PayThink

Are you proud to be a credit union? And if you are, do you keep it to yourself?

Congress’ Joint Economic Committee (JEC) issued a report last October titled, “The Subprime Lending Crisis: The Economic Impact on Wealth, Property Values and Tax Revenues, and How We Got Here.” The study conservatively estimates that through 2009, “Approximately $71 billion in housing wealth will be directly destroyed” through foreclosure; “More than $32 billion in housing wealth will be indirectly destroyed by the spillover effect of foreclosures” on neighboring properties; and “State and local governments will lose more than $917 million in property tax revenue” due to the erosion of housing wealth.

In our January 2008 issue of cent$, our American Airlines Federal Credit Union magazine, I took the opportunity to remind our members of some “hows” and “whys” we are different than other providers of financial services. For all business entities strategic “differentiations” are critical to long-term success and that is even more so the case for smaller niche players such as credit unions. In fact, Michael Porter, in the Harvard Business Review article referred to, sort of defines strategy as tightly linked-differences.

When you turn the page–no, not yet–you’ll find an opinion piece from David Bartoo analyzing what 2008 holds for credit unions and mergers.

For three consecutive years, the number of mergers receiving preliminary approval from the NCUA has declined to the lowest number of approvals in the decade with just 226 through November 2007. This trend, when coupled with the very low number of preliminary approvals granted by the NCUA in October and November (30), could indicate that merger activity will continue to slow in 2008. The first quarter of 2008 will likely be one of the slowest quarters for merger activity in the past five years. However, mergers are rarely a result of poor financial performance and short-term trends but rather a combination of negative long term sustainability trends, emotional concerns and external changes in the market.

Over the last 12 months, many credit unions’ asset and membership growth were flat. And at most of these credit unions there were increased charge-offs attributable to the declining economy.

A wise man once said that someone who does not act on an idea is no better off than someone who does not have an idea. The same is true for organizations. Learning new things from research is a step in the right direction, but acting on that newly found knowledge is what brings success.

Last fall I participated in the Eastern European Credit Union Congress where I was asked to speak on credit union advocacy in the United States. The U.S. is not unlike other movements in that governmental bodies determine the fate or vitality of credit union movements based on the powers they provide and the corresponding regulatory structures they implement.

As I read the article on Professor Jackson’s recent Filene research paper on credit union capital in the Dec. 10 issue I couldn’t help but wonder what conclusions might be different if the selected base line of 1990 had been, say 1980 when the Carter year’s inflation peaked.

In our January 2008 issue of cent$, our American Airlines Federal Credit Union magazine, I took the opportunity to remind our members of some “hows” and “whys” we are different than other providers of financial services. For all business entities strategic “differentiations” are critical to long-term success and that is even more so the case for smaller niche players such as credit unions. In fact, Michael Porter, in the Harvard Business Review article referred to, sort of defines strategy as tightly linked-differences.