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51 posts categorized "Financial Crisis"

April 19, 2012

Point, Counterpoint - No More "Fun" in Functions?


I read an interesting post from That Credit Union Blog yesterday, in which author Rob Rutkowski shed a tear or two for NCUA examiners who were doomed to attend a conference with no free meals or drinks. Not becaus of anything they did, mind you - most of the blame goes to the GSA, who spent $800,000 on an extravagent Vegas that outraged the public and the President, too. 

Rutkowski, from his post: 

...Canceling a reception does not help moral...Look, NCUA has to compete with private employers to recruit bright and honest people.  Are there perks in being an employee of the federal government?  Sure, good benefits, nice holidays, what have you, but in Washington D.C. private industry pays more and NCUA has to compete with that.  Having a modest reception for hardworking employees in any industry is a good idea.

A short time later, Aite's Ron Shevlin (of the Snarketing 2.0 Blog) offered his colorful reply: 

This is the political reality of the times, Rob. The GSA is part of a government whose President calls for “shared sacrifice.” Spending $800k on an event isn’t shared sacrifice, and it should come as no surprise that political opponents would make hay out of this.

I have to believe that Ron's onto something when he talks about the political blowback of another raging party scene. I'm sure that after the GSA had its fun, a big, bad envelope showed up on the desk of every director in every branch of government with a very simple message: 

"Don't even THINK about doing this."

What's the happy medium? How can government agencies give employees a good conference experience and a reason to continue their employment without blowing nearly a million dollars on swag? 

I want to hear your thoughts - leave your comments below.


September 14, 2010

It's a Credit Union Love Connection!


by Ron Daly 

HE'S a niche credit union created to serve the workers of a local cannery in the 1930s! SHE'S a live-work-worship with multiple branches but diminishing deposits! Do I smell romance? NCUA does. 

From CUNA News Now

WASHINGTON (9/9/10)—The National Credit Union Administration (NCUA) said credit unions can expect a national merger registry "to be live by October." The registry, an idea initally recommended by the Credit Union National Association. would provide the names of potential credit union merger partners.

The registry is just one innovation sought by the Credit Union National Association (CUNA) regarding the regulators' approach to voluntary mergers. The trade group has also urged the agency to address due diligence and loss-sharing incentives as it further refines its approach to the merger process.

So the NCUA is launching what is effectively the of the industry. Recently, Dennis Dollar predicted another 2,500 mergers in the industry by 2015. Callahan and Associates data shows a contraction of 248 CUs between 2Q of 2009 and now, and the number is still slipping. 

Is all this contraction a bad thing? Not necessarily. Typically, mergers mean the death of autonomy for the smaller CU in the deal, but no merger takes place without an eye to growth for both institutions and better services for their shared members. The intentions are good, even if the resulting shift makes things a little rocky for management, staff, and members at first. 

I think it's forward thinking of the NCUA to try and facilitate good matches, whatever the means. Pairing CUs with similar goals and good books means the two joined CUs can focus their energies on gaining members and growing. Encouraging search and promoting solid due diligence are the NCUA's responsibility, and they recognize that. I've yet to see this merger registry, but I'm very interested in the concept. 

Which begs the question: how do YOU feel about the registry and mergers in general? Will fewer credit unions with more to offer be better or worse in the long run? Talk to us about it in the comments section.

August 31, 2010

Get your college student out of your house...and into your other house?


by Ron Daly

Most of you folks have already taken your college students back for another year of higher learning. Man, is that on campus housing ever expensive!  Wouldn't it be nice if there was available real-estate near your child's college? 

Chances are, there are houses and apartments abound near your young person's school...and that could mean a real-estate treasure trove for you. 

From the Washington Post

By buying a place and taking out a mortgage, non-deductible dorm rents can be converted into tax-deductible mortgage interest payments.

Parents also benefit from tax deductions for real property taxes, depreciation and the costs of repairs and replacements, as well as travel expenses to locate, acquire and periodically inspect the investment property. The parents' tax burden might also be lessened by the capitalization and amortization of capital improvements made to the residence.

The article presents a pretty compelling case for buying a piece of real estate near a school, focusing mostly on write-offs and tax deductions, but also points out the benefits of not moving your student every year they're in school (hallelujah) and the eventual resale value of a building for whom there will always be interested buyers and renters. 

It's not all smiles, however; the article presents several drawbacks to owning a home near the university, including...well, the fact that your university student will have a home of their own to manage - or not manage - or, heck, outright destroy. Being a landlord is tough enough, but then there's dealing with your own kids as tenants and college students. 

My take? If you've got the means, you should go for it. Your student needs a place to stay, you need a write-off or two, the economy needs a pop in first-time home sales - everyone wins! If the money's cheap, make it happen. Just be very specific about your expectations to your young person before you hand over the keys. 

My take as far as credit unions go? How about a lending-bundle? Programs like Student Choice are making student loans from CUs more convenient to find and programs like CU Realty are giving you great mortgage rates and even cash back. A borrower that's smart enough to smell the opportunity is a borrower you want. 

What do you think? Let us know in the comment section below. 

June 23, 2010

TARP Banks Missing Payments! Time to Send the Repo Man?


by Ron Daly 

Read this article the other day: "More Than 90 Banks Miss TARP Payments". According to the article, 91 banks and thrifts skipped the May TARP payment, seventeen more than those that missed payment in February and 36 more than those that missed their payment in November. 

I don't know how that makes YOU feel, but I'm guessing you're not slowly clapping at your computer, impressed with the great strides made. I'm guessing you're in a state of disbelief and, like me, you find it insulting that for eight of these banks this is the FIFTH MISSED PAYMENT. 

Now, before I get too steamed, let's be fair - according to Treasury Secretary Tim Geithner, banks have repaid about 75% of the TARP money they got back in 2008 and the start of 2009. The impact on the taxpayer is expected to be around $105 billion all in all, which is down from an initial estimate of $341 billion. So not all the news is bad news on the TARP front.

But still - five missed TARP payments? How does any bank get away with that? I know you're not all "money people", but five missed payments on anything else nets you a visit from the repo man. 

Your car loan's not paid up and you haven't taken steps to talk to the bank? They're coming for it. Some big, burly guys are going to roll up to your driveway, put the thing on a wrecker and take it back to the branch. Simple, right? 

It's more complicated for banks. The CNBC article calls out Midwest Banc Holdings as an example of a bank that just couldn't cut it: 

In some cases, small banks are renegotiating the repayment terms. Midwest Banc Holdings, for example, agreed to swap $84.8 million in preferred shares issued under the TARP program in 2008 for $15.5 million in common shares. That would have meant an 80 percent loss for the government—and the U.S. taxpayer—on the initial investment. But the swap was contingent on the bank raising more private capital, which it failed to do. Regulators seized the bank in May.

Is there not more that can be done? Are we just going to have to eat the losses without any upside? AIG has already cost us something in the area of $180 billion, for which we get nothing. Foreclosures and housing numbers are still in rough shape and many "toxic assets" have yet to be dealt with by their holders. The oversight panel can keep an eye and raise concerns, but where's the repercussion for those that don't make the payments? While we're all so busy looking for "asses to kick", let's point our foot at those institutions who balk at repaying the taxpayer for OUR investment.  

What do you think? What do we do with banks that haven't paid? What do we "repo"? 

June 17, 2010

More Ads Coming Out of More Credit Unions - Will It Mean Business or Backlash?


by Ron Daly 

The New York Times did a run-down of credit union ads and the new face of credit union marketing Friday of last week.  The article (in my opinion) goes back and forth between "about time" and "really?" in terms of tone. There are some praise-worthy notes and some jabs that feel a little more like condescension than reporting. But maybe that's just me. 

This was accompanied by a "Bucks" blog post with videos and PDF versions of "anti-bank" campaigns from different CUs around the country. 

I really liked the above ad from America's First FCU. It's got an "anti-bank" element to it, but it ends on a high-note and isn't vitriolic. One aspect of many of the ads featured are actors pretending to be bankers. Really? You really can't come up with one single real-life example of "bankers behaving badly"? Watch the video below:

Visit for breaking news, world news, and news about the economy

Remind me: When's the last time a group of credit union employees tore up the highway in a Lambo? 

There are folks who are concerned all this "bank bashing" is counter-productive. One such person is Jason Sherrill, who wonders if this method of advertising has lead to more people being against financial institutions altogether...and to consequences such as the Durbin amendment. 

I want you to tell me what to think about all this. Are these anti-banking campaigns going to have a negative effect on membership and on our credibility as an industry? 

I set up a simple survey via our online survey tool that will collect your data and I'll print the results when I have an "n group" of 50 voters. 

Talk to me, credit unions. What say you?

Go to and tell us what you think.

[Thanks again to friend-of-the-blog Jeffry Pilcher and The Financial Brand for bringing these stories to our attention.]

May 19, 2010

Waiting It Out, or Just Not Getting On Board?


by Ron Daly

There's an old joke about a guy who lives at the foot of a volcano. The volcano erupts, spilling lava toward his home and his village. His neighbors hop in their car and say "Our car is fast, we can get away in time. Come with us." 

"No," says the man, "God will come for me and save me from the lava."

Later on, the lava has reached his porch and burned off the front steps and the siding. The man climbs to the second floor of his house and a military tank full of survivors rolls by and says "Sir, jump onto the tank. We can't get burned and we'll keep you safe."

"No," says the man, "God will come for me and save me from the lava."

The lava gets deeper, and the house starts to dissolve. The man must climb up to his roof. A helicopter drops him a rope ladder, saying "Climb up! Climb up!"

"No," says the man, "God will come for me and save me from the lava."

The man gets swallowed by the lava, and is reduced to ash.

He gets to Heaven and talks to God. "I thought you'd save me!" the man said to the Almighty.

God looked confused. "I sent a car, a tank, and then a helicopter - what more do you WANT from me?!?"

Which reminds me - Reg E is still an issue. 

Get with the program! 

Reg E is an issue that threatens everyone in the financial services industry - it's going to affect income and capital, it's going to affect member relationships, and it's going to affect the bottom line. Credit unions across the country are scrambling to try and find a way to get folks "opted in" before the deadline on August 15 (yes, there's a July 1 deadline on new members, but August 15 affects everyone). There's a lot of worry, as some credit unions/banks just can't do without the fee income. And when the next step is a choice that hinges on the members and customers, the results could be a blessing or a curse. 

Blessing: the income still exists, members just have to opt-in to overdraft protection (or courtesy pay, whichever you prefer). Which means they'll get their way at POS and pay for it later, and the CU can collect on the error.

Curse: everyone is automatically opted out after August, and that's going to mean a big hit on income. Whether they come back to overdraft protection or not is at their discretion. 

Everyone knows that Bank of America announced they were doing away with overdraft fees and came off looking like a good guy as a result. But they're still offering overdraft protection, they're just making it so that it takes the difference out of your savings or credit account and charging a $10 fee for it, according to this article. When every headline related to that story says "Bank of America does away with overdraft fees" and you're asking people to CHOOSE to be assessed those fees, how do you win? 

What's worse, according to this CU Journal article, is that members are planning to throw out their opt-in forms when they get them, and somewhat more disturbingly: 

The findings should be noted by credit unions and banks, said [Brian] Beach, [CEO of ACTON Marketing], because those customers will not have overdraft protection when they overdraft, will start to have their retail purchases denied and most likely will move their accounts elsewhere. “The psychology of overdraft users is such that they are extremely averse to having their debit card transactions denied at retail,” said Beach. “If they begin to be denied, they will not just re-opt-in with their current bank or credit union. Most likely they will cut and run.”

So, here's the question: how obvious is your car, your tank, your helicopter? Will a person who is at risk to use this service you've provided to them for years know what happened when their transaction is declined? Or are they just going to blame you and leave for a bank? In a new, debt-conscious America, will people want the chance to go over the limit at all? 

The lava's on its way. Get as many folks on board as you can. And if they get "burned", remind them - they had (and still have) a chance.

Your feedback is always welcome. 


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March 03, 2010

HAMP Hampered


by Ron Daly 

The successes of President Obama's financial programs have been debated by pundits for the past year or so. Some say that progress is naturally slow in recovery and that the seeds of these initiatives will bear fruit for years to come. Others say that the programs have not helped enough in the short term to warrant their continued support. 

One program being debated currently is the Home Affordable Mortgage Program, or HAMP. A recent story from ABC News talks about the program - its proponents, its opponents, and its short-term success. 

Watch the video below. [EMAIL READERS - please visit the website to view the video. Flash player required.]

According to the online version of the story, only 116,000 homeowners have taken advantage of the $75 Billion program thusfar. Only 116,000 on a program designed to help 2 million? Why? Because bankers won't help customers and would rather foreclose. This has led some lawmakers to call the program a "failure" and has prompted the Treasury to suggest a stronger hand. If the Treasury and the Obama Administration had their druthers, banks would be required to see if homeowners qualified for HAMP help prior to foreclosure. Banks would only be allowed to begin the foreclosure process after a borrower had been officially unqualified. 

Continue reading "HAMP Hampered" »

February 11, 2010

CUNA to Administration: Where Do CUs Fit In?


by Ron Daly 

For the past few weeks, CUNA has been striking out at the Obama Administration's new Small Business Lending Fund plan. The plan, which would distribute $30 billion in unused TARP funds to 8,000 community banks, doesn't mention credit unions as a potential business lender or alternative to community banks. 

From the above Fox News story:

Senior administration officials say the Treasury Department, SBA (Small Business Administration) and other White House officials and community bank groups worked on this legislation together and will affect banks that have between one billion and 10 billion dollars in assets.

CUNA, upon hearing the details of the President's plan, registered its outrage in a series of posts and stories on its website and in the CU Times. CUNA President and CEO Dan Mica registered his disappointment with further bank investments and is asking for face time with President Obama to speak on behalf of CUs across the country.

From CUNA News Now: 

"Credit unions have been making loans over the past year and can make even more if legislation expanding their capacity to make small business loans is enacted. I hear credit unions say: 'Don't just subsidize the banks; let us help this country get back on its feet--without using taxpayers' money,'" [Mica] added.

Business lending caps have been a hot topic for credit unions in the past year. A recent Washington Post article about CU business lending has this quote from a Treasury rep about bringing CUs into the fold: 

"We work very closely with credit unions and we have put forward a number of initiatives to help small businesses, but we are always willing to explore new ideas," Andrew Williams, a spokesman for the Treasury Department, said Monday.

We're eager to hear your opinion about the Small Business Lending Fund. If the business cap needs to be lifted, or increased, are the ramifications going to be so dire for banks? And what if the cap ISN'T lifted? Credit Unions nationwide have been doing more to lend to businesses with their own money. Do we really want to get in on the bonanza of $30 billion in TARP leftovers, or just keep up our "thanks but no thanks" attitude and lend to businesses as much as we possibly can without the cap disappearing?

Tell us your thoughts in the comment section.

December 15, 2009

Where are all the Credit Union saplings?


by Ron Daly

There are two things I never want to do: 

1) Become President of the United States,

2) Start a credit union.

I guess I'm not alone on #2, since only two credit unions were started in 2009 (click here for the story). Only two?!? That seems...well, not too far off, given what we know about the past year. Failures, mergers, and acquisitions in the financial industry have become part of the territory. While banks have failed at a much higher/faster rate than CUs (106 bank failures to ~20 CU failures, according to this story), credit unions still have cause for concern.

Does that mean that the need for credit unions is waning? I don't think so. There are underserved communities that could really benefit from a credit union. Consider forestry - when a tree is cut, dies, or is destroyed by fire, a new sapling must be planted to bring the forest back to life. But where are all the credit union saplings?

Part of the problem is in scale. How do small, newly-formed CUs gain ground when they have to deal with competition from a decades old, multi-million (or billion) dollar credit union or bank? So much goes into bringing services to members that many startups are hamstrung by the "need" to bring everything members want the moment your charter is approved. "Start small", it seems, is no longer an option. 

One possible solution was put forward by Robbie Wright over at "Life and Times of a CU Employee" came up with an interesting white-paper called "Outsourced CU". His suggestion? A CUSO that starts credit unions. They manage facilities, they provide training, they handle marketing, they provide insurance, etc. This basic skeleton of services would be brought in to support the chartered CU and help it find and serve its market. Is now the right time for a service such as this?

I don't know whether this CUSO would prompt more folks to start up CUs, but I will say this: I do know WHAT the future of an industry is when new players don't enter the industry.

Your comments/thoughts are appreciated, as always.

December 01, 2009

What Did We Learn?


by Ron Daly

2009 has been a year of learning. We've learned all about credit default swaps. We've learned how badly our new members had been treated by their former big banks. We've learned how to do more with less when it comes to marketing budgets, collections budgets, staff shortages - it's been a make-or-break year for the industry, to say the least. 

Here's some basic lessons: 

1) The amount of financial advice out there in the world is astounding. The quality of that financial advice is embarrassing. 

2) Just when you think our industry has hit the bottom of the problems we're facing from this recession, someone throws us a shovel and yells "keep digging". 

Let me cut to the point here...did you ever think we'd be looking at a time in our country when walking away from a mortgage was a good idea? How about a time when people recommended it? 

People like Dr. Brent T. White. A law professor at the University of Arizona, Dr. White recently published a paper titled "Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis".  

His recommendation? The 15-million people with underwater mortgages should just walk. 

15 million people? Let's be optimistic and say those people only borrowed $300,000 on average. That's $4.5 trillion dollars that'll never be recouped. For better or worse, the housing market will never again be what it was. So banks and CUs won't be able to unload those houses, nor does the land beneath them necessarily mean anything to anyone, as developers in personal and business real estate aren't making any moves until the picture's less bleak. Whenever THAT is. 

What's more, it doesn't seem as though Dr. White is in the minority. This story from highlights "walk-aways" and a service designed specifically to help them work toward a strategic default.

This isn't a new problem (that NPR story is from two years ago, when the bottom just started coming up at us). A segment of this Newsweek piece from March states: 

The study is based on the data of some 45 million properties that carry a mortgage, which accounts for more than 85% of all U.S. mortgages. The data was filtered to include only properties valued between $70,000 and $1.25 million. 

The most severe "underwater mortgages"—mortgage loans that are 125% or higher than the value of the property—are in five states: California (723,000), Florida (432,000), Nevada (170,000), Michigan (128,000), and Arizona (122,000). Underwater homes are of serious concern because for some homeowners there is little incentive not to walk away and allow the home to fall into foreclosure. Foreclosed homes drag down the prices of neighboring properties, possibly dragging more homes underwater. 

A veteran real estate broker in Las Vegas who declined to be named said that in 2004 there were only 2,000 homes on the market; now there are some 20,000 and growing. "Everybody became crazy," she said. "In certain areas [home prices are] off 60% from the peak. It's really sad because there's no equity and people can't refinance."

We're looking at a quicksand situation here. If people start walking away from their mortgages on "good advice" like that mentioned above, it will just topple what little is left of the housing market like a string of dominoes. And whatever happened to "promoting thrift"? We must not be doing a great job of that, considering the number of bad mortgages floating around out there. But, then again, maybe people weren't as willing to listen to us "conservative lending institutions" then as they are now. Is now the time to remind people that running away from your crummy mortgage will hurt you? When and how can we make people learn that cut-and-run won't do?

I haven't read Dr. White's entire paper, but I do know this - a default isn't a good thing. And no, I don't agree that you can recover from it inside of two years by paying down the balances on your cards and being otherwise responsible. Where do you live after you've been booted from your home? How do you start recovering? Because like it or not, those two years back to your healthy credit rating are going to be a tough slog.

I'm sure there is a great counterpoint as to why consumers should just walk away...I'd love to hear it.