GAC Focuses on Whether and How CUs Should Respond to Economic Slump
WASHINGTON -- CUNA's Governmental Affairs Conference displayed its usual elements this year. Politics, legislation and Hill visits played a part, as did a customary defense of credit unions from banker attacks and a measure of pageantry at the opening general session.
But like an unfamiliar and unwelcome guest, sometimes explicitly and sometimes only beneath the surface, the issue of whether and how credit union will be able to or allowed to respond to the steadily darkening economic situation in the U.S. kept worming its way into different parts of the four-day event.
It popped up in the conference's general session on March 4, in the speeches of CUNA CEO Dan Mica and other leaders, and carried over as a theme in some of the breakouts as well. CU leaders and regulators both sought to encourage credit unions to reach out to their members who may be suffering the effects of the credit squeeze and carried on discussions on how best to do that.
Mica told the record-breaking 4,700 attendees that history has shown credit unions prosper even in a bad economy and now is not the time to begin to withdraw from the market.
"History has shown us that in economic trouble and uncertainty, credit unions grow," Mica told the attendees at the general session. "People look for safety, compassion, sanity and someone they can trust at times like these. Don't circle the wagons. Work with people. Make loans with logic, care, and sound underwriting but make loans," he said. "Reach out to folks with toxic loans. You may not be able to help all, but the ones credit unions help will be members for life."
But, of course, Mica's comments followed a more familiar message of disdain for the continuing attacks from bankers. Urging attendees to remember the days after the 9/11 terrorist attacks, Mica recalled how bankers at the time put a higher priority on attacking credit unions than fighting terrorism. In a similar way, he said, bankers have put fighting credit unions as a higher agenda item than getting past the current economic situation.
"Now, in 2008, the biggest financial services story in the world, not just the U.S. but the world, is the subprime crisis and the resulting economic downturn," Mica said. "But the bankers latest new list of legislative priorities still puts dealing with credit unions above dealing with subprime problem. I submit that is true zealotry on the part of the bankers and not appropriate public policy," Mica added.
Mica used his remarks on public policy to highlight the most recent move to get at least a few parts of credit unions' regulatory reform agenda passed. In particular Mica discussed the latest bill, the Credit Union Regulatory Relief Act (H.R. 5519), which has been introduced by Representatives Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), and Barney Frank (D-Mass.) and which have some have dubbed the son of CURIA.
The new bill includes many of the regulatory relief items of CURIA but not all of the enhancements, such as risk-based capital and more expansive business lending provisions. It does include a tweaked version of the provision to allow all federal credit unions to adopt underserved areas and would allow payday loans to all potential members, according to one credit union lobbyist.
Mica praised the new bill as the measure that CUNA and the legislators believed they could pass this year. He urged the attendees to support the new measure and CURIA as well, arguing that CURIA's provisions remain a priority even as the new bill might have a better chance of making it into law this year.
"When you go to the Hill tomorrow we want you to take this message to your legislators that both measures are important and that we want their support on both measures," Mica said "And since those folks are taking heat from the bankers for backing our bills, be sure to show them lots of appreciation when they come and speak to you tomorrow."
NCUA Board Vice Chairman Rodney Hood followed on Mica's theme, urging credit unions to help more people during the current economic crisis, which he noted is receiving steadily increasing attention.
But Hood also used the crisis as the basis for an argument against credit unions being covered by the Community Reinvestment Act, making the case that the current economic conditions show CUs are helping their members not because they have to do so but because it's the right thing to do.
Hood told the attendees about a case of a single mother in North Carolina who had been made a toxic mortgage but had been able to make the payments until the rates reset and she was in danger of losing her home. She turned to her credit union for help in moving into a better mortgage, Hood said, an example of a CU doing something "not because there was some punitive rule that said they had to, but because it was the right thing to do."
Hood noted as well that the organization that had made the bad mortgage had a CRA obligation, indicating that merely having CRA was not enough to ensure that a financial institution does the right thing -- something CUs do because that is the sort of institutions they are, he said.
NCUA Board Member Gigi Hyland also urged credit unions to help members in the downturn but also used her remarks to urge attendees to review the report of the Outreach Task Force she chaired and share their comments with NCUA.
Hyland reviewed the process that led to the report and received applause when she recounted the message from CUs not to increase regulatory burdens and how to better tie together the agency's policy and practice, particularly when it comes to credit unions reaching out to underserved communities.
She discussed the Task Force suggestion that NCUA would be able to gain more knowledge from data it already collects and perhaps collect more in a minimally disruptive way. On her final note she reminded the leaders that the NCUA Board would still have to consider and debate the recommendations and there is a lot of room for CUs to let the NCUA know what they think.
"Read the report," Hyland said. "Yes, I know its long. But read it and share it with management and board, think about the impact the recommendations might have and let the NCUA Board know what you think. I know you are not shy."
Hyland's comments about the Outreach Task Force echoed some of the remarks from Tom Dorety, CEO of the $5.9 billion Suncoast Schools Federal Credit Union and incoming CUNA chairman.
In his remarks after formally accepting the chairmanship, Dorety cited the examples of this year's winners of the National Credit Union Foundation's Herb Wegner Memorial Awards as credit union leaders who have proved there is no conflict between the reaching out to people in need and the routine work of credit unions.
"We clearly have gotten the message in the last few years," Dorety said, "but if we move a little quicker and more concerted effort, this will become a non-issue for our regulator and our legislators, and we will prove we do a much better job than banks do in serving working class Americans."