CUNA-NAFCU Merger Talk Needs to Confront Reality
Let's not even try to fool ourselves. In discussions and the recent white paper on merging the two national trade associations, the 800-pound gorilla in the room has been blatantly avoided: This is really all about CUNA acquiring NAFCU.
NAFCU only has about 800 members from the total number of federal credit unions, just over 5,000 at year-end 2007. However, what NAFCU lacks in numbers, it makes up for in dollars, boasting on its Web site (www.nafcu.org) that its membership captures 80% of the top 100 credit unions.
Many of NAFCU's member CUs have a strong affinity for the group, including two of the largest credit unions in the world: Navy Federal and Pentagon FCU, which are not members of CUNA.
NAFCU is dead set against the proposal for obvious reasons, primary among them I believe is sense of purpose. The trade association was founded to establish and defend the NCUSIF, which it has done vigorously. A primary difference between CUNA and NAFCU is their stances on private primary deposit insurance. NAFCU sees it as a threat to federal insurance if a private insurer failed because depositors would not differentiate between the two. I think the current consumer outcry of "how safe is my money" in the wake of the failures or mergers of so many large banks bears that scenario out. Many depositors don't even know what's insured or how much or understand how it works, which is a whole other issue.
Not that CUNA does not support federal insurance, but it also supports states' rights to choose whether private primary deposit insurance is appropriate or not. Philosophically, I don't think this is an area that can be worked out. Even if federal and state charter committees were used to get all the points of view out on the table, there is no compromise here. Either you want private primary deposit insurance or you do not.
In the larger picture, NAFCU generally favors federal preemption of state laws and regulations, which could get sticky in any merger, particularly when CUNA is made up of state leagues with their individual agendas. For example, NAFCU joined the bankers to fight a California credit card law that would have required credit unions, regardless of charter, operating in the state to provide debtors with information on their statements regarding how long it will take to pay the balance off as well as a call center during certain West Coast hours. Federal preemption won the day in that scenario as it should have.
The debate over the overhead transfer rate reached a cacophony a few years back with NAFCU arguing the federals were paying more than their fair share, NASCUS saying the states shouldn't be funding noninsurance related work by the agency, and CUNA sitting on the fence, only stating that the formula should be fair. As a result, the NCUA is much more open about its OTR process, though still has not defined what is and is not insurance-related work, and the debate has subsided. Imagine the result if NAFCU had not been at the table.
However, after all this discussion of philosophy, there are realities to face. With the economy in its current state and credit unions merging away, both trades are competing within a smaller pool with fewer funds. And, of course, it is budget time right now and dues are a decent-sized chunk of every credit union's budget, so they're questioning whether they can do without.
All the CUs on this committee headed up by Kirk Kordeleski are large, so it's not likely they can't afford it. However, he makes a point that CUNA and NAFCU sometimes work at cross purposes on the same issue. I've never seen such personality clashes between the two groups as I have in the last 18 months to two years--and yes, there are personality conflicts, expanding egos and constant efforts to outdo each other and quickly take credit for some small detail that was different from the other group's stance. A healthy competitive spirit between the two groups went on life support a long time ago.
CUNA is certainly a much more comprehensive organization from its educational programs, its public relations and lobbying machines to compliance services and the state league system. NAFCU also has some strong points in these areas. NAFCU also has a direct membership structure, whereas credit unions have to join their state leagues to join CUNA. NAFCU specifically focuses on federal issues, which the federals find appealing.
Philosophically, I think the merger is a bad idea. What I don't understand about the white paper is that the authors say there is no good reason to support two groups. OK, so don't. Leave one or the other. Let supply and demand run its course. If credit unions truly don't see a value in two groups, we'll certainly find out as the credit unions vote with their feet.
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