CLF Was Credit Union Liquidity Solution
Some wise person once wrote, “If we always do what we have always done, we will always get what we always got.”
But that person wasn’t Chip Filson, although Sarah Snell Cooke, in her March 7 column, wrote “he’s fiercely intelligent” (“Avoid Solutions Looking for Problems”).
I am certain no one needs to lecture Chip that we now have only 7,000 credit unions with perhaps a trillion dollars in assets. I doubt there is anyone anywhere who knows more about credit union statistics than Chip Filson. After all, as co-founder of Callahan & Associates, he developed the first-ever, comprehensive statistics to help credit unions analyze their performance and review peer comparisons.
I both agree and disagree with Cooke’s statement that “very few natural person credit unions ever wanted the CLF.” Most didn’t want it, it’s true. But that’s because few understood what it was at the time and what it was designed to do. But the NCUA, CUNA, NAFCU (and probably NASCUS) knew we needed a credit union liquidity solution–a vehicle to enable our industry to take care of itself in liquidity crises. And they worked long and hard to get it.
I suspect there are more than a few prominent credit union leaders still around who recall the very severe liquidity crisis in the late 1970s. It was even worse for credit unions because we didn’t have a Federal Reserve to back us up when lendable funds dried up. Make no mistake. Liquidity absolutely vanished from most credit unions.
Credit unions may not have wanted a CLF, but they certainly needed it to even come close to meeting the borrowing needs of their members. So, their leaders, including the NCUA, worked together to ensure there would be a credit union lender of last resort, avoiding a repeat of the crisis of the 1970s. Fortunately, it didn’t happen again, so, as Ms. Cook writes, few credit unions needed to use it.
Several years later, NCUA board members (none of whom were around during the liquidity crisis) had to be convinced of the need for the CLF. They asked, “Why not do away with the CLF as it isn’t being used very much?” But the industry argued that this would be like closing the fire department because there had been few fires. The CLF was kept.
Further, it is incorrect that there was any so-called arm twisting by Chip Filson to get support from U. S. Central and the corporates. I was there. When that agreement was made, it was Chip who made concessions while others present did the hard negotiating. Without his ability to understand what would work and what wouldn’t, the concept of a central fund to provide liquidity to our own industry–which was much sought-after by CUNA, the leagues and others–would not have been created.
Concerning the CLF funds deposited in U. S. Central, you can find in old U. S Central annual reports this statement: “Nonmember deposits are funds placed by the CLF. These deposits are placed in a special cash account and created exclusively for the CLF. This special deposit does not represent a share account and is therefore reflected as a liability [italics mine]. Funds in this account are available on demand, by the CLF on any business day.”
Note the CLF deposits in U.S. Central are shown as an asset under the title of “Stock of the CLF.”
Un my mind, there is not one person in this world more qualified to serve on the NCUA board than Chip Filson. He has been our conscience and visionary for years. He doesn’t hesitate to say or write what he believes. He knows more about our credit union industry than anyone. He is not in for the glory or financial reward. He is in it for the future of our cooperative financial model, to help ensure we don’t become so homogenized with other institutions that there will be no reason for our not-for-profit status.
It will take a massive amount of support to obtain 100,000 signatures to support the petition to enhance the NCUA board nomination process in such a short time period, but it is doable. It will require uncharacteristic unity for credit unions to remember why we chose the cooperative business model over working in a bank. But what do I know? I’m just a retired guy.
San Dimas, Calif.