The President’s Perspective

​Is a ripple effect of bank closures on the horizon? It’s time to reassure consumers that credit unions are safe and sound. Plus, a tribute to a SD credit union leader. 

Happy spring – well, sort of! While we can see the calendar indicates spring has supposedly arrived, Mother Nature has put a hold on those plans for now. “Hang in there” is what I keep telling myself as the snow continues to pile up and we must find new places to put it. Hang in there, because “in like a lion; out like a lamb” is our March motto – or will the “March Madness” continue?

Ripple effect of bank closures could be on the horizon. 
We all are paying close attention to the news of recent bank collapses, and so are our members and consumers. I was on a call with some of my league colleagues late last week to discuss the crises and the potential impact it will have on our credit unions. Some shared they were already hearing members were pulling their funds out of smaller financial institutions and putting them into larger banks under the impression that the federal government wouldn’t allow the largest banks to fail. This should concern us all. Naturally, consumers are concerned about the effects.
 
Credit unions – as the original financial consumer protectors – will continue to meet our member needs and ensure members and consumers that credit unions are safe. We should continue to tell this story on every communications platform we can. Let’s get the word out that credit unions are safe and sound and remain consumers’ best financial partner.
 
Over the weekend, DakCU issued opinion letters to news outlets across the Dakotas touting the safety and soundness of our Dakota credit unions. Each state was issued a specific letter with unique stats and pertinent information, which you can read at the links below.
 
ND op-ed CU Safety & Soundness
 
SD op-ed CU Safety & Soundness
 
The “gist” of the message is this: Credit unions by nature do not take on the types of exposure and risk we have seen in the “big bank” industry time and time again. Here in the Dakotas, an overwhelming majority of credit unions reflect a very high percentage of total deposits that are insured by the federal government. Overall, Dakota credit unions rank among the most safe and sound financial institutions in the country. No one has ever lost a single penny of insured share deposits within the credit union system – that’s a fact. Credit union deposits are protected by the National Credit Union Share Insurance Fund and insured up to at $250,000 per individual depositor – the same as any other federally insured institution.
 
Congress pivots to consider action in midst of potential failures.
There is one thing that we know: Congress never misses an opportunity to react in the wake of a crisis. We are hearing reports that there could be as many as 200 more banks that are vulnerable to the same type of risk that took down Silicon Valley Bank and could potentially fail if half of their depositors quickly withdraw their funds. There is ongoing debate on instituting the regulatory rollbacks that were provided in SB 1155 in 2018. Other members are considering introducing legislation that would prevent banks of all sizes from passing on FDIC insurance premiums to their customers.
 
What they are saying.
Former FDIC Chair under Ronald Regan, William Isaac, declared this over the weekend, “There's no doubt in my mind there's going to be more. How many more? I don't know. How big? I don't know," Isaac said. "Seems to me to be a lot like the 1980s."
 
Sheila Bair, who served as FDIC chair from 2006 to 2011, overseeing bank failures and other tumults during the global financial crisis, said that this is another wake-up call and remarked, "Institutional money seeking [higher] yield is not stable."
 
Treasury Secretary Janet Yellen stated over the weekend, and President Joe Biden reiterated on Monday, that a federal bailout for of large banks is off the table. However, observers are referring to the startling speed at which the bank (SVB) crumbled and was eventually shut down. Concern is that these large banks hold a significant amount of their assets in interest rate-sensitive financial instruments like government bonds and mortgage-backed securities. The value of those older, low-interest investments dropped sharply as the Federal Reserve hiked interest rates over the past year.
 
Opponents to UCC modernization bill materialize in the Dakotas.  
HB 1193 in South Dakota and HB 1082 in North Dakota were supposed to be slam dunk updates to the Uniform Commercial Code in our two states. However, last minute opposition came out swinging in recent weeks, leading to Governor Noem vetoing HB 1193 and Governor Burgum to consider following suit. However, Burgum did sign HB 1082 late Friday, the final day he had to either approve or veto the bill. The opposition’s concern is that the new definition of money would pave the way for Central Bank Digital Currencies in the US.
 
What does the legislation do and how does it impact financial institutions?
Basically, there have been a few revisions to the various UCC articles since they were first written in the 1950s. However, none of them dealt with technological advances, except some electronic transactions, and therefore, much of the UCC is still paper based and does not recognize the updates that have occurred in digital technology. That being said, the UCC needs to keep up with technology, including digital assets, to stay relevant and useful. The proposed amendments do not add any regulatory content and they do not address other law such as taxation of digital assets or money transmission laws. In addition to some minor tweaks to the UCC, most of the updates to the UCC bring it into the 21st century by allowing creditors and debtors to use digital assets in the various UCC Articles. The amendments are not tied to any specific technology and encompass newer relevant technologies in the future.
 
We didn’t anticipate any opposition. As you know, the UCC is the product of law commissioners from each state who serve together on the Uniform Law Commission (ULC) to develop model acts, or state laws, for adoption by state legislatures. It is not federal law, nor is it developed by the federal government. The UCC serves as the backbone of United States’ commerce, giving all Americans the legal infrastructure necessary to have confidence when conducting business in both Dakotas and across state lines. The reality here is that the failure to adopt the 2022 amendments does jeopardize South Dakota and North Dakota’s ability to remain competitive in commerce and fair market trade. 

Senator Rounds introduces CDFI Bond Guarantee Program Improvement Act.
A group of bipartisan lawmakers led by Senate Housing, Transportation, and Community Development Subcommittee Chair Tina Smith (D-MN) and Ranking Member Mike Rounds (R-SD) last week introduced the CDFI Bond Guarantee Program Improvement Act. This credit union supported legislation would spur economic development in underserved, economically distressed areas, reduce the minimum loan amount, and strengthen community development financial institutions (CDFIs) including credit unions’ ability to serve these communities.
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North Dakota Credit Union Legislative Day set for March 22 in Bismarck.
As a reminder, the ND Government Affairs Committee is organizing a Credit Union Day at the North Dakota Capitol. We are asking all ND credit union leaders and advocates to come to Bismarck on Wednesday, March 22nd to meet with legislative representatives about our FOM modernization bill, SB 2266. Be sure to contact me or Jay Kruse if you have any questions about this event. We hope to see you there.
 
Dakota CU Foundation launches Vacation Sweepstakes
In case you missed the Dakota CU Foundation’s Town Hall on Friday, the Vacation Sweepstakes is now officially open! This exciting new fundraiser not only supports the important work that our foundation does to promote credit unions and financial well-being for all, it provides a chance for anyone from North or South Dakota to enter to win a dream vacation of their choice! You can find all the important details, official rules, and entry form here.
 
We are asking credit unions to help us promote this fundraiser. We have a turnkey marketing toolkit available by email request to Shawn Brummer complete with point of sale posters, banners, and social media graphics.
 
Also – I am issuing a CEO challenge to help fund the purchase price of the sweepstakes prize. I am donating $100, and I challenge all CEOs to a match donation. Funding this prize will allow the foundation to retain more of the proceeds from this event. (This sweepstakes replaces the Foundation Wine Pull and will be the only direct ask to CEOs this year.) You can make a direct prize donation here.
 
Congratulations Amie Aesoph
I would like to send a shout out to Amie Aesoph, Chief Human Resource Officer at First Community CU (Jamestown, ND). She was recently named to the “Top 25 Women in Business” list by Prairie Business Magazine. Amie is well known for her volunteer spirit and for giving back to her community. First Community CU President/CEO says Amie is an integral member of their executive team, and has taken their human resources department to an entirely new level with her recruitment and communication skills. Congratulations Amie, well done! You can see her entire writeup from Prairie Business Magazine here starting on page 14.
 
A tribute to a South Dakota credit union leader.
Many of you may have already heard the news of Roger Peters passing last week. Roger was a longtime servant leader as the president and CEO of Service First Federal Credit Union (formerly John Morrell FCU) for 45 years. He gave back to the industry in many ways, serving in several leadership roles in South Dakota, including chair of the South Dakota League. He was a mentor for many current credit union leaders, and he will be missed.
 
Roger was inducted into the Dakota Credit Union Hall of Fame in 2020. If you wish to see his Hall of Fame induction video, you can find it here. A memorial service is planned for March 25 in Sioux Falls, and you can find his obituary here. On behalf of the association, we send our sincere condolences to his family and friends.

Regards,

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DakCU President/CEO