Fundamentals, Footwork Needed for Tax Exemption Fight for Survival: Editor/Publisher's Column
Joe Montana paid homage to his father during his address at this week’s annual NACUSO conference in Las Vegas. His father wasn’t a big jock, but he could work the fundamentals with his future NFL quarterback son, like tying a tire swing up in a tree–not to swing on–but to throw the football through.
His father would swing it to force young Montana to hit a moving target. Kids being who they are, Montana applied his learning to throwing snowballs at cars passing down the street as well. Still it served him well.
Montana said he was a basketball nut when he was younger. Once his father got too slow to keep up with him, he’d do things like trip him or step on his foot when he was trying to jump. He would complain to his dad that he couldn’t do that, to which his father replied, “What are you going to do about it?”
This really resonated with me. The game doesn’t always go as planned. Credit unions got tripped up in the economic crisis. They had their feet stepped on. What are you going to do about it?
Many credit unions did just what Montana suggested. They got back to fundamentals. Throughout his entire career, Montana practiced fundamentals like footwork. He practiced and practiced throwing the ball a foot in front of where the receiver was going to be. “[Coach] wanted us to catch the ball for the receiver,” he commented. Leadership is practicing until you can’t get it wrong. It’s making it easier for everyone else to do his or her job well.
Leadership is also about work ethic. Montana explained that a guy named Jerry Rice joined the 49ers, and every time he caught a pass he ran it in for a touchdown. Every time. This made practices very long, which initially irritated Montana. But it turned out that Rice became the all-time touchdown reception leader–by far–according to Montana.
You play like you practice. How is your credit union practicing?
Then John Taylor started doing it. And Rice and Taylor began racing each other down the field at practice. At game time that translated into throwing up blocks at the 20-yard line for each other to get the other in the end zone. They played like they practiced, and they trusted each other.
Montana is a Hall of Famer and, according to John Ainsworth of MasterCard Worldwide who introduced him, Montana won more than 70% of the games he played. And, Montana admitted, it was all due to practicing the fundamentals, possessing a strong work ethic and trusting each other.
Credit unions are going to need that kind of winning strategy, not only in their day-to-day operations, but also to fight back the bankers who are ramping up the heat on the tax exemption. Over this week and last, the House Ways and Means Committee has sent out feelers for tax reform recommendations. According to the 2014 budget from President Obama, the credit union “tax expenditure” could be worth $9.5 billion over four years. That’s more in line with the bankers’ estimates of the value of the credit union tax exemption than other government estimates. No one really knows the true value of the credit union tax exemption because credit unions likely would change their structures and business models in order to best survive in that environment. In fact, they would likely return more to the members in order to avoid being taxed on it. Not necessarily a bad thing so long as they maintained enough to remain safe and sound.
In different times, I’ve written that credit unions could survive taxation. Now I’m not so convinced. Likely many would merge out of business or convert to banks. I’ve spoken with a number of CEOs of large credit unions. Most if not all credit unions with more than $1 billion in assets have a conversion plan in their back pockets–not because they want to but it’s at the ready for just such an occasion. The credit union regulators, leagues and smaller credit unions would lose the financial support the large credit unions provide. Credit unions would fail to exist and the American consumers would be worse off.
Every credit union executive must lead his or her institution toward a prosperous future and lobbying is a necessary part of that. Some credit union executives have told me they aren’t comfortable with lobbying because they don’t want to offend their members. Their members are the ones they need to be lobbying to support credit unions in their fight against taxation. If members, who are voting constituents, don’t get involved politically they won’t be members for long–they’ll be customers.