Mica to Senate: Keep the NCUA Separate and Eliminate MBL Cap
He said during testimony before the Senate Banking Committee last Tuesday that while NCUA does things with which he takes issue, it "understands the nuances" of credit unions better than a larger regulator would.
In a written statement submitted to the committee, NAFCU Senior Vice President Dan Berger also stressed the positive results of keeping the NCUA separate.
"The regulatory structure consisting of an independent regulator in the form of the National Credit Union Association along with an independent insurance fund has served the credit union community well over the last several decades," he wrote.
Credit unions received little attention at the session, one of a series of hearings the panel is holding to lay the groundwork for an overhaul of the way financial services are regulated. Much of the focus was on the testimony of representatives of the banks, community banks and consumers.
Much of the discussion focused on the creation of a systemic risk regulator-a super regulator that would set broad regulatory policy and seek to avoid some of problems that caused the economic collapse.
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said one possibility might be to have several agencies-the Fed, the FDIC and the Office of Comptroller of the Currency operate as a council to set broad regulatory policy.
Most senators and witnesses said they opposed making the Fed the sole regulator because of conflicts with its role setting monetary policy and because some question its independence.
Mica said such a regulator shouldn't oversee credit unions because the credit unions have "shunned undue risk."
He said the NCUA's decision to place U.S. Central Corporate Federal Credit Union and Western Corporate Federal Credit Union into conservatorship shouldn't cause an increase in regulation of credit unions because those were isolated incidents.
Mica explained that those corporates got into trouble because the recession and market volatility caused the value of securities that they held to drop. He noted that many of those securities had been rated AAA or AA before the economic collapse.
Dodd also said they would include new rules overseeing ratings agencies when they revamp the regulatory system.
Christopher Whalen, who runs a risk analysis firm, told the panel that it is difficult for him to evaluate many credit unions because the data collection at the NCUA is slow and many updates are not available in real-time.
Mica conceded that the NCUA's system "could be better."
The agency recently approved a revamped data-collection system that will begin in the third quarter for federally insured, natural person credit unions to submit reports and information through a Web-based system. Corporate credit unions will be able to use the system starting in 2010.
Mica also used the hearing to reiterate his case for lifting the 12.25% of assets cap on credit union member business loans.
"We can put $10 billion on Main Street in small business loans," Mica said in response to a question from Sen. Charles Schumer (D-N.Y.), who has said he plans to introduce legislation to lift the cap. He said it was necessary because many banks have slowed down their lending and businesses with good credit are losing their lines of credit.
But Dodd told reporters after the hearing that before removing or lifting the cap, his panel needs to be certain that the NCUA has the capacity to deal with additional commercial lending. He also said that the panel might look into lifting the cap temporarily during the current recession or raising the cap, rather than eliminating it altogether.