Credit Unions and Black Swan Events

An interview with Chip Filson about Callahan’s upcoming webinar discussing the credit union opportunity in 2010 and 2011.


Callahan & Associates: Why are you calling this the most important webinar Callahan will offer this year?

Chip Filson: It is about opportunity. Credit unions are uniquely positioned to respond to the most pressing problems confronting America today. Economic growth and jobs.

Tuesday’s webinar will demonstrate how the collective application of credit unions’ core function – providing credit – can ignite an economic take off.  Credit unions can give ordinary consumers that are constrained by debt payments the ability to immediately improve their cash flow.

Some of the ideas might not be new. However we will show the impact of a collective effort that has taken off in the past several weeks. More importantly, we will illustrate how these efforts relate to the national debate about how to stimulate the economy.

C&A: What about the uncertainties facing credit unions, especially NCUA’s impending actions on premiums and the Corporates?

CF: Uncertainties come in two flavors. One is internal. Credit union leaders are cautious because of the unexpected severity of recent events. Stress is still high. In some instances there is fear of what examiners might do. This is an issue of self-confidence. Do we see opportunity? Do we know what we have done? Do we have a sense of purpose about what we need to do?

The second flavor of uncertainty is about external events. We continue to have bipolar economic forecasts. The good news always seems to be mixed with some area of concern, be it jobs, the deficit, deflation, or double-dip worries. These external uncertainties are why credit unions exist.

Cooperatives are a response by persons to confront forces or circumstances they could not manage on their own. Ironically it is sometimes harder to explain the credit union difference when everything is going right in the economy.

The media saw what credit unions did during the Great Recession. There is no doubt in their minds we are a different way of helping consumers. That confidence about our role reinforces our ability to move forward even when the future is cloudy.

C&A: So how do NCUA’s plans affect this opportunity you see? Couldn’t that slow down the effort?

CF: The key factor to examine when responding to NCUA’s actions is whether the Agency is proposing a solution for which they are seeking a response or imposing a solution that was drafted behind closed doors without any benefit of due process.

If it is the former, I believe everyone wins. If it is the latter, then that speaks to another issue currently being debated around the country. Government needed to intervene to stop the crisis and stabilize the system. The crisis is over. The question today is how does government withdraw and let the marketplace pick up the pace?

The government needed to be the lender of last resort. In NCUA’s case, the government needed to guarantee the solvency of the corporate system. Should government now also be the primary actor that resolves problems? Or should resolving problems be up to the individuals and institutions that operate in the competitive market, put their funds at risk, and live with the consequences of what they choose or choose not to do?

Warren Buffett talked about the mutual responsibilities between regulators and their industries in the 2009 Berkshire Hathaway Annual Report.

“We see a ‘social compact’ existing between the public and our business…If either side shirks its obligations, both sides will inevitably suffer. Therefore, both parts to the compact should…understand the benefit of behaving in a way that encourages good behavior by the other.”

If credit unions perceive a process that contradicts this mutual responsibility, then the response has to be political.

C&A: Why did you use the term “Black Swan” to describe this webinar?

CF: I wanted to start with context, provide perspective for the events of the past two-and-a-half years and what we have learned. I think those lessons are helpful. They can give us confidence in what credit unions can do even in the most difficult circumstances. They show the crucial role credit unions have in the economy. They show how credit unions are different from other financial institutions when the unexpected happens.

Understanding the crisis using the Black Swan concept is helpful. It might even surprise in terms of how one today evaluates the effectiveness of various key players in past events, for example the Corporate examiners and OCCU. My hunch is the Corporate examination results were as professional and thorough and as well done as any objective reviewer could have asked for. They did their job as best as humanly possible.

C&A: So what happened?

CF: Come to the webinar and find out.

In addition to reviewing current data and historical events during the webinar, Chip Filson and Jay Johnson also will present brief case studies that demonstrate growth strategies already underway.