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Today the CU Journal reports that “House leaders agreed yesterday to add a provision to the Troubled Asset Relief Program that would allow credit unions to obtain cash infusions under TARP…”

Cash infusion = taxpayer bailout.

It goes on to say “The credit union provision would allow credit unions to accept TARP cash – like banks – and count it as net worth, or capital, something they are barred from doing under current law.”

Why does our law say NO to taxpayer bailout money?? Um, because we are a financial COOPERATIVE!

Folks – we really need to find a better way to help our troubled credit unions. This is historic…..think of the long term implications. We WILL have to change our bylaws. Beginning with field of membership, and it’ll read something like this:

“The field of membership for Generico FCU will include anyone who lives, works or worships in blah blah blah counties AND the Federal Government (who now sits on our board of directors and tells us what to do.)”

Dale Kerslake, President/CEO of Cascade FCU has declared an NSF Fee Holiday. For the month of December the credit union is waiving all NSF fees for members.

In January, they will get a letter advising them of the dollar amount that was not charged and encouraging members to start the New Year with Balance.

Wow. Happy Holidays Dale! You rock!

In the United States, St. Mary’s Bank Credit Union of Manchester, New Hampshire holds the distinction as the first credit union. Assisted by a personal visit from Desjardins, St. Mary’s was founded by French-speaking immigrants to Manchester from Quebec on November 24, 1908. America’s Credit Union Museum now occupies the location of the home from which St. Mary’s Bank Credit Union first operated.

Not many financial institutions live to the ripe old age of centenarian.
Once you’re over the hump of 100, you need to be really careful, if recent history is any indication. Let’s take a moment and recognize those that have passed recently.
happybirthdaycakefire2

RIP:

WaMu
1889-2008
119 years old

Wachovia
1879-2008
dead at 129

Citibank
1812-
is on the “watch list” at 196 years old.

In order to survive beyond 2008, we need to look at what some of the causes of death in the banking world are. You know, be fiscally financially fit to prolong our life.
Let’s do a bank “autopsy” to see what the cause of death relates to:

The autopsy reports that WaMu was a suicide. They apparently took their own life when they decided to loan over $40 billion in toxic mortgages.

Wachovia was a very healthy organization that died suddenly – after being exposed to toxic waste (from Golden West Financial that was very ill…)

Citibank was still running around just a few months ago, apparently healthy and willing to buy Wachovia – but now there are signs of slowing down. Stock prices dropping……most likely will die of natural causes.

I read a story this week-end that got me a little worried about the health of one credit union. It’s like they have high blood pressure and aren’t willing to take their medication and cut the salt out of their diet. It’s their version of “pay day lending” that has me worried.

Once we hit 100 – we need to be really careful to stay healthy. That’s all I’m sayin……

Picked up a copy of it at the airport because the cover was NOT about Baby Bumps or President Elects. In fact, no pictures at all. Just the title “Why America Needs an Economic Strategy.”

Michael E. Porter from the Harvard Business School states:

“The stark truth is that the U.S. has no long-term economic strategy – no coherent set of policies to ensure competitiveness over the long haul.”

He goes on to say:

“Strategy addresses what to do, but also what NOT to do.”

And so we have to decide. What are credit unions GOING to do and what are we NOT going to do in this economic crisis. As long as there’s the phrase “bail out” in our vernacular, we won’t give it all we got, IMHO.

Credit Union Journal the same week reported: Momentum is Beginning to Build For A CU-Specific Bailout Package.

“With increasing portions of the $700-billion bailout package being earmarked for banks, credit unions are looking to develop a rescue plan of their own.”

There are two scenarios, but this is the one to adopt. The one that has clear strategy for the long haul and protects our 100 years of reputation:

Credit Unions would fund their own program by a special assessment on their 1% NCUSIF deposit. That way, the plan would be credit union-financed and credit unions could continue to assert they have never been the beneficiaries of a taxpayer bailout, helping to bolster their argument for continuation of the tax exemption.

Number two, NCUSIF could accept funds under the Treasury’s program and direct them to needy programs.

As Dan Mica is fond of saying, “Credit Unions are part of the solution.” Welllll…….if that IS our strategy, option two cannot be considered. This is the what NOT to do. According to the article “NAFCU is still focusing on ensuring that credit unions get to fully participate in the sale of troubled mortgage assets sales to the Treasury.” Thankfully Paulson took care of that option this week – not gonna happen for anyone.

NAFCU and CUNA need to get on the same page. I know there’s been talk of merging these two groups so we have ONE lobbying body. We don’t need the distraction of merger on paper – let’s merge in our minds and hearts and values and do the paperwork later.

disney-chicken-little-sky-fallingI’m hearing stories from credit unions who stayed completely out of subprime lending but are seeing losses creep up.

People stop spending, interchange income goes down.
People lose jobs, voluntary repos go up.
The company goes on strike, delinquencies go up.
Gas prices go up. People stop buying cars. Loan volume goes down.

The ripple effect of a weak economy. It happens.

I don’t mean to sound callous, but this is a cycle, albeit a big bad ugly horrific cycle, but to abandon our values completely and look for taxpayers to bail us out will, in the short term help, but in the long-term cause irreparable harm. Here are just a few things that come to mind:

1. We will be taxed. You walk like a duck, quack like a duck, use bail-out money like a duck. You’re a duck. Tax the duck!
2. NCUSIF* will most likely be combined with FDIC into one big fat government agency that regulates everyone – all the ducks.
3. 100 years of reputation – of member-owned financial cooperatives screeches to a halt.
4. Credit unions as we know them today, will begin to disappear.

*NCUSIF was voluntarily capitalized by credit unions in 1985 and has never
received taxpayer dollars. If the government combines the agencies, what happens to our capitalization? Do we lose it?”

Speaking of capital – that’s what it’s there for – a rainy day. It’s pouring right now, so get out that credit union umbrella and use it.

SIDEBAR: Just a thought. If a credit union seriously needs taxpayer money to stay alive, and cannot find a merger partner, then they should consider converting to a Mutual Savings Bank first. That way the credit union brand remains in tact, not costing taxpayer’s money.

imagesCUNA launched the campaign oh so many years ago. I remember because I had to present it at a league meeting to a bunch of marketers. They picked apart the logo, some didn’t “get it” and some flat out refused to use it.

“Credit union growth has been stagnant for more than a decade. From the early 1990s to the present, credit union market share has stayed steady at 6% of total assets. Banks, on the other hand, are gaining billions in new assets every year.
Many would argue that now, more than ever before, credit unions need to aggressively market the credit union difference—individually and collectively.”

Mark Crawford, CUNA Marketing Council wrote this in 2006.

Almost one year ago the folks at Trabian set a record with comments on the topic of a National Brand Campaign.

Nothing like a good old fashioned economic crisis to dust off the National Brand Campaign kits and pledge our allegiance to the credit union difference.

I’ve always felt a tag line is a promise. A promise that should be delivered 100% of the time. The problem with most tag lines, they are lies.

The airlines were a great example. Remember United’s? Fly the Friendly Skies? Took on a whole new meaning after 9/11. Or Delta, “We’re ready when YOU are.” American West (when they were still in business) “What We Fly is YOU!” Not necessarily your luggage.

0846_mz_wamuAnd what was WaMu thinking unveiling “Whoo Hooo” when they HAD to know they were on the brink of failure. Maybe that was their marketing departments point…..

So when CUNA came up with “Where People are Worth More than Money” many thought, well, okay. But what’s our REAL difference?

Today that tag line can become a powerful statement IF credit unions word together to stay out of the TARP trough.

Gary Easterling, CEO of United Federal Credit Union was a guest blogger on CUES Skybox this week. He said it best:

Our banking cousins are “paying” for their obscene profits from recent years by squealing up to the TARP trough, allowing the taxpayer to pick up the tab for their greed. Credit unions have the opportunity to live our difference—meeting the needs of our members, our communities, and our country.
Banks have not expanded lending, even while accessing government funds. They repair their balance sheets, seek mergers and acquisitions, focusing on Wall Street performance, rather than Main Street need.

I for one, am proudly using the America’s Credit Unions logo. Won’t you join me?

I was doing some research this morning for the webinar Mark Sadowski and I are hosting on Thursday (shameless plug) and I ran across this:

As the Great Depression set in the Reconstruction Finance Corporation under President Hoover sought to stimulate the economy with soft loans targeted to banks, railways and large companies. Filene favoured asking for $100 million in reconstruction credits to be pumped into credit unions. Bergengren strongly opposed this position, and his view prevailed this time.

“To him, it meant destroying the vital principle of the whole movement by converting a community enterprise into an agency of the government. To teach people how to help themselves was more important by far in times of depression than at any other time.

Wow. Makes sense. Credit unions survived the depression. We actually thrived after the depression years – why? Because our values were in tact.

Now more than ever we need to follow the example of our forefathers and stay OUT of the government welfare line that is called the TARP.

I think this is a mistake. A huge mistake. Today in the CU Journal is an article titled Treasury Bailout: CUs Want Coverage Under The TARP.

Here’s an excerpt: 

John Annaloro, president of the Washington CU League, noted that after Treasury infused $125 billion into the nation’s nine largest banks, it has agreed to invest another $35 billion into an additional 20 regional banks, with more funds promised for troubled banks. “It’s my contention that credit unions should be eligible for some of those funds,” Annaloro told The Credit Union Journal yesterday

Especially concerning for Washington credit unions, said Annaloro, was news that Washington Federal Savings is receiving $230 million in new capital under the Treasury program. “Our credit unions are worried about how that might affect their ability to compete, with rates on loans, rates on deposits, and all of that.”

I don’t know about you but this article reads like, “Why does HE get to crash the car and I don’t?” 

Um, because crashing the car is not a great idea. It’ll leave a mark – on YOU and the car.

Thoughts?


Since the Bail Out Bill* was introduced, I’ve been in Vancouver BC, Roanoke, Virginia, Salt Lake City, Utah, Osh Kosh, Wisconsin, Port Jefferson, New York, Issaquah, Washington and now I’m in San Diego, California.

No, I’m not running for office, this is the peak speaking/planning session season.

Anyway – rather than just launching in with the hired topic, it was decided that we not ignore the economic crisis, but rather, weave it into the presentation/facilitation.

There was some hesitancy to ask questions at first. No one wants to feel like they’re wrong or ignorant. A show on FOX recently interviewed a few PhDs and they admitted that it’s hard for THEM to make sense of it all.

I think we need to talk. It may not be politically correct but here goes.
Questions I could not answer:

Why are credit unions included in this bill? What should we tell our members?

Could we have still benefited from the increase to our share insurance fund without being on the bill?

Why are CUNA and NAFCU talking merger right now? Isn’t that a distraction?

Who advised Dan Mica? Should there have been a credit union vote?

Will we be united or divided on this issue?

Blogs are meant to be conversations. Please comment.

I don’t have the answers….but I know there are tons of questions.

These are troubling times.

* aka
Troubled Asset Relief Plan (TARP)
HR 3997
Emergency Economic Stabilization Act of 2008

Edward Filene…..what would he say about this economic crisis?

I imagine he would point out that this is why credit unions started in the first place. Banks had gotten out of control, they didn’t care about the well-being of the average American and only catered to big business. Loan sharks were rampant, the depression was looming. He stepped up and began convincing people to pool their resources, take them out of banks and to form credit unions.

He called it “people helping people” and that together we can do more than we could do separately. Those who have the means could safely deposit their money in their credit union, so that those that needed to borrow (for provident and productive purposes only) could have access to reasonable credit. There was a kind of shame built in if you did not repay. A good kind, because you were, after all, borrowing money from friends and co-workers (just in a less awkward way).

The goal was to help families live within their means and to borrow for the things they needed, not necessarily wanted. Like a refrigerator, a car, washer/dryer, seed. Promoting thrift is back, with a vengeance. Saving for a down-payment on a home (and car) will be the norm again. Paying yourself first when signing up for direct deposit to your checking – you remember…drop a little in savings? Christmas club accounts that take an act of Congress to withdraw from (and we all know how hard that can be) will return.

Good times are ahead for credit unions Edward would say. It’s a rebirth of sorts.

CUES has emerged as the modern-day wealthy Boston merchant IMHO. They are urging executives to come to their own Estes Park (okay, it’s Vegas now) and have the important discussion about where we go now. This is an historic time. If your credit union cannot afford to register for this event, it does not matter. CUES says “Pay what you can” because this is that important.

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