Most Important Conversion Question Overlooked
There are so many individuals and groups getting involved in the saga of two billion dollar credit unions in Texas trying to become banks that it is difficult to tell the players without a program. Front and center is Gary Base, CEO of $1.4 billion Community Credit Union in Plano. Playing second fiddle to Base is OmniAmerican Credit Union, a $1.1 billion shop in nearby Fort Worth that has chosen to take a much lower key approach. It is Base and crew that are leading the charge by adamantly insisting their member balloting is legal, by hiring high-powered law firms, by trekking off to the Halls of Congress to play lobbyist, and by getting his state credit union regulator as well as federal banking industry regulators to speak up for them. Meanwhile the battlefield is getting more crowded. On one side is a group, with coalition in its name, that issues a flood of inflammatory press releases big on accusations, but woefully lacking in facts. On the other is another group, that also has coalition in its name, that makes silly demands (liquidation?) of NCUA. Two coalitions fighting each other is pretty confusing. When the national, state, and special interest credit union groups and their banking counterparts weighed in with their usual "he said, she said" finger pointing, it got more confusing. As it did when a CURIA hearing was deliberately turned into a conversion hearing. And as credit unions in Texas continue to debate what their league is or isn't doing. Add to the mix fund raising campaigns on both sides. And promotional "bribes." And threats and counter threats. And a credit union CEO from the nation's second largest credit union who has undertaken a one-man campaign to halt such "thefts of credit union members' money" with personal appearances in Texas, engaging in conference debates, sending out a flood of postcards, etc. And a politician from this CEO's own state of North Carolina who came within an eyelash of publicly using the "F" word to chastise NCUA. Then there are the studies claiming that credit unions save members millions of dollars and that the credit union brand is stronger, and that converting to a bank may actually weaken the former credit union's marketing position and image. And of course all the consultants and lawyers who make out financially when they make conversions happen are also in play. Much has been lost among the escalating hubbub. For example, both credit unions were well aware that in order to jump ship they would need to comply with very specific disclosure requirements laid down by NCUA. Both credit unions reached an agreement with NCUA on exactly how they would disclose to members their desire to convert from a credit union to a bank charter. Only one problem. Neither credit union followed the letter of the law exactly. Close but no cigar. So NCUA said to the two credit unions, sorry but even though you are well along in the time consuming and very costly (possibly a million dollars of members' money) conversion process, however the vote turns out, for or against, matters not at all because you violated NCUA mandated disclosure procedures. To which you agreed by the way. NCUA was immediately accused of using a mere technicality of "how a piece of paper was folded" to enforce its alleged bias against credit unions joining the banking industry. Those in favor of credit union conversions yelled foul. Those against folded their arms smugly and said the law is the law. Live with it! Ironically the pro-conversion forces used as the basis of their argument that credit unions are owned by members who have the right to convert to a bank if they so choose. Anti-conversion advocates responded by saying that credit unions are owned by members who have the right to convert to a bank if they so choose. So where's the argument? Both sides agree that it comes down to member choice. The problem really boils down to the fact that Community Credit Union apparently thought it could get away with telling its members why a conversion, at least in the opinion of the CEO and board, was going to be a godsend for them. But they did so before first presenting them with the required NCUA disclosures. In other words, Community wanted its members to read one message before another. Unfortunately that is not what they agreed to do and that did not meet NCUA disclosure requirements. All the arguments about how a piece of paper is folded are irrelevant. Fact is, it was done wrong. Community could have double checked with NCUA before the printing and mailing and saved a lot of headaches. But they apparently thought they could slip one by NCUA. It didn't work. Now NCUA is positioned as the villain when in fact the real bad guy(s) is whoever at Community CU decided to push ahead knowing they were not fully in compliance. One guess who made that unfortunate decision. What many seem to be overlooking is the one question that very nicely frames the entire argument: What is best for the members who own the credit union? Apparently the answer to that question is not important to some players, at least looking back on the less than two-dozen conversions and conversion attempts over the past 10 years. None of the former credit unions have benefited the former members, but they sure have been a boom to the original instigators, the CEO, management staff, and boards. These insiders have done very well financially, even when the former credit unions floundered as several have. Some involved CU CEOs ended up managing banks that grew hardly at all and getting a pink slip, but took a bag of money out the door with them nevertheless. Finally, the most important question of all: Can anyone show what members who became customers got out of all these conversion wheeling and dealings? One thing? Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail firstname.lastname@example.org.