Markets, Economics and CUs: Dwight Johnston Reminisces on 48 Years

Dwight Johnston, longtime credit union and financial markets veteran and former chief economist for the California and Nevada Credit Union Leagues, retired in late March after nearly five decades of working in the financial markets, bond management, and credit unions.
Dwight Johnston, longtime credit union and financial markets veteran and former chief economist for the California and Nevada Credit Union Leagues, retired in late March after nearly five decades of working in the financial markets, bond management, and credit unions.

As Dwight Johnston retired in late March, many bid him farewell with an admiration for his service to credit unions and an abundance of memories. The former chief economist for the California and Nevada Credit Union Leagues had spun his magic and mix into “DJ’s Economixsince 2012 while also capping off a 48-year career in financial services.

I just want credit union professionals who have followed me all these years to know how much I am honored you did so,” Johnston said. “There are so many memorable moments, including memorable financial market events, that I couldn’t possibly cover them all. Having the opportunity to work with ‘Mr. J’ (Richard Myles Johnson) and Diana Dykstra will especially be something I remember and am grateful for.”

Fresh out of the University of Texas at Austin in 1971, Johnston began his journey in the world of financial markets when Arthur Burns held what some describe as the second-most powerful position in the country—chair of the Federal Reserve (next to the first, President Richard Nixon). The central bank’s “federal funds” benchmark interest rate was at the tail-end of several cuts as the economy began pushing out of a mild recession. Johnston’s career would eventually lead him through the political climate and economic ups and downs, and reactions, of six Fed chair leaders.

It was in this environment that he started working his way into trading bonds, managing portfolios, and eventually leading entire “trading desks” and departments at banks and brokerage firms.

Then came WesCorp, formally known as Western Corporate Federal Credit Union. In 1998, as the San Dimas, CA-based corporate credit union continued growing and adding member credit unions, Johnston took an opportunity to manage a portion of the institution’s expanding portfolio. In time he was instrumental in helping found an investment brokerage CUSO (credit union service organization) at WesCorp that bought, sold and managed bonds, essentially putting credit unions’ surplus funds to good use as they managed loans and deposits.

Johnston’s speaking, writing and economic perspective came adjunctto other duties throughout most of his career. At WesCorp, it took on a larger role and proved to be something members really wanted and valued,” Johnston said. “Then it was my full-time job from then on.”

League staff and credit union professionals have expressed what an honor it’s been to work with Johnston as he offered a unique viewpoint and style on the economy and financial markets through commentaries, webcasts, special presentations, and lively discussions for senior management, boards of directors, and industry conferences. He can’t count how many interviews he’s had with industry journalists and financial reporters from across California and the nation, but his last one with CU Weekly was special:

  • What will you miss the most—and the least?
    Believe it or not, the thing I’ll miss most is that credit union people are just so darn nice. That might sound silly or simple, but it’s true and it makes a big difference. I came from a banking and brokerage background. While I worked with some terrific people, there were people, especially in the upper echelons, who simply weren’t good people and worked only to elevate themselves. There are probably some of those in credit unions, but I haven’t met one yet. 
  • What are some of your most memorable moments working with credit unions?
    At the top of the list are the times I have had members come up to me and thank me for helping them in surprising ways. Most of those comments came from people who were contemplating doing something personally for their credit union that would have had disastrous consequences. I could cite some examples, but let me leave it at that.
  • How has discussion among the national “experts” and credit union leaders on the economy and financial markets changed over the years?
    This really hasn’t changed much. There are just a lot more supposed “experts.” You have to sort out the good ones from the bad. In credit unions, it’s still the same too. There are some boards that are highly engaged and some that are not really engaged at all, especially when it comes to big-picture topics. Fortunately, most boards are engaged, and I’ve seen CEOs with less-engaged boards trying really hard to change things. But change is hard for some.
  • How have the economy and financial markets changed since you started in credit unions?
    The economy isn’t really different. It’s still cyclical in nature. Financial markets are different in that so much trading in stocks, and now bonds, is driven by fast-money algorithm program trades. This makes it much more difficult to discern what investors are really doing and thinking versus discerning based on the mind of an MIT math genius with mad programming skills.
  • What are credit union leaders worried about these days?
    Big differences. Some credit unions, especially smaller ones that rely on investments, are simply worried about interest rates going lower. Others—often larger credit unions with mortgage-backed securities—are worried about rates going up, extending maturities and hurting market values. Mostly, credit unions are worried about what the NCUA might ding them for on interest rate risk. In other words, credit unions are always worried about something.
  • What is the credit union industry’s greatest challenge versus its greatest opportunity?
    Credit unions will always be challenged by changing economic and interest rate conditions. That is a constant that has not, and will not, change. The challenge for credit unions will be to continue to evolve to stay relevant, and to raise awareness of what credit unions are all about. That’s been a problem for credit unions, and I haven’t seen a great deal of progress since I joined.
  • What are some parting thoughts for upcoming leaders, senior management, and credit union boards?
    I don’t have any great words of wisdom they haven’t heard. Just continue to do the right thing by your members and resist the urge to simply chase “new” ideas and profit avenues that don’t really benefit members. When it comes to markets and interest rates, make sure you read things from a few trusted sources and keep an open mind. Don’t find a person you like and read only that one source. Of course, if I was still around I would encourage you to listen only to me! If you think one way about where interest rates are headed, make sure you examine conflicting opinions. In other words, keep an open mind to different scenarios, and plan for outcome A, B or C. If you only have Plan A, that’s almost a guarantee that B or C will occur.
  • How is retirement looking?
    I’ll continue to follow the financial markets but will only follow politics when I absolutely have to. I’ll have some fun trading my own account at times, but I will certainly not be as wired-in and connected to the markets. It’s time to disconnect. Travel will be the key focus in retirement. My wife and I might even live part of each year overseas. But mostly, I just want to stay healthy to enjoy everything. Trite as it sounds, family is first. Work and the markets have consumed most of my interests. I plan to shift that to other fun stuff I haven’t even thought of.
  • Any final thoughts?
    Coming into credit union land after almost 30 years with banks and brokerage firms was a rude awakening. I knew nothing about credit unions. From the beginning I was astounded that WesCorp would frequently do things for members that benefitted members but made WesCorp no money. What a strange concept! I subsequently learned that this was the credit union way. At banks and brokerages, although most tried to do the right thing, profit was always the deciding factor. It took me a long time to get used to how credit unions are fundamentally different.

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