Bucky Sebastian wrote an excellent article for the July 2009 Callahan Report entitled "New Thinking about Affinities." The good folks at CreditUnions.com posted the story today for your reading pleasure.
I'm honored that he referenced my presentation "Oprah, Chicken, and the Future of Credit Unions." The test of course is seeing if we have the will-power, as a movement, to find some ways to facilitate the creation of new affinity group based credit unions as proposed.
For those who did not see my presentation from earlier this summer, here it is again:
31 August 2009
27 August 2009
Bringing Back Optimism
"There is no sadder sight than a young pessimist, except an old optimist." - Mark Twain, 1903.
While I don't make a habit of arguing with the deceased (especially when we're talking about someone of Twain's brilliance), I think I'm going to dispute this assessment.
"There is no sadder sight than a pessimistic credit union employee, except a pessimistic credit union executive." - Matt Davis, now.
Don't get me wrong. There is plenty to be concerned about in the world of financial institutions these days. Over-regulation, a confused consumer base, as well as new legislation with unintended negative consequences for both consumers and financial institutions have wreaked havoc on even the most happy-go-lucky industry insiders. I get that.
But I also believe that it is times like these that should separate leaders from from the pack, the special from the mediocre, and the hopeful from the hopeless. Credit union leaders must realize that now is the time our members need us more than ever. Now is the time to make an impact. Now is the time to reach out to those people who have been pushed out of the system.
Here's why credit unions should be optimistic: we are uniquely positioned to help people through this trying economic time. Imagine being an executive at a bank. You go to your bank's board and say, "hey, our customers are really going through a rough time right now. Let's start making small, unprofitable loans to help them make ends meet. Let's modify loan agreements so our customers can stay in their cars or homes. I think we should also lower fees so we don't add insult to economic injury."
By the time the board stopped laughing, you would probably be out on the street just like your disrespected customers.
The promise of credit unions is that compassion can play a role in operations. Sure, budgets are tight. The financial services industry's future is uncertain. The economy will likely be rough for quite some time. But our members need us now.
My point is this (and it is intentionally controversial). The future of your credit union is far less important than the future of your members. Yes, I just wrote that.
Don't misinterpret that. While we are not in business for profit, we are not in business to lose money either. This, I realize. But some credit unions are so terrified to dip into the sacred cookie jar called capital, that we have used the economy as an excuse to hibernate when our members desperately need our help.
Swallow your pride. Spend some money. Take some chances on your members. Be optimistic that in doing this, you are being exactly what you promised your members you would be: a financial institution that they can count on, no matter what.
While I don't make a habit of arguing with the deceased (especially when we're talking about someone of Twain's brilliance), I think I'm going to dispute this assessment.
"There is no sadder sight than a pessimistic credit union employee, except a pessimistic credit union executive." - Matt Davis, now.
Don't get me wrong. There is plenty to be concerned about in the world of financial institutions these days. Over-regulation, a confused consumer base, as well as new legislation with unintended negative consequences for both consumers and financial institutions have wreaked havoc on even the most happy-go-lucky industry insiders. I get that.
But I also believe that it is times like these that should separate leaders from from the pack, the special from the mediocre, and the hopeful from the hopeless. Credit union leaders must realize that now is the time our members need us more than ever. Now is the time to make an impact. Now is the time to reach out to those people who have been pushed out of the system.
Here's why credit unions should be optimistic: we are uniquely positioned to help people through this trying economic time. Imagine being an executive at a bank. You go to your bank's board and say, "hey, our customers are really going through a rough time right now. Let's start making small, unprofitable loans to help them make ends meet. Let's modify loan agreements so our customers can stay in their cars or homes. I think we should also lower fees so we don't add insult to economic injury."
By the time the board stopped laughing, you would probably be out on the street just like your disrespected customers.
The promise of credit unions is that compassion can play a role in operations. Sure, budgets are tight. The financial services industry's future is uncertain. The economy will likely be rough for quite some time. But our members need us now.
My point is this (and it is intentionally controversial). The future of your credit union is far less important than the future of your members. Yes, I just wrote that.
Don't misinterpret that. While we are not in business for profit, we are not in business to lose money either. This, I realize. But some credit unions are so terrified to dip into the sacred cookie jar called capital, that we have used the economy as an excuse to hibernate when our members desperately need our help.
Swallow your pride. Spend some money. Take some chances on your members. Be optimistic that in doing this, you are being exactly what you promised your members you would be: a financial institution that they can count on, no matter what.
24 August 2009
21 August 2009
Things That Made Me Happy Last Week
I have been getting a little cranky on my blog lately. That stinks. The thing is...I'm just as passionate about things I like as I am about things I don't like.
So, after an amazing week at CUDE training, I thought I'd write about some of the things that really made me happy in the last seven days.
Jeff Hardin's friendship.
Mout Rainier's beauty.
Matt Vance's passion.
Tom Decker's quiet intellect.
Bill Myers' creativity.
Carol Schillios' inspiration.
Safeway.
Jeremy Cybulski's comedy.
Jill Nowacki's drive.
Tim McAlpine's modest brilliance.
Jill Vicente's mastery of all things marketing and friendliness.
Larry Blanchard's love for credit unions.
Mike Banks' playfulness.
Gigi Williams' kindness.
Deer.
Teamwork.
Credit unions.
Pike Street Market.
Friends.
Fun.
Forgiveness.
Family.
Shari Storm's aura.
Terrell Meek's clever sense of humor.
Andytastic's wit.
Debbie Wege's Michael Jackson impersonation.
Brian and David's hospitality.
Bainbridge Island's peacefulness.
Islandwood's uniqueness.
Steve Delfin's perspective.
Jeanne Saarinan's patience.
30-minute ferry rides.
Ocean air.
Jason Lindstrom's calmness.
Pat Sterner's sharp mind.
Ava Milosevich's room presence.
Cassie Brown's ability to light up a room.
Jimmy Goodrum's smile.
Matt Kaudy.
Dress codes.
Una Townsend's accent and eloquence.
Shannon Tackett's extroversion.
Juan De Lora's dance moves.
Milly Cramer's animal identification skills.
Jimmy Marks' maturity.
South Africa.
History.
Future.
You.
So, after an amazing week at CUDE training, I thought I'd write about some of the things that really made me happy in the last seven days.
Jeff Hardin's friendship.
Mout Rainier's beauty.
Matt Vance's passion.
Tom Decker's quiet intellect.
Bill Myers' creativity.
Carol Schillios' inspiration.
Safeway.
Jeremy Cybulski's comedy.
Jill Nowacki's drive.
Tim McAlpine's modest brilliance.
Jill Vicente's mastery of all things marketing and friendliness.
Larry Blanchard's love for credit unions.
Mike Banks' playfulness.
Gigi Williams' kindness.
Deer.
Teamwork.
Credit unions.
Pike Street Market.
Friends.
Fun.
Forgiveness.
Family.
Shari Storm's aura.
Terrell Meek's clever sense of humor.
Andytastic's wit.
Debbie Wege's Michael Jackson impersonation.
Brian and David's hospitality.
Bainbridge Island's peacefulness.
Islandwood's uniqueness.
Steve Delfin's perspective.
Jeanne Saarinan's patience.
30-minute ferry rides.
Ocean air.
Jason Lindstrom's calmness.
Pat Sterner's sharp mind.
Ava Milosevich's room presence.
Cassie Brown's ability to light up a room.
Jimmy Goodrum's smile.
Matt Kaudy.
Dress codes.
Una Townsend's accent and eloquence.
Shannon Tackett's extroversion.
Juan De Lora's dance moves.
Milly Cramer's animal identification skills.
Jimmy Marks' maturity.
South Africa.
History.
Future.
You.
20 August 2009
A Multi-Party System?
Several months ago, I tweeted the seemingly random comment: “credit unions should go to a two-party system.” One person responded “What are you proposing? The Credit Union Civil War?” Others wondered if I was joking.
Quite the opposite, actually.
Turns out, this was an issue that had been bugging me for some time. Not all credit unions share the same operational philosophy. Sure, we are all not-for-profit financial cooperatives, guided by democratically-elected volunteer directors, that return earnings to member-owners. This basic structure leaves a lot of room for interpretation, however.
How does your credit union empower member-owners to control their credit union’s operations? How are earnings returned to members? How does your credit union cooperate with other credit unions? The community? The credit union system? How does your credit union stand on the idea of growth? When is growth bad? What’s your position on risk-based pricing? Tiered deposit rates? When is profit from product offerings, even profit that is returned to members, bad profit?
The ways credit unions answer these questions can vary widely...but I’ve always wondered if we could generally put credit unions into two or more distinct, and official, categories.
Let me explain.
The Tampa Bay Devil Rays decided a few seasons ago that they would build their team around speed and defense. They started assembling young talent to fit this mold, and put their plan into action. While most teams were stocking up on proven power hitters and veteran pitchers, the Devil Rays were creating a style of their own. It was still baseball, and it was not to be considered better or worse that the prevalent model, but it was a distinct approach to the game.
Credit unions use distinct approaches as well. Increasingly, there seems to be a divide between a few general approaches to the way credit unions do business. Our reactions to the Corporate Stabilization issue give a unique insight to my point. Many credit unions adamantly opposed a taxpayer-funded solution to the problem. Others saw access to TARP as being a responsible solution. It was a healthy debate (that doesn’t need to be rehashed in this post), and very telling about what we have become as a movement.
Disagreement among credit unions is natural, but how do we balance our individual credit unions’ stances on the issues with the overall consumer view of credit unions? More specifically, how do credit unions organize amongst ourselves into political-type parties? How does a consumer know how an individual credit union stands on important philosophical issues? Not all democrats think alike, and not all republicans think alike. Generally, however, we can pretty much know how each will approach a decision.
“How’s the U.S. two-party political system working out for you these days?” you are no doubt murmuring.
Well, you make an excellent point. It’s dysfunctional. But it’s no more dysfunctional than confusing the marketplace with differing views on credit union philosophy. If our core principles are our keys to differentiation, shouldn’t consumers know generally how you implement those principles?
So, here’s the idea.
Organize a group of credit unions to spell out certain philosophical principles that member credit unions within the group must abide by. Credit unions could voluntarily join the group based on their general belief in that framework. Multiple groups could emerge, and each would present a distinct alternative to how credit unions should operate. Consumers would then know exactly what a credit union stands for before joining, and would more easily decide which values he/she aligns with.
For example. A group of credit unions could decide that their soul focus should be on democratic control, member ownership, and organic growth within the individual credit union. This would totally change this group’s approach to an important issue such as credit union to bank charter conversions. It would also dictate how those credit unions attract members. Want an equity stake in a credit union? This is your model.
Maybe another group emerges that says “to heck with individual credit unions, our goal is to make the movement as a whole bigger.” This group would truly believe in the notion that we are a cooperative of cooperatives. How would that affect this group’s stance on corporate credit union bailouts? Inter-credit union competition?
Another group could emerge that believes credit unions are purely social service organizations. Outreach, consumer education, advocacy, and development would clearly drive these credit unions. How would this change how this group approaches pricing? Would members of these credit unions then choose to receive lower returns on their deposits or higher loan rates in the name of philanthropy?
The number of philosophical divisions could be endless, but I would imagine that you could generally develop a small enough group of subsets that it isn’t overwhelming for the audience. Imagine the democratically-elected leaders of these divisions being at the table when our trade associations or regulators assess their positions on a matter.
The intention is not to create disunion within the movement. Instead, it’s a way to create better debate within the movement about key issues. While I truly believe credit unions need to speak with a unified voice, I also know that the reality is that we simply don’t have that consensus. Maybe this structure would allow us to better reach agreements on transformative issues? Maybe it will allow credit union boards to do some soul searching about what it is they are here to do? Maybe this exercise will simplify complex ideas like national branding campaigns, specific legislation, or opportunities for collaboration?
Maybe it won’t.
Quite the opposite, actually.
Turns out, this was an issue that had been bugging me for some time. Not all credit unions share the same operational philosophy. Sure, we are all not-for-profit financial cooperatives, guided by democratically-elected volunteer directors, that return earnings to member-owners. This basic structure leaves a lot of room for interpretation, however.
How does your credit union empower member-owners to control their credit union’s operations? How are earnings returned to members? How does your credit union cooperate with other credit unions? The community? The credit union system? How does your credit union stand on the idea of growth? When is growth bad? What’s your position on risk-based pricing? Tiered deposit rates? When is profit from product offerings, even profit that is returned to members, bad profit?
The ways credit unions answer these questions can vary widely...but I’ve always wondered if we could generally put credit unions into two or more distinct, and official, categories.
Let me explain.
The Tampa Bay Devil Rays decided a few seasons ago that they would build their team around speed and defense. They started assembling young talent to fit this mold, and put their plan into action. While most teams were stocking up on proven power hitters and veteran pitchers, the Devil Rays were creating a style of their own. It was still baseball, and it was not to be considered better or worse that the prevalent model, but it was a distinct approach to the game.
Credit unions use distinct approaches as well. Increasingly, there seems to be a divide between a few general approaches to the way credit unions do business. Our reactions to the Corporate Stabilization issue give a unique insight to my point. Many credit unions adamantly opposed a taxpayer-funded solution to the problem. Others saw access to TARP as being a responsible solution. It was a healthy debate (that doesn’t need to be rehashed in this post), and very telling about what we have become as a movement.
Disagreement among credit unions is natural, but how do we balance our individual credit unions’ stances on the issues with the overall consumer view of credit unions? More specifically, how do credit unions organize amongst ourselves into political-type parties? How does a consumer know how an individual credit union stands on important philosophical issues? Not all democrats think alike, and not all republicans think alike. Generally, however, we can pretty much know how each will approach a decision.
“How’s the U.S. two-party political system working out for you these days?” you are no doubt murmuring.
Well, you make an excellent point. It’s dysfunctional. But it’s no more dysfunctional than confusing the marketplace with differing views on credit union philosophy. If our core principles are our keys to differentiation, shouldn’t consumers know generally how you implement those principles?
So, here’s the idea.
Organize a group of credit unions to spell out certain philosophical principles that member credit unions within the group must abide by. Credit unions could voluntarily join the group based on their general belief in that framework. Multiple groups could emerge, and each would present a distinct alternative to how credit unions should operate. Consumers would then know exactly what a credit union stands for before joining, and would more easily decide which values he/she aligns with.
For example. A group of credit unions could decide that their soul focus should be on democratic control, member ownership, and organic growth within the individual credit union. This would totally change this group’s approach to an important issue such as credit union to bank charter conversions. It would also dictate how those credit unions attract members. Want an equity stake in a credit union? This is your model.
Maybe another group emerges that says “to heck with individual credit unions, our goal is to make the movement as a whole bigger.” This group would truly believe in the notion that we are a cooperative of cooperatives. How would that affect this group’s stance on corporate credit union bailouts? Inter-credit union competition?
Another group could emerge that believes credit unions are purely social service organizations. Outreach, consumer education, advocacy, and development would clearly drive these credit unions. How would this change how this group approaches pricing? Would members of these credit unions then choose to receive lower returns on their deposits or higher loan rates in the name of philanthropy?
The number of philosophical divisions could be endless, but I would imagine that you could generally develop a small enough group of subsets that it isn’t overwhelming for the audience. Imagine the democratically-elected leaders of these divisions being at the table when our trade associations or regulators assess their positions on a matter.
The intention is not to create disunion within the movement. Instead, it’s a way to create better debate within the movement about key issues. While I truly believe credit unions need to speak with a unified voice, I also know that the reality is that we simply don’t have that consensus. Maybe this structure would allow us to better reach agreements on transformative issues? Maybe it will allow credit union boards to do some soul searching about what it is they are here to do? Maybe this exercise will simplify complex ideas like national branding campaigns, specific legislation, or opportunities for collaboration?
Maybe it won’t.
03 August 2009
The Keith Leggett Watch
There are few organizations on this planet with less political capital right now than the American Bankers Association. Amazingly, though, they have still decided that the time is right to continue their attacks on credit unions.
I stumbled upon ABA Senior Economist Keith Leggett's "Credit Union Watch" blog today, which held no punches in responding to USA Today's story about credit union payday alternatives. Upon first glance, Leggett makes an excellent point - credit unions are supposed to, as he puts it, be "an alternative to usurious money lenders." He points to payday alternative loans at Kinecta FCU and Nevada FCU that amount to an annualized 275% and 455% APR, respectively.
Written that way, any reader should be disgusted. That's Leggett's plan.
Here's reality.
Credit unions are not-for-profit financial cooperatives owned by members and directed by democratically-elected volunteers. While we serve members of all income levels, we are particularly adept at helping those who have been shut out by the rest of the financial services world - people of modest means. This is precisely the target market of the "usurious money lenders" Leggett describes. The moral dilemma many credit union boards are faced with is: how do we help this segment avoid the payday lending trap (high fees, high interest rates, terms that disallow borrowers from ever getting rid of their debt), while protecting the credit union's (read: members') assets?
Many credit union boards have decided that offering lower cost payday alternative loans is in line with the credit union mission of people helping people. What I personally love about a lot of these programs is the unique ways they are addressing the issue. North Carolina State Employees' Credit Union, for example, has been amazingly successful at reaching out to this population with small, short-term loans (maximum 31 days and $500) at 12% APR. A key component of these loans is a 5% automatic deduction of the loan amount that is placed in the member's savings account. So, through time, the borrower isn't digging him/herself deeper in the hole. Conversely, the borrower is building savings with which the cycle can be broken.
That is looking out for the little guy, Mr. Leggett. That is a conservative credit union doing a remarkable job of reaching out to those who need a credit union's touch more than anything. These are the exact same people who the financial institutions you represent have either fleeced for every nickel and dime they could squeeze out of them, or shut out of the system completely. All of this while nearly screeching the entire world economy to a halt and requiring bailouts bigger than the GDPs of several continents.
I won't take one moment of anyone's time trying to defend Kinecta FCU or Nevada FCU, especially since I know no more about their products than what I've read in USA Today and the NCLC Report. I get even more disgusted with poor credit union behavior than I do with bad bank behavior. We expect it out of the latter. We expect much better out of credit unions.
And while I cannot stand people who justify bad behavior with worse behavior, I must point out the amazing timing of Mr. Leggett's comments. On the same day of his post, we learn that Bank of America was fined $33 million for misleading investors about $3.6 billion in Merrill Lynch bonuses paid to failure executives that needed $10 billion in taxpayer bailouts, California banks have cost the FDIC $15 billion, and Colonial BancGroup gets raided by the feds. Maybe you could have waited a day or two...or is there even worse news on the way?
There are bad apples in the financial services world, Mr. Leggett. Unfortunately, there are even a few on my side of the discussion. You have a lot of problems to fix on your side, however, before anyone anywhere will be able to come close to forgiving the banking industry for the nearly irreparable harm you have caused.
(PS...I would have written this on your blog, but you don't allow comments. That's not a blog, Mr. Leggett.)
I stumbled upon ABA Senior Economist Keith Leggett's "Credit Union Watch" blog today, which held no punches in responding to USA Today's story about credit union payday alternatives. Upon first glance, Leggett makes an excellent point - credit unions are supposed to, as he puts it, be "an alternative to usurious money lenders." He points to payday alternative loans at Kinecta FCU and Nevada FCU that amount to an annualized 275% and 455% APR, respectively.
Written that way, any reader should be disgusted. That's Leggett's plan.
Here's reality.
Credit unions are not-for-profit financial cooperatives owned by members and directed by democratically-elected volunteers. While we serve members of all income levels, we are particularly adept at helping those who have been shut out by the rest of the financial services world - people of modest means. This is precisely the target market of the "usurious money lenders" Leggett describes. The moral dilemma many credit union boards are faced with is: how do we help this segment avoid the payday lending trap (high fees, high interest rates, terms that disallow borrowers from ever getting rid of their debt), while protecting the credit union's (read: members') assets?
Many credit union boards have decided that offering lower cost payday alternative loans is in line with the credit union mission of people helping people. What I personally love about a lot of these programs is the unique ways they are addressing the issue. North Carolina State Employees' Credit Union, for example, has been amazingly successful at reaching out to this population with small, short-term loans (maximum 31 days and $500) at 12% APR. A key component of these loans is a 5% automatic deduction of the loan amount that is placed in the member's savings account. So, through time, the borrower isn't digging him/herself deeper in the hole. Conversely, the borrower is building savings with which the cycle can be broken.
That is looking out for the little guy, Mr. Leggett. That is a conservative credit union doing a remarkable job of reaching out to those who need a credit union's touch more than anything. These are the exact same people who the financial institutions you represent have either fleeced for every nickel and dime they could squeeze out of them, or shut out of the system completely. All of this while nearly screeching the entire world economy to a halt and requiring bailouts bigger than the GDPs of several continents.
I won't take one moment of anyone's time trying to defend Kinecta FCU or Nevada FCU, especially since I know no more about their products than what I've read in USA Today and the NCLC Report. I get even more disgusted with poor credit union behavior than I do with bad bank behavior. We expect it out of the latter. We expect much better out of credit unions.
And while I cannot stand people who justify bad behavior with worse behavior, I must point out the amazing timing of Mr. Leggett's comments. On the same day of his post, we learn that Bank of America was fined $33 million for misleading investors about $3.6 billion in Merrill Lynch bonuses paid to failure executives that needed $10 billion in taxpayer bailouts, California banks have cost the FDIC $15 billion, and Colonial BancGroup gets raided by the feds. Maybe you could have waited a day or two...or is there even worse news on the way?
There are bad apples in the financial services world, Mr. Leggett. Unfortunately, there are even a few on my side of the discussion. You have a lot of problems to fix on your side, however, before anyone anywhere will be able to come close to forgiving the banking industry for the nearly irreparable harm you have caused.
(PS...I would have written this on your blog, but you don't allow comments. That's not a blog, Mr. Leggett.)
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