At a time of uncertainty for the economy in general and creditunions in particular, Credit Union Times recently sat downwith NAFCU President Fred Becker for a wide-ranging discussion.

Credit Union Times: You've come outvery strongly critiquing parts of the Obama administration's planfor a new agency on financial products, earlier than other groupssuch as CUNA. What prompted you to go out front so quickly?

Fred Becker: We had a number ofquestions regarding the plan and its impact on credit unions, whichare already the most heavily regulated financial institutions. Ihave spoken with [Assistant Treasury] Secretary [Michael Barr] andwith our board and we have a number of issues. The loss ofpreemption for federally chartered institutions. Who would pay forit? The potential conflict between safety and soundness andconsumer protection. Also, the potential for including creditunions under the Community Reinvestment Act.

CU Times: You are allied with thebanks on this issue, a bit?

Becker: Not exactly. We don't opposecreating the new agency, like the banks do. Instead, we just don'twant us and the banks to be under the purview of the newagency.

CU Times: What are the chances of yourproposal passing?

Becker: The administration is comingto a recognition that the entities that they have problems witharen't credit unions; they are those that operate outside theregulatory structure.

CU Times: This is a difficult time forcredit unions, what is NAFCU doing to increase its efforts to helpthem through this period?

Becker: Our continued alliance withFannieMae, which brings our members real returns. We areemphasizing our fiscal responsibility and that we are value basedand that most of our products and services are included with dues.Our policies come as a result of input from our members, and we areimmediately responsive to their concerns. We pride ourselves onbeing fast, direct and accurate and giving members news they canuse.

CU Times: What worries you in themonths ahead?

Becker: We are still operating in verychoppy waters. There will be additional losses to the insurancefund because of losses to natural person credit unions. Compared toother parts of the financial services industry, we haven't beenimpaired as badly, and credit unions are generally well thought ofand that helps us when we deal with the government. But theeconomic recovery has been, and will continue to be, uneven. Creditunions won't go away and we will take advantage of the recovery togain new members. We are not cutting back like some in banking butare repositioning ourselves.

CU Times: What other fears do you haveabout things Congress could do?

Becker: Restrictions on interchangeand overdraft fees. That would further impact credit unions' bottomline. And if you combine that with the losses facing the insurancefund, that's a lot happening on top of what we've alreadyexperienced.

CU Times: How would you assess theNCUA's performance in handling problems that credit unions,especially the corporates, have faced?

Becker: When errors happen oftenpeople don't assume responsibility and look for other reasons whythings happen. The key is to look ahead and avoid having a repeatof the crisis that faced the thrifts. Under our cooperativestructure, if one institution makes a mistake or has problems, wewill all be affected. The key is to mitigate risk; one way might beto create a separate insurance fund for the corporates. Part of thesituation with the corporates is that they made investments thatlooked very good at the time that they made them.

CU Times: How could the NCUA beimproved?

Becker: Over the past year, by andlarge, the chairman has done a marvelous job with the other boardmembers in reacting. He got there and the ship torpedoed. It took abig push from him and the board members and the industry to get thestaff to recognize that the losses were more significant than firstanticipated. Further, you had to find solution and spread it outover several years. Credit unions have evolved a lot in the last 10years and will continue to evolve. And it sometimes takes a pushfrom the outside to get the bureaucracy to evolve and continue toserve its function.

CU Times: How has NCUA not recognizedevolution in the industry?

Becker: More credit unions are gettinginto mortgages and member business lending and the solution isn'tto keep us from doing that but to train people to regulate thatproperly.

CU Times: What has surprised you abouthow things have played out in the last few months? What, if any,have been the pleasant surprises?

Becker: Our industry is small and thatcan be a liability or an asset. Our problems were small to everyoneoutside the industry and that caused some problems. The magnitudeof the problem wasn't as obvious to Congress and some at the agencyas it should have been. We didn't want a situation where theythought we were overplaying the magnitude, but we needed to getCongress' attention at the right time and with the right message.Hopefully, because we've been through this, we can mitigate thingsin the future. My concern is that in a decade, people won'tremember what happened.

CU Times: Let's get back to regulatoryrestructuring, where do you think the overall plan, not just theconsumer agency part, will end up?

Becker: I am concerned with the Fedhaving too much power and am concerned if they can do the job ofprotecting the system that it is being asked to do. As for thesystemic risk regulation, we have systemic risk in our industry butit doesn't cause risk to the financial industry as a whole. Asmentioned, we are concerned about the consumer agency. Who is goingto pay for it? How much will be transaction based? How much basedon asset size? And there are a number of regulations that onlyapply to credit unions, such as anti-usury laws and a ban onprepayment penalties. Credit unions are member-focused andconsumer-focused and having an additional layer of regulationbeyond NCUA will make it harder for us.

CU Times: While other tradeassociations have had to deal with the recession by cutting staff,you've avoided doing that. How have you done things to prepare fortough times?

Becker: We built up substantial netassets and that has helped us, and we've done things such as buyingour building which we now own free and clear. We've always beenfiscally responsible, even in good times. Our culture here-startingfrom the top-is very member focused. We focus on spending ourmembers' money like it's our money and do many things withoutadditional costs to members.

CU Times: What about the future of theindustry?

Becker: We originally thought thenumber would flatten at 6,000 but that may not happen. A number oflarger credit unions are merging and that will have an impact onthe industry and it will continue to get smaller because of theoverall economy and merged credit unions have an advantage in termsof economies of scale.

CU Times: Speaking of changedenvironment, how would you describe your dealings with the newadministration?

Becker: The meeting we had with Mr.Barr was as good a meeting as we've had with an assistant secretarysince Wayne Abernathy [during the first term of President George W.Bush]…This administration has been very proactive in terms ofe-mails when they ask us what we think of proposals. It is good tobe reached out to and thought of.

CU Times: How does the Obamaadministration's approach compare to the Bush administration's?

Becker: The Bush administration wasn'tas proactive when they were selling their programs. We are calledmore often and invited to more things.

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