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Bringing Back the Community Bank with Charley Cummings
179 Plays4 months ago
If most of us are honest—banking probably isn’t the first thing that comes to mind when we think about social and environmental change. But what if it could be?
In today’s episode, we talk with Charley Cummings, CEO of Walden Mutual, an innovative bank that’s restoring a community-driven model that has largely disappeared in the face of 50 years of banking consolidation.
Charley walks us through the recent history of US banking and how the fundamental thesis behind it has changed, leaving many behind. He explains how is own experience as the founder of Walden Local - a sustainable meats company - helped him see the lack of a local financing option that embodied his values. From there, Charley dives deep into their community driven model, showcasing what a relationship-driven, place-based banking model could mean for the future of local agriculture and our food systems at large.
In this episode, we cover:
- Charley’s political origins and how he came to see the need for a new model for community financing.
- The essential role that community banking played in building the American middle class.
- How shareholder primacy - which is taken as gospel now - is a societal construct that arose in the 1970s and has fundamentally reshaped our banking system.
- How they are restoring character based lending through a fusion of modern tools and a relationship driven approach.
- Financing local economic “ecosystems” in order to create mutually
- What a place-based banking model could mean for the future of food systems.
- And much more...
More about Charley:
Charley Cummings is the founder and CEO of Walden Mutual Bank, the first newly chartered mutual bank in the US in 50 years. Walden Mutual lends to sustainable food and agriculture businesses in New England and New York, while offering impact driven online and mobile deposit accounts to businesses and consumers. Charley previously founded and ran Walden Local, Inc., now the leading brand of locally produced pasture-based meat in the Northeast. Previously he worked at various venture-backed clean technology companies and co-founded a non-profit advocacy organization formed in support of the country's first proposed offshore windfarm. Charley began his career at Monitor Group (now part of Deloitte) and earned a BA from Brown University and an MBA from Harvard Business School. He lives with his wife, three children and small flock of Kitahdin sheep in Hopkinton, New Hampshire.
Agrarian Futures is produced by Alexandre Miller of You Should Have a Podcast, who also wrote our theme song.
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Transcript
Introduction to Natural Systems and Local Impact
00:00:02
Speaker
At some point in the technology revolution of the past couple of decades, we've become entrenched of this idea of inputs and outputs when it comes to natural resources. And that is not really how natural systems work.
00:00:18
Speaker
natural systems are cycles. The return to a community banking model ah of the past and a return to at least some elements of a local food system that prioritizes resiliency alongside of efficiency is one in which Those interactions are a cycle and the money is returned and re-spent in the community over and over again. That's the broken link that is missing and the sort of philosophical change we're trying to make in the world.
Introducing 'Agrarian Futures' Podcast
00:01:03
Speaker
You are listening to Agrarian Futures, a podcast exploring a future centered around land, community, and connection to place. I'm Emma Ratcliffe. And I'm Austin Unruh. And on the show, we chat with farmers, philosophers, and entrepreneurs reimagining our relationship to the land and to each other to showcase real hope and solutions for the future.
00:01:32
Speaker
Charlie, thank you so much for joining us today to give you a little bit of context around our project and agrarian futures. Austin and I set out to start this podcast to really explore questions around what would like a more ecological, environmentally sound future look like.
00:01:51
Speaker
For both of us, we kind of felt like that in the kind of mainstream media discourse, there's a lot around technological solutions, carbon credits, big government agreements and actions, but we didn't really feel like there was that much dialogue around what would it look like to live more within the boundaries of our environment, more localized food systems, healthcare care systems, communities.
Role of Walden Mutual in Localizing the Future
00:02:18
Speaker
So that's kind of really the theme of our podcast. And I think that when people think of agrarian futures, they typically think of small farms, rural economies, all these really important things, but people rarely think about banks. In fact, for many of them, banks are almost this evil thing.
00:02:36
Speaker
But in reality banks and how our financial system works is integral in facilitating the kind of society you want to live in. And I think that's what you guys are doing at Walden Mutual. So super excited to be talking to you today and to kind of dive into What is the role of Walden Mutual in kind of facilitating this more localized future? And what should the role of the financial system in general be? So to get us started, could you maybe just tell us a little bit about your story and how you started first Walden Local, which was us a local meat company, and then kind of out of that, how you came to start a bank?
00:03:16
Speaker
Great, yeah, I'm happy to and thanks so much for having me.
Charlie's Journey to Walden Local and Environmental Externalities
00:03:20
Speaker
By way of background, my interest in this space may be derived really early on from a proposal to put the first offshore wind farm in the country off the coast of Cape Cod, which was in the early 2000s.
00:03:35
Speaker
ah That's why I grew up. I helped a start and for a long time served on the board of an organization that was formed in favor of the project after some local opposition rose up the Kennedy family amongst them, sort of saying, well, we're for wind energy, but just not here, not in our backyard.
00:03:53
Speaker
And so I started to become aware of this idea of negative externalities when our choices around things like energy affect somebody else somewhere else. And fast forward many years, I have come to view food and waste and ultimately banking through that same lens. If you're not thinking about how your choices are affecting the other side of that equation,
00:04:22
Speaker
they're likely affecting someone else somewhere else in a negative way. And as long as that's out of sight, out of mind, that's where I think we get really negative outcomes from an economic perspective, from an ecological perspective, and even from a socio-political perspective.
00:04:40
Speaker
So I know that that that was a lot to like jump into all at once, but that's sort of the basis of what became um my first company that you mentioned called Walden Local was and continues to be a brand of pasture-based meat in the Northeast. We work with about 100 different partner farms across New York and New England to produce grass-fed beef, pasture-raised pork, chicken, lamb, etc. And that's largely a direct-to-consumer subscription company. So we own and operate a slaughter and processing plant and then a pick-pack cold storage facility, but ultimately distribute to tens of thousands of individual families on the other end.
00:05:19
Speaker
And it was in that same vein of if you can bring these two sides together and incorporate this idea of attachment to place into people's food choices, you can get really profound differences in the way people think about their food.
Banking's Influence on Social and Environmental Outcomes
00:05:35
Speaker
And at some point along the way, it became clear we were financing some large part of the growth of that supply chain. And that's a big part of where the idea for the bank came from because There seemed to be a gap in the existing lending infrastructure for these types of food and farm businesses.
00:05:53
Speaker
At the same time, banking is a place that to me really lacked compelling consumer brands generally speaking, but specifically lacked any brands that had much interesting to say about social environmental impact. And given the profound way in which banks are at the center of everything we do economically, there's a tremendous opportunity to use a bank for good.
00:06:22
Speaker
and use the model of banking to achieve social and environmental impacts in a way that increasingly a huge segment of the population has shown a desire to you know be associated with brands that represent those kinds of values across every other consumer category, from clothing to cleaning products to whatever. And so that that same opportunity seemed to be there from a banking perspective.
00:06:49
Speaker
and maybe even more importantly, pretty powerful from an impact perspective. And Charlie, you started out talking about negative externalities. So if you could give me some, maybe some stories or some examples of what does a negative externality look like in this space, whether that's banking or in the example that you gave earlier of the wind farming,
00:07:13
Speaker
So if that wind farm doesn't go through, what's the negative externality? Or if someone banks with one of the major banks in the country, what does that do compared to banking with Walden Mutual?
00:07:25
Speaker
Yeah, I think um I shouldn't say that because negative externality is sort of an economist's fancy word for bad stuff. um But the that the literal alternative to this proposed offshore wind farm, which ultimately didn't go through because of the well-funded opposition group behind it after a decade-long fight,
00:07:47
Speaker
is a coal plant in someone else's backyard or a nuclear gas plant in someone else's backyard. And I found that pretty hard to swallow. An example in the food world, I spent a lot of time in California's Central Valley. this is the agricultural center of the universe. It's the most productive place on the planet and produces huge portions of the country's nuts, fruits, vegetables, all kinds of specialty crops. And yet there are many communities in that valley that you can see those impacts sort of plain and clear in front of your face. You know, I remember walking through one of these towns that has an egg laying facility and
00:08:28
Speaker
You can walk down the sidewalk of the main street of this town without your eyes watering from the ammonia smell of this plant. And in a lot of other regions of the country, particularly New England, I just can't imagine that being tolerated for very long. And so it's a good example of the choices that someone makes here affecting someone over here in pretty unfortunate ways, but ways in which, you know, you're quite blind to if that food comes from far away.
00:09:01
Speaker
And it seems like a ah part of this is distancing, which is ah related to the negative externality. The fact that if the people in Central Valley of California were in a true sense responsible for making the choice of how their food system should be, they would take into account the fact that they can't walk down the street without it smiling back, because you know they would experience that externality, and so they can incorporate that into their choices. whereas when it's someone sitting maybe in New York that is driving the choices that are going to design what that food system looks like in the Central Valley of California, they don't see that externality. It's meaningless to them.
Historical and Modern Banking Transparency
00:09:43
Speaker
Totally. And by and large, banks are the ones that obscure that connection. And that's why I find banking to be such a powerful mechanism for social change.
00:09:58
Speaker
It used to be, you know a hundred years ago, a lot more transparent what was happening with your deposit dollars. People understood that the bank was serving small businesses in the surrounding community. And this is when I start to sound like it's a wonderful life, but that's an example of what I'm talking about. People understood if they tried to pull all their deposits at once, they were hurting their community because it was the surrounding businesses that were in turn supporting them and their families and their home mortgages and such that were all sort of supported by that system. When that is obscured by the size of an institution as big as the four largest banks in this country that are lending around the world, that makes those negative externalities a lot harder to see. There's a really interesting study done probably two years ago at this point
00:10:54
Speaker
suggesting that $125,000 in a bank account with one of the largest, the top four or top three deposit-taking institutions in this country was equivalent to the average American's carbon impact for an entire year. So if you think about that, and i I recognize that's a larger sum of money than most people have in their savings account, but that's sort of beside the point, it's simply to say,
00:11:19
Speaker
Those are dollars just sitting in a bank account doing nothing else relative to someone driving, flying, eating, all the impacts of your everyday life. And yet, because of the way those dollars are lent out on the other end,
00:11:34
Speaker
their carbon impact is much more significant than a lot of those everyday consumption decisions. And we don't get tattoos of our bank brands. We don't wear our our bank brand on our sleeve. So it is this out of sight, out of mind thing, but it's no surprise why that's the case. like Those top four institutions are also the single largest funders of fossil fuel development around the world.
00:11:58
Speaker
So that's your money. And again, one of the most impactful individual consumption decisions you make, and yet it's not at the top of the list of what a lot of people think about. You know, food you put in your body, clothes you wear on your body, and other people can see the brands, and banking is this sort of hidden thing that's you know deep in the bowels of your wallet and your back pocket. but To me, it's at the center of that that whole equation of sort of reconnecting those two those two pieces.
00:12:31
Speaker
Yeah, and to clarify for people, because often, again, banks are very amorphous. When you deposit money in a bank, people maybe just think that it sits there, but in actuality, it's been lended out. Or I would say probably and clarify me if I'm wrong, but traditionally, it was just lent out in various business loans. Today, it's probably a lot more complex than that, and it's a lot of very large loans to large corporations, probably also money market operations. I mean, it's a lot it's a much more complex situation, but not at small banks. Not at small banks, not at small banks. And that's ah that's an important distinction. So it's really interesting that you asked that question because I think people had a better understanding because of the dynamic I just described of what a bank was and what their money was, what was happening with their money when they put it in a savings account.
00:13:23
Speaker
And we've lost that potentially because of the size of the dominant banks in this country, potentially because, I don't know, life is more complicated now than it was 100 years ago. So there may be another other there are a number of other factors at play.
00:13:37
Speaker
But yes, now today, most people think I put my money in a savings account and it's probably in a safe or it's probably just sitting there. And in all cases, it's lent out to something else on the other side of the bank. That's foundationally, banks' role in the economy is creating credit for other consumers and businesses. So you're right, and in the largest institutions, because of a law called Glass-Steagall, which was repealed, investment banks and commercial banks and residential banks can all now be one and the same, and all that money is sort of in the same pot, so to speak. and so
00:14:21
Speaker
In a small bank, you're generally talking about banks lending to the surrounding business community and lending to home mortgages and things like that in a relatively constrained geographic area. At larger institutions, you've got a number of other business lines intersecting, and so that money could go in a variety of different places and be lent out around the world. Part of that is consolidation.
Mutual Banks vs. Deregulated Models
00:14:47
Speaker
so We're dipping a little bit into banking history here. So tell me how deep you want to go into this. but No, that's where we want it to go. So let's do it. So early 1900s, we had 15,000 banks in this country. Now we have right around 4,000.
00:15:04
Speaker
So there's been this 100-year consolidation of the banking system um that has favored larger institutions. We also, in the early part of the 20th century, 80% of deposits in this part of the country were held by mutual institutions, not stock-owned institutions. And the distinction there is that mutual is essentially a cooperative. The bank is ultimately owned by its depositors. So on one hand,
00:15:32
Speaker
Nobody really gets rich. And on the other hand, there are not the same incentives to take the insane types of risks that you see a lot of larger institutions take because of the governance structure of a mutual. It's very much akin to a credit union. So back then, banks were almost regulated like utilities, like electric utilities. So the government had in place both sticks and carrots in the sense that there were caps on interest rates, so banks couldn't charge more than X amount on a loan and couldn't pay out more than Y amount on deposits. And there were carrots in the form of tax breaks, so mutuals didn't have to pay income tax.
00:16:19
Speaker
And so you had this system that served depositors incredibly well, created credit in the surrounding community and had removed the incentives for the sort of investment bank style risk taking that we see today. And it was also illegal to have an investment bank and a normal commercial bank under the same roof. And that's no longer true.
00:16:40
Speaker
And in the 80s, we decided to remove initially the sticks and then eventually the carrots as well. The interstate bank restriction laws were were removed in the 80s, right?
00:16:53
Speaker
Yeah, that too. And so you got this continued consolidation and suddenly banking became a much more interesting business from a profit perspective. And that really fundamentally changed it and mutual banks really became a relic of the past.
00:17:13
Speaker
Nobody ever thought a new one would be formed when we were putting together plans to do this because it has sort of long fallen by the wayside as this legacy way of organizing that was sort of seen as archaic and outdated. But gosh, did it serve us well for so long? So when we were putting together plans for the bank, I discovered this organizational structure as a way of protecting the bank for the long term and sort of institutionalizing our commitment to the original mission of the bank from a governance perspective. so What's important about that is, and this is true maybe more outside of banking than inside, you see so many exciting companies start with this incredible
00:18:03
Speaker
mission orientation to them and deeply held beliefs about the social or environmental change that they were formed to go after. And their choice of structure you know for profit or nonprofit is sort of incidental. Oftentimes the founder will say, I did this as a for profit because I thought it was the best way to fund it or the way to achieve this impact in a scalable way or what have you.
00:18:29
Speaker
and these companies go on to have this amazing impact in the world. And then at some point, for a number of reasons we don't have to go too far down this road, but at some point an ownership transition is usually necessary. And it's usually big company buys small company. And I don't know of any cases, I've been looking, but I don't know of any cases in which the commitment to mission as a result of that purchase intensifies. But I know of a lot of examples where it slowly gets watered down and then many years later is ultimately a sort of shadow of its former self. Ben & Jerry's probably being the most often cited example. And so the mutual structure, going back to banking,
00:19:18
Speaker
is a way of removing that possibility of an ownership transition because it's a permanent structure. So we have long-term capital through this, and they're called special deposit shares. Those people have access to our profits in the form of dividends, but they don't benefit if the bank is sold. That's sort of the key. So there's sort of this intense commitment to building this place for the long term. And to me, that's an important element of the whole impact-oriented, mission-oriented company B Corp movement. is like That's the missing piece. as you You need a governance model that is going to back this stuff up for the long term.
00:20:03
Speaker
Otherwise, it can just be ephemeral because the business will ultimately need a new home and it's just always at the whim of whoever the new owner is. And so it's it's hard to instill those things for the long term in the sort of DNA and the governance model of a company. And so to me, the mutual was a perfect fit for that and just in need of a little polishing and revitalization in the modern era, but it was the perfect It felt very timely because there's a need for that but structure. So we went from the early 1900s when there was over 15,000 banks to today around 4,000 banks. So massive decline that came, it sounds like, in large part through deregulation, removal of interstate banking regulations in the 70s, which allowed
00:21:01
Speaker
banks to consolidate beyond their own state, from my understanding, and then the Glass-Steagall Act. And then also, since the 2008 crisis, a whole new set of regulations that were designed to be good, but that, from my understanding, have also made it very hard to start a bank.
00:21:19
Speaker
Well, they've further intensified the wave of consolidation. They've further deepened, I think, a policy maker and maybe the regulator's perspective too that generally bigger is safer. That's sort of the prevailing thought. And I think probably gotten us further away from this originally really well-functioning, boring area that was successful in really building the middle class throughout the 20th century. So we're only getting further away from that original structure that served us so well.
00:22:06
Speaker
So Charlie, can we go back to that idea of big banks being potentially more secure or being too big to fail? Sounds like you don't fully agree with that logic. Can you explain that a little bit?
Challenges of Large Banks and Character-Based Lending
00:22:19
Speaker
Well, the so the whole notion of too big to fail is that there are these globally systemically important banks that if they were to fail would risk a collapse of the entire financial system. This is the idea we emerged with after the global financial crisis.
00:22:35
Speaker
I don't think there's any debate that that's true. I think the debate might need to be around, well, are these really public or private entities at that point? Because like so many places, we've decided to privatize the profits while socializing the costs of those institutions. And so there's still something fundamentally broken there.
00:22:59
Speaker
It is a defensible idea to say that a more diversified institution is protected from risk in the sense that, hey, if something goes wrong over here, you've got this other pool over here. and But that's been taken to an extreme in the consolidation we've seen in the banking system as a whole.
00:23:18
Speaker
Another part of what happened over the last hundred years that contributed to some of the challenges we see today is the rise of the shareholder value paradigm and the primacy of shareholders amongst all the constituents of a business.
00:23:35
Speaker
We now sort of take that as gospel from economists that, of course, this is true. These are the ultimate owners of the business. The capital providers should be your primary constituency as a manager. That's a made up idea. That's a a societal construct that's no different than business casual clothing looks like this.
00:24:01
Speaker
It's not a God-given natural law. It's just an idea. And before the 1970s, nobody thought that way. We had managers that were administrators of a business that were trained by business schools that in the early part of the 20th century had the mandate of training those administrators to serve all of the interests of a business, specifically not the narrow interests of capital or labor alone. That's what a business originally was. And when we started to believe that the purpose of a corporation
00:24:45
Speaker
is to serve shareholders alone. That in concert with a lot of these changes in the 1980s to the banking regulatory regime created this idea that the purpose of banking is to serve shareholders. And that philosophy is really what contributed to the banking system we now have today, which looks very, very different than the one we had in 1950.
00:25:10
Speaker
Well, and I think that maybe is a little bit linked to this kind of idea that like profit is the perfect indicator of society. right That if by maximizing shareholder value, you are following the optimal societal outcome.
00:25:26
Speaker
Yeah, and for better or worse, it is also an important indicator of bank health. It is perceived to be an important indicator of bank health. And while that makes sense at some level of like, of course a bank needs to be profitable to be sustainable and have a business that can operate perpetually, when banks are compared to their peers and That's an important indicator for a bank's health is how profitable is it relative to peers. You do have this dynamic where it's not just about what's enough to sustain the business. It becomes what sort of maximizes value for this individual constituency.
00:26:04
Speaker
Yeah, so you used to have banks often community-based with the banker, maybe living in in the town, that would lend out to a diversified set of businesses. And obviously you had you know all the kind of typical underwriting data, but then on top of that, you had all this like kind of like relational knowledge. like you are As the person underwriting the loan, you're you you're in the community, you might even interact with the business, you kind of have an intimate knowledge of the market.
00:26:34
Speaker
And things were less automated, so that allowed you to be quite flexible in in your ability to underwrite businesses. Well, what it meant was there was actual character-based lending. So I know this person because there you know were two steps removed. I recognized the other business that they had previously run, or so-and-so.
00:26:57
Speaker
ah you know knows this person from Rotary Club or what have you. You just had those societal connections that were a little tighter that allowed you to do true character-based lending. and Interestingly, so we're we're trying to build a new variant of that because the modern alternative is this automated system that leaves a huge portion of the population out of the banking system entirely.
00:27:24
Speaker
so For most banks today, the shorthand for character, well, let me back up a second. any Any underwriting you're doing is generally based on the three C's, or some people have five, but there's really three fundamental ones. Collateral, cashflow, and character. So collateral is what assets are sitting behind the loan, so something goes bad.
00:27:47
Speaker
What does the lender have access to? Cashflow is, is this business sustainably producing enough income to pay back the loan? And character is, if things really get tough, is this person going to work with the bank to find the best possible outcome?
00:28:04
Speaker
are they a person of integrity? And the modern short hands for character are now a FICO score and a personal guarantee and a number of other ways to get deeper into a credit history from other third party data sources. And there's also a debit history of the way you've interacted with banks from a savings or or checking account perspective.
00:28:29
Speaker
Those short hands though are problematic when you have a lot of individuals that either have very limited interaction with the banking system previously, or they had a credit issue in the in the past, which no one wants to admit it, but a lot of times those aren't people's faults.
00:28:47
Speaker
They were subject to a number of other the number of things and were unlucky and now that haunts them for the rest of their lives. Many times a low credit score is someone's fault and they were totally delinquent and deliberate about it. So I don't mean to say no one should take responsibility, but there are certainly a great number of people that got caught up in something like that for no fault of their own. And they could be brilliant business operators.
00:29:14
Speaker
So we're just starting now this little pilot program we're calling Seedlings Loans to lend to small businesses in partnership with a local nonprofit here called the Hannah Grimes Center to essentially build an alternative character-based lending model where we have the nonprofit almost vouching for the individual to say, hey, this person has participated in our technical assistance programs. They've built forecasts. They've attended all the programming that we put in front of them. We validated their business model. And it's trying to find a way to replicate
00:29:57
Speaker
the lending model from a long, long time ago with a few more modern tools. So instead of relying on these technical short-hands that leave so many people out, you know we're relying on at first one, but we'd like to build a lot of other folks into this pilot, nonprofit organizations that are out there finding and helping these underserved entrepreneurs.
00:30:21
Speaker
So this is a little baby program that we're just barely getting off the ground, but that's another way in which we're sort of harkening back to the past for inspiration.
Walden Mutual's Regional Grain Ecosystem Support
00:30:31
Speaker
Yeah, so going into what what sort of businesses you guys work with at Walden Mutual, could you tell us a little bit, maybe give us a few examples of the kind of businesses that you you're able to underwrite and also what's your process? A great example is in grains. We have been really fortunate to start to develop a practice area there and we have a lovely person in business development named Chloe that was tasked with going out and
00:31:00
Speaker
trying to build the beginnings of a practice area and regional grains. And we have now made a loan across every stage of that value chain. And so you'll hear me use the word ecosystem a lot in what we're trying to create. And this is a good example of that. So we've made a loan to a grower of grains called Stonehouse Grain. They grow grain both for human consumption and animal. and We've made a loan to a producer of flour called farmer ground flour that uses local grains or all kinds of specialty flours. We've made a loan to a malt house that buys that grain and creates all different kinds of specialty blends of malts.
00:31:45
Speaker
but made a along to ah bakery also that uses farmer ground floer We've made a loan to a that uses the malt from the malt house. We've made a loan to a cracker producer that uses the spent grain from the brewery to produce crackers. So we've really got the entirety, we've got relationships at the entirety of that cycle.
00:32:11
Speaker
And it's been an interesting way of us being of service to those folks beyond the loan itself, being able to connect them to each other, other customers, other vendors, investors, advisors. And again, that's kind of what a bank used to be a long time ago, because there was nobody else. You didn't have this you didn't have the level of specialization that we have today, and the bank was sort of the go-to resource for all of these individual businesses. And so by virtue of focusing on this specific ecosystem, we aim to be helpful to our borrower partners in that way because we're sort of a connecting point between all the different pieces.
00:32:52
Speaker
And for those businesses, if Walden Mutual did not exist, what would have their options have been? Do they come to Walden Mutual because they can't get funding elsewhere? Or would the the funding be significantly more expensive elsewhere? Or are you bringing other points of value to the table where you're able to be more flexible or you're able to be more specific to their needs because small agricultural related businesses are your very focus. A couple different ways to think about that. So one of our impact metrics that we track is the percentage of loans where we're worth the only offer on the table.
00:33:35
Speaker
So that's a situation where there was no other offer for financing that this person was able to consider. And that's not always the case, but in a good portion of our loans. That is the case because you've got some unique things about these businesses. You've got perishable inventory. You've often got concentrated distribution relationships where a huge portion of the volume is going to individual distributors or customers.
00:34:01
Speaker
you've got supply chain risk, you've got commodity price exposure, you've got a health and safety regulatory regime that looks a little bit different for most businesses. So there's a lot of things that make these unique from a lending perspective. And the fact is there are really no remaining banks in this region of the country that have significant practice areas in AG. And like I said, in most other regions of the country, you have commercial banks that are really dedicated to to food and ag that compete with farm credit. And that's really not not the case here anymore. So another reason that we structured this as a bank and not just a fund or something else is, well, one, who needs another fund in the world? But two, the power of the banking business model is in the cost of capital.
00:34:56
Speaker
A bank is granted a license by the government that entitles them to the lowest possible cost of capital of any type of entity, including, kind of oddly, the government itself, because the government doesn't take deposits. And what that enables you to do is lower the cost of capital for any of the entities that you're lending to.
00:35:23
Speaker
And so in my view, if you're talking about fundamentally enabling the growth of this ecosystem and making it more sustainable, more vibrant, more inclusive, lowering the cost of capital for all of those participants has to be a part of that. So that's a very long way of saying we're generally the lowest cost, lowest risk part of the capital stack.
00:35:49
Speaker
Charlie, I'm interested, you had said that this was the first mutual to be approved in a very long time. And many people probably thought that never again would another mutual appear because the ah model seems to be very outdated.
00:36:06
Speaker
I'm curious, are are you seeing more entities, more people interested in starting up their own new mutuals around the country where you're able to provide a model to others to reinstate this kind of an old-fashioned business model that has a lot of application for our modern world?
Future Vision for Cyclical, Community-Focused Systems
00:36:25
Speaker
Yeah, I've definitely been heartened to see a lot of activity amongst mutuals and a lot of excitement around a new kid on the block. And there are a couple in various stages of formation. So we're being as helpful as we can to help get those folks off the ground and collaborate with other mutual institutions.
00:36:47
Speaker
one of the sort of core tenets in the cooperative world, like in the cooperative grocery world, is collaborating with other cooperatives and being committed to that whole. And while historically that hasn't been part of the stated purpose of mutuals,
00:37:07
Speaker
there is that very same collaborative spirit. you know I'm from outside the banking industry, and so coming into it was not surprised to see a lot of things that wouldn't surprise you about the banking industry, like technology is generally slow to come to the industry. And there's some cultural practices in the industry that seem a little arcane at times. But I was surprised to see there's this open acknowledgement that we're all just a few Davids against, a lot of Davids rather, against a couple of Goliaths. So we're not really competing with each other. We're collaborating to bring change as a whole in the banking system. and so
00:37:51
Speaker
That's been really positive and there's a lot of amazing mutual bank leaders out there that continue to be excited about the next phase of ah mutualism in banking. and I think ultimately, i mean I think it's also up to the consumers to make the choice because you know you can choose to bank with Chase or you can choose to bank with world in mutual and that has an impact and hopefully more and more people recognize that and make the right choice. So just maybe to wrap us up real quick, what would you know the more beautiful world you want to see look like? And especially maybe from a banking perspective.
00:38:32
Speaker
So I think the positive future we're going for is based around the simple idea that at some point in the technology revolution of the past couple of decades, we've become entrenched of this idea of inputs and outputs when it comes to natural resources. And that is not really how natural systems work. Natural systems are cycles.
00:38:58
Speaker
And the return to a community banking model of the past and a return to at least some elements of a ah local food system that prioritizes resiliency alongside of efficiency, prioritizes nutrition alongside of yield, is one in which Those interactions are a cycle and the money is returned and re-spent in the community over and over again, not one in which we perceive it to be a system of inputs and outputs. That's the broken link that is missing and the sort of philosophical change we're trying to make in the world.
00:39:45
Speaker
Well, Charlie, thank you very much for your time. I know we went over time, but thank you very much for being able to sit down and have this conversation with us and share about your vision, about the work that you've done. Thank you very much for pioneering this space, maybe re pioneering this space and showing the value in and reinvigorating some of these older financial institutions for the modern world and for a more beautiful future that we want to create.
00:40:13
Speaker
I really appreciate it. It was fun to chat with you both and happy to do it again soon.
00:40:23
Speaker
Agrarian Futures is produced by Alexander Miller, who also wrote our theme song. If you enjoyed this episode, please like subscribe and leave us a comment on your podcast app of choice. As a new podcast, it's crucial for helping us reach more people. You can visit agrarianfuturespod dot.com to join our email list for a heads up on upcoming episodes and bonus content.