With Chin Up, Mica Discusses the Challenges Facing Industry, NCUA and CUNA
Credit Union Times recently sat down with Mica, who has run CUNA since 1996, for a wide-ranging interview.
Credit Union Times: Assess the state and health of the credit union movement as of the middle of 2009.
Dan Mica: Well, compared to other financial institutions we are doing extremely well. On a historical basis for credit unions, we have just come through a very difficult 12-month period. The good news is that our membership growth is beginning to turn around. It's the best in five years. At the end of March, it was 1.5% over the previous year. And our lending has been strong under the circumstances, too. And third, our savings are strong, and that's very interesting because it's a great plus for credit unions and a challenge on the ratios. People have more confidence in credit unions than they have in any other institutions we are aware of right now. The bankers did a [confidence] survey for 21 years, and we won every year so they stopped doing it. On an anecdotal basis, we'd probably win again this year based on everything the banks have gone through.
Credit unions are doing better than many people would have imagined. Does that mean everything is rosy in credit union land? Absolutely not. We have some pockets of some very difficult problems: Southern California, Arizona, Nevada, Florida and some parts of Texas. And some areas are going strong, like New Jersey. On all the averages, things are doing pretty well. But we have a lot of challenges.
The conservatorships [of U.S. Central Corporate FCU and Western Corporate FCU] has created a lot of problems. But I'll tell you something, it has taught me a great lesson. I have been working with credit union folks for 13 years, and I come away with a great deal of admiration whenever we have problem like this. They are worried, concerned and without a doubt fearful, but in a matter of weeks, they learn to deal with it. Many have figured out exactly what they want to do and are prepared to move on.
It's very interesting to watch the credit union spirit. They say, "We don't like it, we wish it hadn't happened, but we're moving forward.'' It's an amazing spirit to see. In the first quarter of this year, I felt a vibration in the credit union movement and now I am feeling a sense of stability. We've never worked harder during my time here-with Congress and the regulators and the old and new administrations. We were able to get the Corporate Credit Union Stabilization Fund approved and were able to make the regulator give us some additional data and numbers. And because of the problems, we [at CUNA] have had to do some belt tightening. We are going to do what credit unions do, which is to keep our chin up and move forward.
CU Times: You've been outspoken about how the NCUA has handled things in terms of transparency and in terms of the policies it has issued. What's your overall assessment of the agency and what would you like to see it do differently? How do you think the agency will change under the chairmanship of Deborah Matz?
Mica: If I am going to criticize, I am also going to compliment. Over the last 75 years, credit unions have had great success with an independent regulator. They have flourished. There will always be differences between the regulator and the regulated and we will have those differences. Many times we work those out without a lot of public uproar. Unfortunately, in the last few years we've had some instances where we've had some public disagreements, but that should never be read that we don't want to work together or we don't want an independent regulator and we don't have mutual respect.
Having said that, I think there has been a sense on the part of the credit union system that the regulator has been too insular in making its decisions and by announcing its decisions on what some might term a trust me basis, as opposed to the kind of transparency we've seen more recently. And if there is a word for the new chairperson, it's that we want a good, solid and fair regulator, but we also want transparency and innovation. Other regulatory agencies in the financial services area have been very creative and very willing to look at new approaches, new ideas and new legislation. And the credit union system has felt for some time that the agency has been much more traditional and reluctant, and it's often that they are conservative, they are concerned with safety and soundness and therefore they don't make changes. I feel you can be conservative, have strong safety and soundness standards and make all kinds of changes to improve the environment for credit unions and thus the consumers. So I guess, innovation and transparency would be the key improvements.
CU Times: When I've spoken to people at the NCUA, they have said they always listened to what you've said, but listening doesn't always mean they will agree with you. They also say that when they've run some of the suggestions by their contacts on Capitol Hill, they've been nonstarters. One of those issues is allowing the Central Liquidity Facility to lend money directly to corporate credit unions.
Mica: It's in the best interest of consumers that when the trade association and regulator are trying to maintain their appropriate roles and work in a concerted way, that transparency critical. If we think it's salable on Capitol Hill and they don't, we need to get to the bottom of those differences. Sometimes that doesn't happen.
CU Times: You worked with Chairwoman-designate Matz when she was on the board from 2002-2005. How do you expect things will change at the NCUA under her stewardship?
Mica: Well, she has always been open and willing to discuss ideas and suggestions, and she has been very direct in indicating when she might agree or disagree. But she has always been willing to find common ground. Deborah, as much as anyone I know, has safety and soundness and the consumer in mind. She is also interested in good public policy, and I believe she will take transparency to the next level. And there has been some progress on that in the last few months, I must say. At one point, the regulators were not going to release anything on anything, so we got into a little push and pull. They banned me from their office forever, just kidding.
CU Times: Credit unions have had a pretty good run so far this year on Capitol Hill. You got the Stabilization Fund through and prevented cram-down legislation and kept interchange out of the credit card bill. What's next on your wish list and what about the areas you'll play defense on, such as the Community Reinvestment Act and interchange?
Mica: We do have to worry about those two defensive actions. On offense, there is some interest in some form of alternative capital and member business lending. Those are two areas we will look at closely. A third area, and we don't know if it's going to be offensive or defensive until we see what form it is going to take, is the streamlining of the regulatory structure.
CU Times: You don't hear much about the fate of the NCUA in the leaks that come of the White House, perhaps because it is too small. What do you think is likely to happen, and are you concerned about the NCUA's status as an independent regulator?
Mica: You know, I don't know that concerned would be the word I'd use. We've had so many assurances that we aren't going to have a problem and that everybody's with us. I don't see a major advocate for doing away with us, and I do see a number of champions saying they are going to make sure that it doesn't happen. But to go into a complacency mode would be absolutely wrong. But I do believe there is going to be a major restructuring in the next six to 12 months. I think it's almost guaranteed.
CU Times: Where do you come down in the tug of war between House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd on the question of the systemic risk regulator, with Frank wanting it to go to the Fed and Dodd to the FDIC?
Mica: We don't have an official position on that. I have a personal thought, but I don't share it. At this time, we just want to watch and see how it would be structured and which powers are granted to whom. We would like to be at the table where they are making decisions that could negatively or positively impact credit unions. But that doesn't mean we would want to give up an independent regulator. Our folks want a regulator that commands respect and can help get the needs of credit unions met. And to date, without blaming any individuals, that simply hasn't been the case. And that may never change because of our size. But it could start to change because of our effectiveness.
CU Times: Will the fact that Chairman-designate Matz is well-connected and has close ties to senior administration officials help the agency?
Mica: She has the ability to bring credit unions to a new level of attention in Washington.
CU Times: When you've met with administration officials, have you found them to be receptive to credit unions' views?
Mica: The newest folks we've talked to at the Treasury Department and White House have been extremely positive. Some of the warmest receptions we've received in some time. I don't know where that will lead, but the initial conversations have been positive. We spoke about our problems, and I didn't get a lot of 'thanks and goodbye.' There was a lot of understanding about the good that credit unions do.
CU Times: Have you met one-on-one with Treasury Secretary Geithner?
Mica: Not one-on-one. I've been fortunate to have been in a group meeting with him. There is still a lot of jockeying within the administration about what form the [systemic risk] regulator will take, whether it will be one agency or a council of regulators.
CU Times: How does this period compare in terms of intensity and pressure, compared to earlier ones?
Mica: There are an awful lot of people on Capitol Hill who are passionate about CRA, cram-downs and regulatory reform. And with that passion comes a strong effort to get their views approved. I can't recall seeing so many passionate individuals coming forth on financial services. I've seen it in health care, the environment and energy. In financial services, they are coming out of the woodwork with solutions.
CU Times: You've run CUNA for 13 years. Are you tired of the job?
Mica: I love what I'm doing and love coming in every day, but I want to step down six months before they want me to leave. I love the team. It's like a second family. We're all different in terms of personalities and philosophies, but we work together for credit unions.
CU Times: Have there been any upsides to the recession and other financial setbacks for credit unions?
Mica: It has increased our workload at CUNA, especially the problems of the corporate credit unions. But it has highlighted the obvious, that we need to decide on a new corporate credit union structure.
CU Times: Could the problems of the corporates have been prevented by stronger oversight?
Mica: Nobody saw this coming. Not the private sector, not the rating agencies. To single out one agency is not fair. Could they have done a better job? Sure. Are they to blame? No. Everybody is closing the barn door after the horse has left.
CU Times: What are your predictions about the economy?
Mica: The stock market will gradually pick up, but there is always the chance of a second fall. Growth will lag and employment will lag. But hopefully the worst is behind us. It took 25 years for the market to get back after the Great Depression. Credit unions will have some residual problems, and there will be an increase in consolidations. But those credit unions that have stuck to solid fundamentals and used good judgment and thought about the long term, rather than the short term, will avoid some of the fundamental problems.
CU Times: What's your reaction to the banks' criticism of credit unions and their opposition to expanding CUs' ability to make member business loans?
Mica: Banks have no business criticizing credit unions because they've left America in financial shambles. And we have a less than 1% default rate on mortgages and member business loans. [The banks'] are in high single digits or double digits. We'd all be better off if banks and credit unions went to Capitol Hill and looked at what we can do to help consumers, rather than have the banks try to attack credit unions.