Two Breakout Sessions Advocate Strategies for CU Survival
By DAVID MORRISON
WASHINGTON -- Two breakouts sessions at this year's Government Affairs Conference urged credit unions to adopt strategies that speakers said may be key to credit union survival in the U.S.
Guy Messick, general counsel for the National Association of Credit Union Service Organizations, urged a packed audience of credit union executives and directors to start CUSOs or start participating in existing CUSOs to help their credit unions cut costs as interest spreads continue shrinking.
As a metaphor, Messick used the contest in 1921 between World War I flying ace Billy Mitchell and then Secretary of the Navy Josephus Davies. In the wake of the war, more defense dollars were flowing to the construction of dreadnoughts than to aircraft technology and Mitchell talked his way into being allowed to introduce aircraft into war games that were using captured German battle cruisers. A provisional force of planes that Mitchell organized and commanded succeeded in sinking the captured cruisers, at least one of which having been considered unsinkable and thus won more money to develop U.S. military air power.
Messick argued the new technology and techniques represented by Mitchell are akin to CUSOs, and relying on interest rate spreads is like relying on battleships because they won the last war. "Seventy plus years of living off the net interest margin no longer works," Messick said.
Messick listed fears of the unknown, fears of getting out of the comfort zones and a naturally conservative attitude as reasons that credit unions often put off getting involved with starting CUSOs, along with a fear of losing authority and prestige as reasons many credit union leaders choose not to do so. But he added that more data was being generated every day that credit unions that cut their costs by joining CUSOs enjoy better financial health.
On the other side of the Washington Convention Center, a panel made up of Kirk Kordeleski, CEO of the $3.7 billion Bethpage Federal Credit Union, Mary Dunn, deputy general counsel for CUNA and John McKechnie, NCUA's director of public and congressional affairs led an engaging discussion of how best to provide more credit unions with sources of capital other than retained earnings.
The speakers acknowledged that most credit unions might not ever need to have other ways to raise capital but contended that under current regulations some successful credit unions are being effectively prevented from growing because retained earnings do not keep pace with deposits or loan demand.
The panel discussed different strategies credit unions could take to accept capital deposits from their members or sponsoring organizations as well as the impact of the U.S. Treasury's recent decision to allow community development credit unions assess to capital loans from TARP funds.