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From the October-01, 2008 issue of Credit Union Times Magazine • Subscribe!
CEOs Advocate CUNA-NAFCU Merger; Threaten to Drop Membership in One
WASHINGTON -- Six CEOs of large credit unions are advocating that their credit unions would be better served if CUNA and NAFCU merged.<p>Saying that the credit union movement would be better represented with one voice, these CEOs, three of whom run credit unions with assets of more than $1 billion, are urging the boards of those associations to begin merger talks.</p><p>"We now believe that the old system of two lobbying organizations no longer works in the best interest of our credit unions. It seems to us that the oppositional stands of each organization to the other is counterproductive and has likely led to instances where decisions are made in order to give one organization a leg up in the battle for credit union support, rather than a logical decision that is in the best interest of credit unions," the CEOs wrote to the boards of CUNA and NAFCU in May.</p><p>Representatives of the group met with the boards of both organizations at their annual meetings this summer.</p><p>All of the CEOs run credit unions that are members of both trade associations.</p><p>In the CEOs' letter to CUNA and NAFCU, which was accompanied by a white paper spelling out their arguments, they said, "if a merger conversation cannot be successfully completed, our credit unions may be forced to withdraw from one of the trade organizations."</p><p>CUNA Chairman Tom Dorety, CEO of Suncoast Schools Federal Credit Union, indicated that CUNA was open to such talks, but NAFCU Chairman Brad Beal, CEO of Nevada Federal Credit Union, said NAFCU was not.</p><p>The letter was signed by John Bommarito, CEO of Western Federal Credit Union ($1.4 billion in assets) in Hawthorne, Calif.; Mary Cunningham, president/CEO of USA Federal Credit Union ($697 million in assets) in San Diego; Gordon Dames, president/CEO of Mountain America Federal Credit Union ($2.7 billion in assets) in West Jordan, Utah; Teresa Freeborn, president/CEO of Xceed Financial Credit Union ($770 million) in El Segundo, Calif.; Nader Moghaddam, president/CEO Financial Partners Credit Union ($658 million in assets) in Downey, Calif.; and Kirk Kordeleski, president/CEO of Bethpage Federal Credit Union ($2.3 billion in assets) in Bethpage, N.Y.</p><p>Kordeleski, the group's spokesman, said in an interview that credit unions could get more of what they want from Congress in key areas like regulatory relief if lawmakers only heard from one credit union group.</p><p>"When we don't speak with one voice, we don't get as much of what we want. The two groups sometimes fight each other, rather than fight the bankers. When lawmakers hear competing voices, their tendency is to do the minimum or nothing at all."</p><p>Kordeleski said his group of six CEOs had received support and encouragement from "a range of credit union CEOs" including many in the aerospace field.</p><p>He noted that on the vast majority of issues affecting credit unions, CUNA and NAFCU are in agreement. According to Kordeleski, the only big issue on which the two groups disagree is share insurance, which NAFCU thinks should only be run by the NCUA and CUNA favors allowing states to decide whether there can be private insurance. On the smaller issues where there are disagreements, the fighting between the two groups diminishes their effectiveness.</p><p>Dorety said, "We agree conceptually with what they said and we believe we should sit down and discuss it with NAFCU."</p><p>Beal, said his group's "core values involve direct membership, commitment to a federal charter and a commitment to an independent trade association, and we couldn't reconcile these values with a merger."</p><p>He also said that when the board sent an e-mail notification to its members about its decision to reject merger talks, "more than 90% of the 30-40 responses we received strongly supported what we did."</p><p>Beal said NAFCU's board is willing to "meet more often" with its CUNA counterpart to better coordinate their lobbying efforts. He also expressed an interest in reviving the joint coordinating council, made up of board members from both groups, which was established during the campaign for consumer choice.</p><p>Dorety said CUNA's board is not opposed to planning strategy with NAFCU when beneficial but "there has been very little value in the coordinating council." </p><p>Kordeleski said his group plans to write another letter to the boards of CUNA and NAFCU requesting another meeting to discuss these issues. If nothing comes of that "the next step will be encouraging CEOs about the future.... If no one will listen, you have to vote with your dollars."</p><p>Kordeleski said a merger would also represent a cost savings for credit unions such as his, which now feel the need to join both trade associations. He said his credit union pays about $120,000 annually to the Credit Union Association of New York and CUNA and between $40,000 and $45,000 to NAFCU.</p><p> Cunningham added, "As more of our system consolidates, it makes less sense to have separate lobbying organizations for such a small movement. We are always looking for cost savings but the only area where we don't look to make changes in economies of scale is the two trade associations.''</p><p> </p><p>The idea of merging the groups is not a new one. When CUNA President/CEO Dan Mica came to the organization in 1996 he expressed an interest in combining the groups, but NAFCU has long been opposed to the idea.</p><p>Kordeleski also pointed out that two of the banking industry trade groups--the American Bankers Association and America's Community Bankers--merged last year and gave that industry a more unified voice. The Independent Community Bankers of America remains intact.</p><p>CUNA, which is headquartered in Washington, but houses the bulk of its employees in Madison, Wis., has 273 employees and an annual budget of $56 million. It was founded in 1934.</p><p>NAFCU, headquartered in Arlington, Va., has 65 employees and an annual budget of $11.5 million. It was founded in 1967.</p><p>In addition to the logistical questions of merging personnel and deciding which employees from each group would work for the new entity, the boards would have to find a way to reconcile the boards' disparate approaches to membership. Credit unions join CUNA through their state leagues while credit unions join NAFCU directly.</p><p>Kordeleski said CUNA's presence in every state through the leagues is one of its greatest strengths because it gives the credit union movement political clout in every state. He noted that when he met with CUNA's board, some of the league representatives expressed concern about a merger diminishing the strength of the leagues.</p><p>He also said that NAFCU's direct membership structure is appealing as well, especially to credit unions that want to bypass state leagues and only join a national organization.</p><p>--firstname.lastname@example.org</p>
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