What an exciting year we’ve had. And such excitement brings with it a good share of challenge. Hank and Dale started the year with a trip to the Big Island of Hawaii. Neither had ever been to the Big Island. But, over the years Dale has taken all three of the kids to Hawaii. The highlight of the trip was a day trip to Pearl Harbor to the Arizona Memorial.
On March 14, Dylan Joseph Szmyglewski arrived, 7 pounds and 20 inches. Sara is attending Hillsborough Community College part time. She is such a good Mommy. Great Grandma Schumacher now has six Great Grand Children – all boys.
Patti and Dale headed to the Pacific Northwest in May, spending time with Dale’s parents (Harold & Marilyn), as well as sister, Jill, nephew Jason and his family (Alison & Kyron). What a beautiful time of the year to be there.
The end of June brought the entire family (Dominique, Sara and Hank) together on the beach in Sarasota FL. The picture at the right (and below) was taken at that time. We are very proud of our kids and our three grandsons (Connor, Carson & Dylan). It appears that Patti and Dominique could be beach combers without too much persuasion.
The time together was bitter-sweet. It was great to have everyone together. But, at the end of the time, Hank was off to basic training in the US Navy at the Great Lakes Naval Training Center – just north of Chicago. He says he’s following in Dad’s footsteps. We’re very proud of him, as we were of Sara when she entered the US Air Force a few years back. Hank finished basic training and the whole family invaded Northern Illinois. We had a great weekend and Hank was off to San Antonio TX for military police training. Patti and Dale journeyed there for his 21st Birthday, on October 3 – a birth date he shares with his namesake.
Another big event that occurred this summer - Dale turned 60. He didn’t want a surprise party, so he planned a party of his own. We had a whole house full of people participate in our celebratory open house. Dale realized a dream. Because of the generosity of his friends, he has been able to establish the Dale Schumacher Scholarship Fund at the University of South Florida, focusing on the children of employees of Tampa Bay Federal Credit Union. He is very pleased and proud.
Then along came the end of October. The entire family, except Hank, headed to Central Illinois for a special Family Reunion. Faye opened her house to us. Dale’s Mom and Dad traveled from the Oregon Coast with Jill. What a weekend. We were able to see Aunts, Uncles and Cousins we hadn’t seen in ten years. Hope we don’t wait so long to do that again.
Right after Thanksgiving, Patti and Dale headed to the Western Gulf of Mexico and Caribbean Sea on a cruise ship. The weather wasn’t all that good, but the cruise was very relaxing. We visited Belize, Guatemala and Coasta Maya Mexico. What a great week.
Dale and Patti returned home to a visit from one of Dale’s Viet Nam comrades - Ken Smith (pictured above). They served on River Patrol Boat 125, River Division 521 in northern South Viet Nam (1969-1970). They had not seen one another in nearly 39 years. Ken has kept the lines of communications open and Dale is grateful for that. There is still a Lot of catch up to do.
We’ll all be together again in Southern Illinois this Christmas with Dominique, Grandma Ann, and our three precious grandsons, Connor, who’ll be 6 in January, Carson will be 4 in June and Dylan is 9 months old. We really look forward to this special time with them every year! We can’t wait.
We thank God for all of our blessings, including the health and safety of all of our family and friends and we pray that God will extend these blessings to all of our troops serving here and abroad at this holy time of year.
Wishing you all the joys of celebrating the holiday season with your family and friends…with LOVE,
Dale
Thursday, December 25, 2008
Tuesday, November 18, 2008
Newpaper Postings for Discussion
2008 has been an interesting year, to say the least. And, it looks like 2009 will be more of the same. “These are the times that try men’s (and women’s) souls.” Was that Thomas Paine?
Check out my latest postings. Two newspaper items: one an editorial and the other a news article. Both involve Bucky Sebastian and both were published here in Tampa. I believe there are national implications. What do you think?
Check out my latest postings. Two newspaper items: one an editorial and the other a news article. Both involve Bucky Sebastian and both were published here in Tampa. I believe there are national implications. What do you think?
Monday, November 17, 2008
Principled Banker Has Cause To Be Burned Up About Bailout
The Tampa Tribune
Published: September 24, 2008
The proposed federal rescue of the nation's financial system has investors breathing easier, but one Tampa financial executive is steaming about the unfairness of it all. He's right. Every honest participant in the system should be outraged.
Longtime president of GTE Federal Credit Union, Wendell "Bucky" Sebastian, makes local mortgages and looks after the investments of savers. Most of his mortgages are sound and all the money on deposit is safe. But the normally jovial Sebastian isn't happy.
"We were the ones not taking stupid risks," he explains of his and similar credit unions and banks. "The bad guys made billions of dollars. I used to believe virtue would be its own reward. Now being virtuous is beginning to look like you're stupid. As a human being, I'm incensed."
He agrees that federal intervention is essential to get the bad debts out of the banking and investment systems, but he's rightly angry about a few details that have largely escaped public attention. One is the interest rate paid on certificates of deposit, which are federally insured. Banks are advertising rates of 4 percent, even 5 percent, while Sebastian's credit union is offering around 3 percent.
"These banks are raising money at these rates because they can't borrow anywhere else. A conservatively run institution like ours, people ask, how come you're only paying 3.05?" Customers go for the highest rates because all institutions are insured equally. It's a system
rewarding irresponsible behavior.
"Why should anyone do business with us? It's a perversion of common sense. We could issue a 12 percent CD, and it would be insured, until we went out of business. We bankers are not required to be responsible. We, the American public, are insuring risky business."
And now it goes far beyond banks to include even money markets.
"The worst thing about the bailout, we gave de facto insurance to every financial institution in this country, in effect, all the money on Wall Street. You just took real insurance and made it worthless. Insuring every deposit in the country is insane."
How the nation got in this jam is no mystery. As a reaction to the Great Depression, the nation had set up a regulated mortgage system to encourage home ownership.
"The whole thing was working beautifully," until standards slipped and safeguards dropped, allowing mortgage buyers Freddie Mac and Fannie Mae to get "fat and loose," as Sebastian puts it. "Over the last 10 years, partially from urging of Congress and from the executive branch, and from non-regulated entities, slowly they peeled all the rules away until it was almost impossible to turn down a mortgage.
"The incentive is more, better, faster. It gets you on a treadmill that goes faster and higher every minute. They made it go a little faster every quarter, so sooner or later you're going to have a heart attack and die. It's irrational."
"Just because there hasn't been a fire in a week, you don't close the firehouse. It's not surprising we had a conflagration."
Now, even the best-run banks and credit unions are feeling the pinch. "Secondhand smoke can kill you," he says, and explains: "If all your neighbors got mortgages and weren't asked to verify employment, and if they had inflated appraisals, suddenly there could be 10 homes in your neighborhood in foreclosure. You're going to die from secondhand smoke.
"I have signed off on $15 to $20 million in restructured mortgages. We want them mowing the grass, keeping their kids in school. We're taking in half as much each month from them. That's nobody's fault in our loop. It's a travesty.
"The other people all outside the regulated framework got away with it. We didn't do any of the things they did. We made good loans to good members under good conditions. But conditions have changed.
"From developer right down to the finance companies, I don't think anyone was acting in the best interest of the homeowner. They have all gotten their money, and they're gone. "The average citizen has done everything by the book. They're being asked to bail out the
highest-flying risk takers in my memory."
The vast majority of us, like Sebastian, have done nothing wrong yet are forced to help cover bad loans . We have little choice but to pay, but we don't have to like it.
Published: September 24, 2008
The proposed federal rescue of the nation's financial system has investors breathing easier, but one Tampa financial executive is steaming about the unfairness of it all. He's right. Every honest participant in the system should be outraged.
Longtime president of GTE Federal Credit Union, Wendell "Bucky" Sebastian, makes local mortgages and looks after the investments of savers. Most of his mortgages are sound and all the money on deposit is safe. But the normally jovial Sebastian isn't happy.
"We were the ones not taking stupid risks," he explains of his and similar credit unions and banks. "The bad guys made billions of dollars. I used to believe virtue would be its own reward. Now being virtuous is beginning to look like you're stupid. As a human being, I'm incensed."
He agrees that federal intervention is essential to get the bad debts out of the banking and investment systems, but he's rightly angry about a few details that have largely escaped public attention. One is the interest rate paid on certificates of deposit, which are federally insured. Banks are advertising rates of 4 percent, even 5 percent, while Sebastian's credit union is offering around 3 percent.
"These banks are raising money at these rates because they can't borrow anywhere else. A conservatively run institution like ours, people ask, how come you're only paying 3.05?" Customers go for the highest rates because all institutions are insured equally. It's a system
rewarding irresponsible behavior.
"Why should anyone do business with us? It's a perversion of common sense. We could issue a 12 percent CD, and it would be insured, until we went out of business. We bankers are not required to be responsible. We, the American public, are insuring risky business."
And now it goes far beyond banks to include even money markets.
"The worst thing about the bailout, we gave de facto insurance to every financial institution in this country, in effect, all the money on Wall Street. You just took real insurance and made it worthless. Insuring every deposit in the country is insane."
How the nation got in this jam is no mystery. As a reaction to the Great Depression, the nation had set up a regulated mortgage system to encourage home ownership.
"The whole thing was working beautifully," until standards slipped and safeguards dropped, allowing mortgage buyers Freddie Mac and Fannie Mae to get "fat and loose," as Sebastian puts it. "Over the last 10 years, partially from urging of Congress and from the executive branch, and from non-regulated entities, slowly they peeled all the rules away until it was almost impossible to turn down a mortgage.
"The incentive is more, better, faster. It gets you on a treadmill that goes faster and higher every minute. They made it go a little faster every quarter, so sooner or later you're going to have a heart attack and die. It's irrational."
"Just because there hasn't been a fire in a week, you don't close the firehouse. It's not surprising we had a conflagration."
Now, even the best-run banks and credit unions are feeling the pinch. "Secondhand smoke can kill you," he says, and explains: "If all your neighbors got mortgages and weren't asked to verify employment, and if they had inflated appraisals, suddenly there could be 10 homes in your neighborhood in foreclosure. You're going to die from secondhand smoke.
"I have signed off on $15 to $20 million in restructured mortgages. We want them mowing the grass, keeping their kids in school. We're taking in half as much each month from them. That's nobody's fault in our loop. It's a travesty.
"The other people all outside the regulated framework got away with it. We didn't do any of the things they did. We made good loans to good members under good conditions. But conditions have changed.
"From developer right down to the finance companies, I don't think anyone was acting in the best interest of the homeowner. They have all gotten their money, and they're gone. "The average citizen has done everything by the book. They're being asked to bail out the
highest-flying risk takers in my memory."
The vast majority of us, like Sebastian, have done nothing wrong yet are forced to help cover bad loans . We have little choice but to pay, but we don't have to like it.
A Maverick on a Mission
By Jeff Harrington, Times Staff Writer
Published Friday, November 14, 2008 12:42 PM
TAMPA - Wendell "Bucky'' Sebastian has always been a bit of a maverick within the sedate universe of credit unions. Before he took charge at the GTE Federal Credit Union in Tampa, he helped trigger the biggest overhaul of America's credit union system since the Great Depression. As general counsel of the National Credit Union Administration in the 1980s, he wrote the legal opinion (which eventually became law) that allowed credit unions to vastly expand and merge with other unrelated unions.
Now, at the age of 64, Sebastian is at it again. He's floating a proposal that could dramatically reshape and expand the mission of credit unions. Sebastian thinks he has a window to make his pitch, given that reform of the financial services industry is a front-burner issue in Washington, D.C., as the Obama administration takes over. "I'm absolutely confident we can get this done,'' he said, adding with a laugh: "It'll either be impossible or not that hard. ... My friends call me a maniac on a mission.''
His wants to create a new type of charter for credit unions. In fact, organizations that opt in wouldn't even be called federal credit unions any more, but "federal financial service cooperatives.'' Like credit unions, the co-ops would be not-for-profits that pay dividends to members, choose their own membership fields or markets and be run by a volunteer board elected by the members/owners.
Unlike credit unions, the new co-ops would have unlimited authority for business lending, mortgage lending and commercial lending. And they would have access to capital markets to raise money for lending. Had such a charter been in place, credit unions would have access to the multibillion dollar federal rescue plan now priming the pump at banks across the country. The federal bailout funds are intended in part to ease the credit crunch and help financial institutions make more loans.
"We don't have access to any of that money,'' Sebastian said. "We could be lending more. We could be following the needs some of the people have right now. ... But we're less capable to solve this situation because of that inhibition.''
In late October, Sebastian shared his plan in a Washington, D.C., meeting with 40 CEOs of the 100 biggest credit unions in the country. Though not as hard-hit as some regional banks, the country's 8,000 credit unions haven't been immune to the downturn, particularly those in Florida that are heavily reliant on real estate loans. The GTE credit union last month reported a $2.7-million loss in its third quarter, contributing to a $21.9-million loss for the past nine months. And Suncoast Schools Federal Credit Union in Tampa, the largest credit union in Florida, notched a quarterly loss of $25.7-million as it set aside nearly $24-million in reserves to cover bad mortgage loans.
Tom Dorety, president and CEO of the $6-billion Suncoast Schools credit union, welcomed Sebastian's initiative as a way to broaden services and funnel more loans to hard-pressed members. "Conceptually, I think it's a great idea,'' he said. "We're at a disadvantage that we can't even raise capital (to lend). We're not getting any infusion of capital from the government.''
Despite the economic downturn, Suncoast is not closing any branches. Its membership is still growing at a 7 percent clip. "But some type of capital reform would allow us to do an even better job,'' Dorety said.
John J. McKechnie, director of public and Congressional affairs for the National Credit Union Administration, the governmental agency that oversees the industry, is aware of Sebastian's plan. But whether it will be part of the group's legislative agenda hasn't been determined.
"The chairman and the board are still assessing various proposals'' of credit union members, McKechnie said. "No decisions have been made.''
When Sebastian arrived in the spring of 1989, GTE Federal Credit Union was a $160-million operation with nine branches and 40,000 members — all with ties to the old General Telephone (now part of Verizon). Today, it's a $2-billion institution with 205,000 members. Thanks to the upgraded charter rules that Sebastian helped push when at the National Credit Union Administration, GTE's footprint stretches from Port Charlotte to the Georgia state line. It even has branches in Louisiana.
From his perch inside the credit union's 13-acre headquarters on the outskirts of downtown Tampa, Sebastian last week lamented how the fiscal crisis has widened to affect all lenders and why he believes "our system of a cooperative is the answer.''
What he calls "the gospel according to Bucky'' is that credit unions have different DNA than banks. Without the pressures that publicly traded banks feel, he says, credit unions don't have to manage quarter to quarter to keep profits up. As he sees it, banks try to get as much money out of customers through fees to raise their bottom line. For credit unions, because the customer is the owner, their interest is making money for their customers, not for the not-for-profit institution itself.
Historically, banks have objected to any widening of credit union mandates. They've cried foul that credit unions aren't on the same playing field because they're exempt from being taxed. As a concession, Sebastian's plan calls for taxing the converted financial services cooperatives at a corporate rate, but only after the co-op covers all operating expenses, pays dividends to members and sets aside reserves of 6 percent to 12 percent.
To blunt another common criticism of credit unions, he also suggests the cooperatives be subject to disclosing their lending patterns to minorities as banks do under the Community Reinvestment Act provisions. But whether or not the bankers get on board — or his fellow credit unions, for that matter — Sebastian is undaunted about pushing his cause. "I'm not asking for anyone's permission. I'm not immune to suggestions to improve it ... but I'm not soliciting support,'' he said. "I just know we could be solving some of the needs of our people right now.''
Jeff Harrington can be reached at 727-893-8242 or jharrington@sptimes.com
11/17/2008 http://www.tampabay.com/news/business/banking/article903472.ece
Published Friday, November 14, 2008 12:42 PM
TAMPA - Wendell "Bucky'' Sebastian has always been a bit of a maverick within the sedate universe of credit unions. Before he took charge at the GTE Federal Credit Union in Tampa, he helped trigger the biggest overhaul of America's credit union system since the Great Depression. As general counsel of the National Credit Union Administration in the 1980s, he wrote the legal opinion (which eventually became law) that allowed credit unions to vastly expand and merge with other unrelated unions.
Now, at the age of 64, Sebastian is at it again. He's floating a proposal that could dramatically reshape and expand the mission of credit unions. Sebastian thinks he has a window to make his pitch, given that reform of the financial services industry is a front-burner issue in Washington, D.C., as the Obama administration takes over. "I'm absolutely confident we can get this done,'' he said, adding with a laugh: "It'll either be impossible or not that hard. ... My friends call me a maniac on a mission.''
His wants to create a new type of charter for credit unions. In fact, organizations that opt in wouldn't even be called federal credit unions any more, but "federal financial service cooperatives.'' Like credit unions, the co-ops would be not-for-profits that pay dividends to members, choose their own membership fields or markets and be run by a volunteer board elected by the members/owners.
Unlike credit unions, the new co-ops would have unlimited authority for business lending, mortgage lending and commercial lending. And they would have access to capital markets to raise money for lending. Had such a charter been in place, credit unions would have access to the multibillion dollar federal rescue plan now priming the pump at banks across the country. The federal bailout funds are intended in part to ease the credit crunch and help financial institutions make more loans.
"We don't have access to any of that money,'' Sebastian said. "We could be lending more. We could be following the needs some of the people have right now. ... But we're less capable to solve this situation because of that inhibition.''
In late October, Sebastian shared his plan in a Washington, D.C., meeting with 40 CEOs of the 100 biggest credit unions in the country. Though not as hard-hit as some regional banks, the country's 8,000 credit unions haven't been immune to the downturn, particularly those in Florida that are heavily reliant on real estate loans. The GTE credit union last month reported a $2.7-million loss in its third quarter, contributing to a $21.9-million loss for the past nine months. And Suncoast Schools Federal Credit Union in Tampa, the largest credit union in Florida, notched a quarterly loss of $25.7-million as it set aside nearly $24-million in reserves to cover bad mortgage loans.
Tom Dorety, president and CEO of the $6-billion Suncoast Schools credit union, welcomed Sebastian's initiative as a way to broaden services and funnel more loans to hard-pressed members. "Conceptually, I think it's a great idea,'' he said. "We're at a disadvantage that we can't even raise capital (to lend). We're not getting any infusion of capital from the government.''
Despite the economic downturn, Suncoast is not closing any branches. Its membership is still growing at a 7 percent clip. "But some type of capital reform would allow us to do an even better job,'' Dorety said.
John J. McKechnie, director of public and Congressional affairs for the National Credit Union Administration, the governmental agency that oversees the industry, is aware of Sebastian's plan. But whether it will be part of the group's legislative agenda hasn't been determined.
"The chairman and the board are still assessing various proposals'' of credit union members, McKechnie said. "No decisions have been made.''
When Sebastian arrived in the spring of 1989, GTE Federal Credit Union was a $160-million operation with nine branches and 40,000 members — all with ties to the old General Telephone (now part of Verizon). Today, it's a $2-billion institution with 205,000 members. Thanks to the upgraded charter rules that Sebastian helped push when at the National Credit Union Administration, GTE's footprint stretches from Port Charlotte to the Georgia state line. It even has branches in Louisiana.
From his perch inside the credit union's 13-acre headquarters on the outskirts of downtown Tampa, Sebastian last week lamented how the fiscal crisis has widened to affect all lenders and why he believes "our system of a cooperative is the answer.''
What he calls "the gospel according to Bucky'' is that credit unions have different DNA than banks. Without the pressures that publicly traded banks feel, he says, credit unions don't have to manage quarter to quarter to keep profits up. As he sees it, banks try to get as much money out of customers through fees to raise their bottom line. For credit unions, because the customer is the owner, their interest is making money for their customers, not for the not-for-profit institution itself.
Historically, banks have objected to any widening of credit union mandates. They've cried foul that credit unions aren't on the same playing field because they're exempt from being taxed. As a concession, Sebastian's plan calls for taxing the converted financial services cooperatives at a corporate rate, but only after the co-op covers all operating expenses, pays dividends to members and sets aside reserves of 6 percent to 12 percent.
To blunt another common criticism of credit unions, he also suggests the cooperatives be subject to disclosing their lending patterns to minorities as banks do under the Community Reinvestment Act provisions. But whether or not the bankers get on board — or his fellow credit unions, for that matter — Sebastian is undaunted about pushing his cause. "I'm not asking for anyone's permission. I'm not immune to suggestions to improve it ... but I'm not soliciting support,'' he said. "I just know we could be solving some of the needs of our people right now.''
Jeff Harrington can be reached at 727-893-8242 or jharrington@sptimes.com
11/17/2008 http://www.tampabay.com/news/business/banking/article903472.ece
Friday, November 7, 2008
FIELD of MEMBERSHIP & SECONDARY CAPITAL
I am concerned about the future of the industry. Are we ready to serve members changing financial needs in the digital age? I think the technology exists (and will continue to be developed) that will enable credit unions and other financial service providers to work within the digital life style that younger (and some older) members want. I’m not certain the regulatory environment is there yet. Nor, do I hear encouraging discussions that make me think we’re headed there. I am concerned that Agency (NCUA) Executives are so busy analyzing industry data (past events) that they are not advising the Board about future possibilities. And, every six years there is a reconstituted Agency Board. How does a conversation about the future come to the Board?
There are two issues that I believe are holding credit unions back. Both issues will require regulatory courage, perhaps legislative courage, for the industry to recapture the status of a movement and head into the future. First, I believe it is well past time for fields of membership to move beyond geographic boundaries. The future, mobile delivery channel will know no geographic boundaries. Is the Agency ready to consider a world without brick & mortar branches to serve members? If the Agency’s leadership is ready, I don’t see evidence in the field.
Second, there is a need for secondary capital in the natural person credit union. When this subject has been brought up in the past, it has been roundly dismissed. After all, the industry has eleven percent capital. Why would any credit union need access to additional capital? Well, if the beginning of this current economic cycle portends the future, we’re in for a very bumpy ride. Unfortunately, this may be the catalyst that is needed to bring the issue to the table. Wish we, as an industry, had been more pro-active. I’d be happy to share letter’s I’ve written to sitting NCUA Board Member Gigi Hyland (2008), former NCUA Board Chairman Dollar (2003) and former US Congressman, Jim Davis (D-FL) [2004] on the subject.
Again, how do we get the conversation started? Please, may I hear from you via return email?
Reactions?
There are two issues that I believe are holding credit unions back. Both issues will require regulatory courage, perhaps legislative courage, for the industry to recapture the status of a movement and head into the future. First, I believe it is well past time for fields of membership to move beyond geographic boundaries. The future, mobile delivery channel will know no geographic boundaries. Is the Agency ready to consider a world without brick & mortar branches to serve members? If the Agency’s leadership is ready, I don’t see evidence in the field.
Second, there is a need for secondary capital in the natural person credit union. When this subject has been brought up in the past, it has been roundly dismissed. After all, the industry has eleven percent capital. Why would any credit union need access to additional capital? Well, if the beginning of this current economic cycle portends the future, we’re in for a very bumpy ride. Unfortunately, this may be the catalyst that is needed to bring the issue to the table. Wish we, as an industry, had been more pro-active. I’d be happy to share letter’s I’ve written to sitting NCUA Board Member Gigi Hyland (2008), former NCUA Board Chairman Dollar (2003) and former US Congressman, Jim Davis (D-FL) [2004] on the subject.
Again, how do we get the conversation started? Please, may I hear from you via return email?
Reactions?
CREDIT UNION RELEVANCE
Relevance - A measure of how closely something matches a user's need. Another way to look at it is: “Would anyone miss the Credit Union if it ceased to exist?”
Are credit unions relevant? Individually, yes. Credit unions are relevant to the community they serve. Credit Unions are relevant to the members who look to them for the excellent financial products and services credit unions are known for. There is evidence which supports something I’ve believed for a long time, “Consumers, even those who do not directly use credit union services, are better off because credit unions exist.” Back in the day - my days in Carbondale IL – I always believed that even though SIU Credit Union was one of the smallest financial service providers in the market, we kept the bigger ones honest. They always had to compete with our rates and fees, as well as our level of service. CUNA has recently published several articles, based on 2006 data, which conclude that credit unions are worth approximately $200 per year in savings to each credit union household, including the impact credit unions have on bank rates and fees. I have done a calculation at Tampa Bay Federal, based on the CUNA data, that estimates this savings per household at $177, plus the impact credit unions have in our market on bank rates and fees. Are individual credit unions relevant? Again, you bet. We just don’t tell anyone, outside the family, who we are and what we do.
This is a topic for another discussion, but I’ll put it on the table. The Tampa Bay Federal Experience is designed to create a Needs Based Sales & Service Culture, that leads to active members providing endorsements to their family and friends of what we hope will become a Legendary Experience. I’m working on the Sixth Edition at this time.
Now, let’s get back to the Relevance discussion.
Collectively, the argument is more difficult. When a subset of an industry is only 6% of the market, it is hard to claim relevance. If we expand the industry to include non-insured “deposits,” such as mutual funds, etc., credit unions only make up 3% of the market. When there are artificial barriers to entry, such as field of membership, it remains hard to claim relevance. When organizations like ZOPA are gaining traction in the United States, it will become harder to claim relevance.
How can credit unions stay relevant in today’s market place? One member at a time.
Reactions?
Are credit unions relevant? Individually, yes. Credit unions are relevant to the community they serve. Credit Unions are relevant to the members who look to them for the excellent financial products and services credit unions are known for. There is evidence which supports something I’ve believed for a long time, “Consumers, even those who do not directly use credit union services, are better off because credit unions exist.” Back in the day - my days in Carbondale IL – I always believed that even though SIU Credit Union was one of the smallest financial service providers in the market, we kept the bigger ones honest. They always had to compete with our rates and fees, as well as our level of service. CUNA has recently published several articles, based on 2006 data, which conclude that credit unions are worth approximately $200 per year in savings to each credit union household, including the impact credit unions have on bank rates and fees. I have done a calculation at Tampa Bay Federal, based on the CUNA data, that estimates this savings per household at $177, plus the impact credit unions have in our market on bank rates and fees. Are individual credit unions relevant? Again, you bet. We just don’t tell anyone, outside the family, who we are and what we do.
This is a topic for another discussion, but I’ll put it on the table. The Tampa Bay Federal Experience is designed to create a Needs Based Sales & Service Culture, that leads to active members providing endorsements to their family and friends of what we hope will become a Legendary Experience. I’m working on the Sixth Edition at this time.
Now, let’s get back to the Relevance discussion.
Collectively, the argument is more difficult. When a subset of an industry is only 6% of the market, it is hard to claim relevance. If we expand the industry to include non-insured “deposits,” such as mutual funds, etc., credit unions only make up 3% of the market. When there are artificial barriers to entry, such as field of membership, it remains hard to claim relevance. When organizations like ZOPA are gaining traction in the United States, it will become harder to claim relevance.
How can credit unions stay relevant in today’s market place? One member at a time.
Reactions?
Secondary Capital for Credit Unions
It makes a great deal of sense and would request that you look beyond Risk Based Capital and consider the advisability of uninsured Secondary Capital as a component in the Net Worth calculation for natural person credit unions. I think it is an idea that should be implemented with four limitations: 1) The total amount of Secondary Capital included in the calculation may not exceed 50% of the Retained Earnings portion of Net Worth; 2) The total amount of Secondary Capital from non-natural person sources (natural person and corporate credit unions, as well as other corporations) included in the calculation may not exceed 50% of Secondary Capital; 3) The total amount of Secondary Capital from any one individual included in the calculation may not exceed 10% of the Retained Earnings portion of Net Worth; and, 4) The Dividends paid on Secondary Capital should be limited to the credit union’s Return on Net Worth (Equity) as calculated: Net Income divided (Net Worth plus Secondary Capital). The addition of Secondary Capital to the Net Worth calculation makes sense for several reasons. Most obvious is that stock and bond market conditions have a significant impact on the intermediation of dollars to depository institutions. Even when we lower dividends to previously unthinkable levels, funds continue to roll in. While these very low dividend rates may slow deposit growth, they do not stop it. In fact, the recent depress equity markets has caused a flight to safety and the resulting excessive deposit growth has caused otherwise well-managed credit unions to face Prompt Corrective Action restrictions. Another reason that Secondary Capital makes sense will not be popular in the wake of Enron and other corporate earnings/accounting scandals, but I think is important to the long-term success of the Credit Union Industry. Credit unions often lack the ability to attract the best and brightest young talent because of the inability to offer an ownership stake in the success of the organization. During my 28 years in the business, I have noticed on several occasions that tight labor markets have made it particularly difficult to put a compensation package together that meets the needs of highly motivated, highly talented individuals, when they have the option of going into the world of stock owned banking. Giving credit unions the ability to place some portion of compensation into a Secondary Capital account will let interested individuals earn a return directly in proportion to the credit union’s financial performance. Similarly, Secondary Capital has a place in the long-term incentive compensation scheme for senior executives of a credit union. Some portion of compensation can be placed into a term Secondary Capital account, again earning a return directly in proportion to the credit union’s financial performance.
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