umpire in this case. He understood the human element of the situation, and chose empathy over self-pity.

To me, this was a perfect game...pitching and otherwise.

Excite Innovation

How could a person who never comes up with a new idea, never approves an initiative, and has no funding authority or ability become the most important person in the innovation process?

Easy.

Sometimes all an innovator needs is someone else to be excited with him/her about an idea.

Be that person.

Ghost Pots

I was sent the following video today about "ghost pots" scattered about Virginia waterways. Although their name makes you think of illicit behavior at a Grateful Dead concert, ghost pots are actually crab traps that have been lost by their owners. This doesn't sound like a big deal until you consider that these pots continue to fish, and uselessly kill, as many as 60,000 bushels of crabs each year.



It makes me wonder about all of the remnants of credit union campaigns, web tools, signage, and the like that continue to fish for and kill the chances for gaining prospective members. I've been to way too many credit union websites over the past 6 months that contain dead links, dated graphics, typographical errors in the copy, poor navigation, and bad information (wrong NCUA share insurance coverage numbers, for example).

I was in a Twitter argument (Twargument?) the other day with a prominent financial advice writer who claimed that credit unions are behind the times when it comes to adoption and deployment of new technology. This claim is definitely bogus. When you look at Verity Credit Union (first financial services blog), Vantage Credit Union (first financial institution to deploy Twitter-hosted banking), Mt. Lehman Credit Union (their list of firsts is a mile long), and the vast number of "firsts" credit unions have been responsible for in technology over the years, it's hard to argue that we have been anything short of pioneering in this area. However, number of credit unions whose websites and technology are stuck in 1994 take the public's attention away from that fact.

Like it or not, we all reflect on one another. We need to do a better job of cleaning up our own shops...and a much better job of helping each other do the same.