Credit Union Times: What have been the high and low points of the past year?
Fred Becker: The subprime crisis. It's dominated everything and has continued to unravel. When I spoke to you in June, it was front and center and still is. It is unraveling beyond anyone's expectation. So our posture has been, like in the movie "Caddyshack," what's the next gopher that's behind the tree?
At the same, this continues to be a time of opportunity for credit unions. They are being impacted but not as much as everyone else and with a crisis comes opportunity. If you look at the NCUA data, you will see that, in terms of asset growth, it's the highest for credit unions since 2004. A few years ago, the same measurements showed smaller growth. But we are not without challenges, including in the area of capital. Delinquencies, charge-offs and bankruptcies are up, though not as much as at most banks. For NAFCU, we are getting good support from our members. We had a 96% retention rate, compared with an 84% average for trade associations. Also, we are getting revenue because of the economic crisis, we are selling lots of inserts about share insurance that credit unions can mail to members.
CU Times: What other difficulties are there?
Becker: Helping credit unions get more capital so they can do more to stimulate the economy.
CU Times: Is there a risk as credit unions ask for the ability to lend more money that they will blur the distinction between banks and credit unions?
Becker: A study by the Treasury Department during the Clinton administration showed that MBLs that credit unions make do not threaten banks because they have distinct markets.
CU Times: Are you concerned that Congress might try to repeal credit unions' tax-exempt status?
Becker: We are always watching out for that, but I don't think it will happen.
CU Times: What are your concerns about what the next Congress will do?
Becker: It could change the rules on interchange fees and limit our members' flexibility to take the steps need on credit cards and overdraft to manage their risks.
CU Times: What about on regulation?
Becker: There will be a temptation to put some of the financial institutions together under the same regulatory agency, but since credit unions didn't cause it, we want to be sure they are not swept in by the groundswell. We have a good chance of avoiding that because everyone recognizes that credit unions didn't cause the current crisis and neither did the community banks. The big banks were doing the CRA [Community Reinvestment Act] in reverse
CU Times: What do you think of the Obama economic team?
Becker: They are impressive and understand how the economy works and understand complicated subjects and know how to evaluate things from all sides. And [former Federal Reserve Chairman] Paul Volker, an outside adviser, has worked with credit unions.
CU Times: What would you like to see done to repair the economy both in the short and long term?
Becker: In the short term, it looks like Congress will pass a stimulus. In the long term, we need to deal with entitlements so we can cope with the retirement of baby boomers so we can solve the economic problems and continue the pattern of each generation having a better life than the last one.
CU Times: What do you fear most in the year ahead from a policy perspective?
Becker: Being lumped in with the bad actors. The FDIC has floated a plan to have community banks help finance the bailout of some of the bigger banks we don't want to be lumped in with the same regulator and have to rescue the big banks. I don't want us to bail out the banks for their misdeeds and those misdeeds are not going away.
CU Times: What about the interest by some to expand CRA to credit unions?
Becker: I know [House Financial Services Committee] Chairman [Barney] Frank is interested in looking at that, but they are already the most heavily regulated financial institutions. Also, CRA was designed to punish banks for redlining, and nobody is saying credit unions are doing that. Given all the other items that need to be dealt with, I suspect that will be dealt with down the road. We need to remind those on the Hill and in the new administration that our regulatory burden is already bigger than any other financial institution. And our small credit unions have the same regulatory requirements as the bigger ones. The NCUA does what it can to relieve the regulatory burden on credit unions but it has to comply with the law.
CU Times: How would you assess the NCUA's responsiveness to your concerns about regulation?
Becker: They have been responsiveness in some areas and not as much on others. We were pleased that they listened to some of our suggestions about the budget and cut some of the expenses and made changes on the examinations.
CU Times: How will next year compare to this year?
Becker: Last year, Congress fully intended to hold hearings on CURIA [the Credit Union Regulatory Improvements Act], but the world changed in August during recess. The subprime mess took off. When they came back from the recess Chairman Frank held a hearing within two days on the causes of the subprime mess, and they have stayed focused on it ever since. You can't expect them to go off of that focus because the country expects them to do something.
This year when they finally got around to doing our bill, they pulled it because they didn't want to put [House] members in a box and make them choose between either banks or credit unions before the election. So they combined them and the bill passed the House by voice vote.
As for next year, we will try hard to get changes in the rules on capital. Everyone understands that credit unions ought to have risk-based capital. There were 133 co-sponsors of CURIA reelected, so we will look for an opportunity going forward.