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It's been 34 years since Brian McDonnell went to work for Navy FCU. During that time the world's largest credit union has grown from around $90 million in assets, located in cramped headquarters in a downtown Washington, D.C., Navy yard, to more than $20 billion on a sprawling campus in suburban Virginia, just outside the nation's capital.

McDonnell, now 60, can be seen any day of the year (he likes to say his operations run seven-by-24-by 365) at one of Navy Fed's 84 member service centers in the U.S. or 26 overseas, or at one of the several boards he serves on (NAFCU, Consumer Federation of America, and until recently, CUNA Mutual Group). A former Navy lieutenant, McDonnell has been CEO of Navy Fed since 1995.

The Credit Union Journal recently caught up with McDonnell in his office after a whirlwind tour of NFCU facilities.

CUJ: During your time at Navy Federal you've worked for a number of CEOs, Richard Cobb, Joe Scoggins and Tom Hughes. What have you learned from them?

McDonnell: You learn something different from every one. The first guy, Cobb, was much of a theory X-type manager. He was a strict disciplinarian. He did things like, in the Navy Yard, in Washington, he had the windows painted so the employees couldn't see out.

He taught me a lot of things about systems work and workflow. You know, I could tell you how many feet between desks and how to line up things, how to build files, records, workflow systems; time and motion studies. Forms design and control. Almost like industrial engineering. That was the basis for all of the systems around us and the way in which we do things today.

Then Joe Scoggins came on and Joe was a retired admiral. Joe was very much of a people person...He changed the culture of the organization to more of caring-type culture. I learned from him how important a workforce is and how you take good care of a workforce and they take good care of you, in turn. So, a lot of the benefits and the things we did for our workforce came as a result of Joe's years around here.

Then Tom came along. And Tom, of course, was very bright. What I learned from Tom is the ability to get involved externally. Tom was very good at external relationships and that sort of thing. With the trade organizations. With CUNA and NAFCU. DCUC, corporate credit unions. He just enjoyed the external relationships. He enjoyed testifying on the Hill. He enjoyed a lot of interaction he had externally.

CUJ: How about with the community, I know you guys do a lot of stuff with the community. Is that something he started?

McDonnell: I think I really picked it up a lot. In fact, before I came along we had a policy against making any contributions or donations. That was a change that I instituted. It was one of those things, where do you end, with that kind of stuff. It's not easy to deal with because you're always being asked for this or that. And I just say we either focus on our Navy community or the credit union community in some way and just stick to that.

CUJ: Let me ask you about the war in Iraq and your role. What do you do for the war effort?

McDonnell: We provide as much assistance as we can for the defense forces.

CUJ: But most of these guys get everything they need from the military, room and board, food. So what do they need from you?

McDonnell: They have families. We want to make sure their families are able to live the same way that they were able to live before they went on active duty.

You know what really hits home? We've had about 125 Marines where I personally sent out letters to their next of kin, to their mothers or their wives, killed over in Iraq. And the reason that I do that is not only to express our sympathy, but also because we provide loan protection insurance and life savings insurance and we want to make them aware that we're here for them and what the insurance will do for them, and continue the relationship with them.

CUJ: Service CU recently won approval to serve all branches of the military. Is that in your plans?

McDonnell: It's not in my scope right now. I think it's important to know your customer. We certainly know the Navy and the Marine Corps, and we certainly have the infrastructure in place to serve the Navy and the Marine Corps. That gives us tremendous advantages, not only from the standpoint of philosophically, in terms of knowing who we're dealing with, but also, its important economically and it's reflected in loss ratios, things like that.

So we don't have any plans to expand beyond the department of the Navy, which, of course, includes the Marine Corps.

CUJ: With your size, you're not really typical of the credit union movement. How do you represent credit unions, when, for instance, you go up to Capitol Hill to testify before Congress?

McDonnell: Well I think we're more typical of the credit union movement than you think we are. In terms of philosophy, tradition, the differentiating characteristics, the things that are important; I would say that we're pretty typical. Where we're different is in size. And size alone, should not make us different when it comes to the credit union community. In other words, I think the differentiating characteristics that we agree are important to us are interests that are shared by many different credit unions.

CUJ: Speaking of philosophy, you said it was Joe Scoggins who taught you the importance of relationships and the credit union philosophy. Summarize that for me.

McDonnell: We think there are things, distinguishing characteristics that credit unions have to keep in mind if we want to survive as an industry. I'm talking about things like democratically controlled; one-member, one vote; the importance of volunteers. Some kind of a structure, an articulated and regulated field of membership.

I mean, these guys who think you can just serve anybody you want to serve, that's going to get your behind handed to you, doing that. Even if it's perception on the part of Congress, it's still important. That's why we were so upset during (CUNA's) Renaissance when they came up with the (recommended) ability of credit union boards do select who they want to serve. That's just kind of leading with your chin, as far as I'm concerned. These characteristics that distinguish us from other financial institutions are important. What we have to remember as an industry is you have to pay a price for a choice... And number two, their choice may involve other people. And when that choice involves other people, then it's no longer something (others affected) should disregard. Let me give you an example. You've heard some people say we want to choose what we want to do. But when you do that, you're changing the characteristics of credit unions, as far as I'm concerned, and that impacts me because you're dragging me into your fight... If you want to go in a different direction; if you don't want to have structured field of membership or some of these other differentiating characteristics, convert to a mutual savings bank and leave me alone.

CUJ: Don't you need the expanding field of membership to evolve with the evolving financial marketplace?

McDonnell: Not necessarily. With my membership, which is large, I serve my membership. I penetrate my membership. I'm not one of those guys who go around saying, "my field of membership is bigger than yours." We actually serve and penetrate and serve our membership, in terms of numbers who sign up for membership with us, but also in the products that they get from us. That's the way in which you penetrate your field of membership.

CUJ: The horse is kind of out of the barn on FOM, isn't it?

McDonnell: I know. But I'm saying, some kind of articulated and regulated field of membership (is needed). Whether it's community charter or multiple SEGs, senior employee group; there should be some structure to it. There should be somebody that's above the credit union movement that (determines FOM).

CUJ: You didn't use the term, but it's 'common bond':

McDonnell: When I first came to work here the chairman of the board, Vince Lascara, used to say, 'if you no longer have a common bond, you should go out of business.' And he felt very strongly.

Now I have changed since then, because I have no choice. While someone can make the argument that we no longer have a common bond anymore, I think it's still important to have some kind of structure and regulation as to who it is we're going to serve.

CUJ: Even in a big organization, a big credit union like this, how important is it to have a common bond?

McDonnell: To me the fact that we serve the Department of the Navy is extremely important...because, you know what, when these bankers are trying to figure out who to go after you don't see them coming after us very often. Do you? Because we have a pretty good story to tell and we can still tell that story about the underserved portions of our membership that we take care of and the financial counseling we do and all of the good things we do for the enlisted personnel in the Navy and the Marine Corps. And the banks have trouble when it comes to fighting a credit union that does that sort of thing.

...And it's not only important philosophically and politically, but it's important economically. Our members have a tremendous loyalty to us. And it shows in things like bankruptcy reaffirmation and everything else. They don't mind sticking BJ's or whatever is down the road, but when it comes to Navy Federal they reaffirm their debts with us, and everything else.

CUJ: Is taxation inevitable? What's your main justification for the continuation of the tax exemption?

McDonnell: It's a harder fight every year. The fact that we're a not-for-profit institution and the distinguishing characteristics that I mentioned before, that allow us to serve a particular component of the American consumer in a way that makes us a valuable competitor for banks. And I think if we weren't around then banks could do just about anything they wanted. From my perspective, we consider ourselves to be a very socially responsible financial institution. We do things that are in the best interests of our membership. When I'm talking to our employees, I ask them all the time, "what are we here for?" We're here to keep our interest rates on our loans as low as we can; our savings rates as high as we can: to minimize fees and to provide as much convenience as we can. My purpose in life is not to maximize profits. And I worry about individual credit unions that have lost sight of that way of thinking, that socially responsible way of thinking. And I worry if we get taxed, it's not that the bankers do us in, it's because we do ourselves in.

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