Help, getting lost in the weeds!
Several readers - SECU members in particular - have asked for a roadmap, since it seems the blog keeps veering from ditch to ditch - issue to issue. A valid observation! Here's the list of concerns for you to think about:
1) The credit union movement/industry is rapidly consolidating for various reasons. There are @4,400 credit unions left - down from @23,000 several decades ago. The largest 400 or so credit unions represent 85% of all members and total assets.
2) Most larger credit unions no longer are bound by the traditional limitations on membership and are able to serve everyone. Many credit unions have moved beyond a traditional focus on consumer finance into commercial financial services and are difficult to distinguish from banks.
3) The similarity of functions between credit unions and banks has brought the tax-exempt status of credit unions increasingly into question. What would happen if the tax-exempt status were revoked?
4) The core cooperative governance and ownership principles of a credit union appear to break down and become irrelevant as a credit union grows large. Boards of directors are still elected by members to direct the day-to-day operations of the credit union. Boards however have increasingly infringed upon or eliminated credit union member governance rights. Is the credit union cooperative model relevant or appropriate any longer "at scale"?
5) History shows that "at scale" cooperative and mutual financial organizations - think savings and loans, mutual insurance companies, perhaps Blue Cross/Blue Shields, etc - are eventually converted into stock-owned, for profit businesses. Should a sensible path for the conversion of credit unions into for-profit institutions be established?
6) If credit unions by choice or "accident" become for-profit financial institutions, how will the accumulated billions of dollars in capital/reserves be disbursed among the member-owners and other stakeholders? History clearly indicates you don't want to leave this "to chance" - think avaricious consultants, lawyers and insiders!
7) Given the preference of many credit unions to transition to a more commercial, bank-like model is it time to redefine the principles and scope of a non-profit, cooperative credit union?
😎 Hope that helps... how would you reconcile these diverging issues?
What’s the status of your self-nominees getting their packets in? Reminder - the deadline is August 1st.
ReplyDelete??????? Where did you see that? Board moved the date up 2 weeks. "No change in election procedures" = "no formal proposal proposal."
DeleteNot sure if poster was looking at this ...
Delete2025 Board of DirectorElection Procedure Schedule
https://www.ncsecu.org/content/dam/ncsecu/pdfs/aboutus/governance/2025ElectionPoliciesandProcedures.pdf
(scroll to bottom of pdf)
Is there a chance the NCUA believes that it is cheaper for the credit union share insurance fund to have more ways for capital to be infused into a credit union (ie give credit unions the ability to raise capital via additional membership qualifications instead of via additional insurance fund premiums)?
ReplyDeleteNo. You are not lost in the weeds. The credit union industry is. SECU certainly is. Paul Krugman has a piece on "enshittification". Worth a read here
ReplyDeletehttps://paulkrugman.substack.com/p/the-general-theory-of-enshittification
Pretty good description of where this board, Hayes, and Leigh Brady and her ELT are taking this once fine organization.
The Shepard has left their flock for the wolves to entertain ...
ReplyDeleteI do not usually agree with the points that you make, but Credit Unions should not be buying any banks. It is not a good look for credit unions and I am not sure how it helps their members. Will SECU buy a bank, no.
ReplyDeleteWho cares if it’s not a good look to buy a bank. Remind me - who are we trying to look good for?
DeleteEach credit union should do what’s best for them, as decided by a majority member vote. There are many reasons that buying a bank makes sense for some credit unions.
5:31pm You convey a lot in those few sentences. New mission statement for the CU moement?
DeleteWhat are the "many reasons" that buying a bank makes sense?
7:49 CU Boards have a fiduciary duty to their member owners, not some so-called credit union movement. The term movement is a problem in and of itself. It shouldn’t be used anymore - it discredits an industry already fighting for relevancy. Members want to be served by a sophisticated financial services firm, not a cult.
DeleteGood reasons to buy a bank? Often the same reasons why it makes sense to merge with a CU. But I’ll give you one specifically - to enter the MBL space. It’s easier to buy than build. Look for SECU to do this as we can grow the commercial side must faster if we do.
Deleteis any of the reasons for the benefit of the member/owners?
Deletewhat do they bid on and with? credit unions don't buy other credit unions, they merge.
ReplyDelete7:54 am What is the distinction between merge, acquire, purchase, consolidate, etc.
DeleteYou seem to believe that "merge" is somehow a different process - how so?
The important point about CU mergers is that there is no consideration. One cu does not buy another CU. Only on charter survives do a merger and an acquiring CU have identitied, but “acquirer” doesn’t bid on or pay anything. The balance sheets are simply combined, after a mark to market is done. The difference between the FV of assets and the FV of liabilities is recorded by thecaquirer as net income, which drops to capital in the new cu. Effectively the merged CU’s capital gets rolled into the new CU’s balance sheet.
Delete9:52am Lengthy response but you didn't answer the question. You are aware that consideration is permitted by law aren't you?
DeleteThe whole point of the posts has been to ask why this shouldn't be happening every time. Why don't the members deserve the payout?
Financial and economic disciplines don't provide any reason it shouldn't. Boards are at risk.
9:52 am Your statement: "The important point about CU mergers is that there is no consideration"... is not true.
DeleteConsideration is permitted in credit union mergers. Are you not aware of that fact?
For consideration to exist, both parties, by definition, need to get something of value. It's not unilateral. If a credit union is given away, as you put it, how is there consideration? Can you reconcile that?
Delete9:52am But I do agree that a merger "without consideration" is inconsiderate... actually unconscionable for credit union boards to approve in the "new/new "no-longer-a-movement world.
Delete"Without consideration" kinda sounds like a synonym for "without due diligence"...
.You likely know CU mergers are under purchase accounting since 2009.
ReplyDelete2:32pm 'Purchase accounting"....P-U-R-C-H-A-S-E ...say no more! Yes it is purchase according to both the CPAs and the regulators... who's to argue with the experts?
ReplyDeleteP-U-R-C-H-A-S-E , P-U-R-C-H-A-S-E , P-U-R-C-H-A-S-E !
Never heard of "give away accounting"... have you?
Do you think it's financial and economic discipline for acquiring credit unions to take on liabilities that are far more costly than the value of the assets they are getting? Really interesting approach. What about the fiduciary duty of the acquiring board?
ReplyDeleteWhat do they bid on and with? Credit unions don't buy other credit unions, they merge. They are not sold to any bidder. Agree, it would be insane to give away a credit union, so good thing that not how it works. What would be insane is for an acquiring credit union to merge with a cu that has no capital and has a net value (gain) of zero.
ReplyDelete