Despite the Bumps in the Road, CUs Can Be Thankful
Credit union executives, not historically accustomed to laying employees off, have had to make the tough decisions for the future viability of their institutions. At the same time, adding to the U.S. unemployment figures does not do anyone in the entire global economy any good. Many of these laid-off employees could very well even have loans at the credit union that they can no longer pay. But the managers owe it to the members of the institution to keep it available to members in perpetuity, and for that, the members will be thankful.
These cutbacks and other careful whittling away at nice-to-have (and hopefully not need-to-have) products, services and back-office operations are the result of careful deliberations toward this goal. These difficult choices have resulted in just 22 failed credit unions in 2009 through October. While this figure is higher than credit unions have experienced in recent memory, it is a far cry from the 50 failures FDIC-insured banks incurred during the third quarter alone. Credit union boards and staff should be proud of the work they have accomplished to keep their shops up and running as well as providing an alternative to traditional banks, and for that we should all be thankful.
However, the NCUA announced that it is expecting continued failures into 2010 as the number of credit unions and the insured shares in troubled credit unions escalates. At its Nov. 19 board meeting, the agency announced an estimate of 15 to 40 basis point premium for credit union in 2010. The agency also said its budget would increase $23 million over 2009, to $200 million, part of which will be spent on filling 74 new positions, including launching the office of consumer protection and the office of the chief economist.
How the agency got along without the latter in particular for so long is beyond me. Credit unions generally do well by themselves, but they do not operate in a vacuum as everyone in the industry has discovered. Common sense would dictate this department should exist to help head off and prepare for future crises. While now is not an opportune time to add to credit unions' costs, this will help to shore up the regulation of credit unions and hopefully pay for itself in mitigating costs via the insurance fund. Credit unions will be grateful for this move by the NCUA in the long run.
It should also be noted that the FDIC actually went negative to the tune of $8.2 billion. The number of problem banks grew to 552 as of the end of September. Banks' assets have fallen for the third straight quarter, and annualized net charge-offs rose to 2.71%, the highest since record-keeping began in 1984, according to a Wall Street Journal report. The banks will also prepay $45 billion in assessments-such a figure would annihilate the credit union industry, and nearly could have if the agency did not step in to guarantee corporate deposits. For this, we should all be thankful.
The NCUA also came out with its official proposal for the corporate credit union restructuring. While credit unions, corporates and industry analysts are still sifting through the legalese, at least now a more concrete platform for the future of the corporates has been forged. A modicum of certainty is better than none at all.
NCUA Chairman Debbie Matz has planned on two more town hall meetings and Webinars over the 90-day comment period. Take advantage and be thankful for the opportunity.
Many credit union executives and board members may have loaded their quiver of angst with persecution of the corporates, their regulators, the banks or whoever is centered in the bull's eye that day. But, taken in proportion, credit unions have much to be thankful for. Quit worrying about the chipped plates and give thanks for the positives about your situation.
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