Tuesday, December 10, 2024

SECU: Federal Deposit Insurance - Well, Since You Brought It Up...

 https://sevenpillarsinstitute.org/wp-content/uploads/2023/11/Financial-Ethics-101-Fiduciary-Duty-1024x576.jpg 

             ... the SECU Board fiduciary duty.

"Credit Union: 101" has gotten to be a bit of a slog hasn't it... thanks to those who are hanging in there. 

Was trying to move quickly pass the introduction of federal deposit insurance (NCUA) for credit unions in 1970 and at SECU in 1984. That change was important to all credit unions and SECU, but I didn't think it would be of much interest to you. Several comments indicate a little deeper dive might help [here go back and take a look at the comments].

Comment: "Why did it take SECU 14 years to provide their depositors federally backed insurance on their life savings? That seems to fly in the face of the Board’s and CEO’s fiduciary responsibility to the membership."

Ouch - a clear case of fiduciary irresponsibility by the SECU Board and CEO! Actually a great comment, since a hard look at the issue of the fiduciary responsibilities and performance of the SECU Board is what this three year debate has been - and continues to be - about.

Here's more of the story which the "shoot first, ask questions later" commenter was unaware. SECU provided deposit insurance to SECU members beginning in 1967! 

Federal insurance was unavailable, so SECU in conjunction with several dozen other North Carolina credit unions and S&Ls formed the N.C. Savings Guaranty Corporation (NCSGC) to mutually insure member savings. Another example that, even going back 50 years, SECU was a good bit better - and much more member focused - than "the industry standard". And, also worked cooperatively  "across the aisle" with diverse, local institutions to help improve the lives of all North Carolinians.  

Yes, as a "unicorn", SECU can make a tremendous, innovative difference in North Carolina; as a run-of-the-mill industry standard... not so much.

The N.C. Savings Guaranty Corp. was later rebranded as FIAC (the Financial Institutions Assurance Corporation) and was liquidated in 1984 when the national savings and loan industry collapsed. After assisting with the "bailout" of the FIAC-insured, North Carolina S&Ls, SECU seamlessly converted to the NCUA federal deposit insurance system. More than you wanted to know, but most certainly a good example of fiduciary responsibility met in spades by the SECU Board. 

But one serious point for you as an SECU member to keep in mind: The national savings and loan industry imploded in the mid-1980's at tremendous financial and social cost to the American people. 

Key reasons for the financial collapse: 1) out-of-market regional expansion, 2) a move to commercial lending, 3) rapid expansion through financially dubious mergers, 4) charter conversions from mutual to for-profit, and 5) ... a failure of fiduciary duty by uninformed - and frequently unethical -  boards of directors, often misled by criminal management.

It will never happen again! ... but it always does.