Business Decisions That Turn Hair a Whiter Shade of Pale
We all make tough business decisions where there is no black and white, only shades of gray. A credit union loan officer might struggle with whether to approve a loan on D paper. Or the NCUA might struggle to make the right decisions based on information that it is often bound not to divulge while taking heat from the industry.
The NCUA, despite an ongoing court case regarding the matter, liquidated Kappa Alpha Psi Federal Credit Union (See page 1). According to the NCUA's spokesman, the credit union was unwilling to support a transfer of shares. Yet Kappa Alpha Psi and Hope Community confirmed that the two were in merger talks. Possibly the credit unions could not reach a deal, but how much of a risk is a credit union with assets of under $1 million for another week?
KAP FCU absolutely had its issues, not the least of which was its nearly 25% delinquency ratio and negative capital. The NCUA also made public at least one letter of understanding and agreement with the credit union. But the agency made the decision to blow past conservatorship straight to liquidation. How quickly did the agency have to move to a resolution because the NCUSIF had to cover member deposits whether last week or next?
A former credit union CEO noted to me that the agency is erring on the side of protecting the insurance fund rather than regulating credit unions. The NCUA and NCUSIF are inextricably linked as the structure currently exists and obviously there are certain strains on the credit union-funded NCUSIF right now-a very fine tight rope to walk.
Another question that arose from this lawsuit is what is the check and balance of the NCUA's authority to take over a credit union. Even in court filings the judge said he could not control the agency's takeover of the credit union. If the judicial branch isn't ensuring the executive branch doesn't have too much power, then what does? Several have jumped up to challenge the NCUA's move, but no one has access to some of the information the NCUA has on credit unions and that is for the best.
The legacy asset plan is another area where no one outside the agency really knows what's going to go down, which leads to speculation. Speculation is good and bad. Brainstorming by knowledgeable people in the credit union industry can be good, but some scenarios can also lead to panic. The uncertainty behind the speculating leads to frustration and anger.
The NCUA is taking a lot of heat for not being more transparent regarding the development of the plan to deal with the legacy assets. In the end, the agency's silence may be the best business decision but in the meantime some executives and volunteers are expressing their displeasure.
Journalism operates a lot in the gray. Is this legitimate news, as in the CU of Atlanta CEO story? Do we have enough sources to support what we're reporting? How long do we wait for a source to call back? Will our competitors scoop us?
As editor, while I'm permitted the luxury of public opinions, I still have to make tough calls on our reporting in an unbiased manner.
All politics is local in the credit union industry. Though nationwide, it's its own tight-knit community. It seems just about everyone knows everyone else. As reporters and editors, we work with numerous sources to get our job done; some we might even consider professional friends.
Such was Tom Glatt Sr., former CEO of REALTORS FCU and Continental FCU. We're running a story on the deed in lieu on his house in Arizona (See page 3), which had been financed by Continental FCU. I wrestled with it but ultimately made the decision to run with this story. For starters Tom Glatt is a very well-known credit union figure who regularly speaks at conferences. He just left REALTORS FCU, which was hyped as the next generation credit union. A credit union CEO left the members of his (at the time) credit union with a debt that had been approved by the credit union the CEO ran. And while this issue is of a personal nature, it's also public record.
The story was legitimate, timely and appropriate. Any decision I would have made would have had me ruminating about it all night, which I did. I know that's no consolation to Tom and his family, and I understand he'll probably never speak to me again. That's unfortunate. I do wish him well in his future endeavors. In the end, I made the right decision for Credit Union Times.
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