In Slogging Our Way to Survival, We Must All Hang Together
As I write this, the entire credit union industry is jittery with anticipation regarding Friday, Sept. 24 with the corporate credit union regulation and legacy asset plan and possible execution of it.
Some have suggested a scenario where the so-called legacy assets might go straight to market. Realizing the as-yet unrealized losses without some sort of government guarantee will tack on a $10 billion premium for federally insured credit unions. If that's to be the case, credit unions' current estimated assessment over the next seven years of 15 basis points per year will rise to 25 basis points a year.
And that's assuming the NCUA could broker a deal with Treasury to spread that additional payment out over seven years; the agency was working to ensure the credit unions didn't have to pay up front. If the industry had to take that hit all at once as a worst-case scenario, the assessment could be upward of 100 basis points, leading to catastrophic natural person credit union failure and losses. The effect would ripple through the credit union industry, service providers such as Credit Union Times, the trade associations and American consumers who have demonstrated their trust in credit unions by parking their savings in droves. The NCUA itself would lose a large chunk of its authority and possibly risk being folded into the FDIC or other regulatory body.
Perhaps more or different expertise at the agency, at the vendors or at the trade associations is necessary. Missteps have been made along the way by all.
However, nothing breeds creativity like necessity. The NCUA, the trades, tech vendors and publications are slogging their way toward survival and beyond along with credit unions. We all go about it in different ways, but in the end the survival of all those who touch credit unions depend upon credit unions and are doing what we believe is best for the industry.
Credit unions have been in a lot of pain over the last two years. They've had the wind knocked out of them by the corporate crisis, some been back handed by their regulators and many have been burned by the very members they are trying to serve. Many in the credit union movement have responded as an abused animal might with an ASPCA officer, lashing out at those trying to save them.
I visited a lot of people this last week. I spent a day at NAFCU's Congressional Caucus, hearing from credit unions, consultants, legislators and regulators. The group put together a formidable agenda, including Elizabeth Warren who is charged with setting up the new Consumer Financial Protection Bureau. This is a very positive sign for credit unions that she (and timing) made NAFCU first on her list of interested parties to address. The regulations that come from this new agency will have a significant impact on credit unions' bottom line, from interchange to Regs Z and E-and all the letters in between.
Some have criticized the trade associations as just part of Washington's political machine. My question is: What's wrong with that? Credit unions representing themselves in Washington on a day-to-day basis would be impractical from a resources and expertise standpoint. Credit union executives need their primary focus on their institutions now more than ever-a luxury afforded to them by the sometimes heralded, sometimes maligned trade associations.
CUNA went out and hired a CEO who not only had trade association experience but a long history in credit unions. Bill Cheney's balanced background in credit unions and politics made him a good choice, yet he's getting sued for the WesCorp's overly concentrated private-label MBS investments that took place after he left the board. Something about the timing is fishy there, yet some are very vocal in their outrage at the CUNA Board's pick.
As many busy executives do, I'm pounding out this column on a bumpy flight back from credit union Mecca, otherwise known as Madison, Wis. CUNA provides so many educational services to credit unions at significant markdowns from normal market pricing, it's difficult to imagine the group can make money at it, but it does. The organization that founded many of the first credit unions has a higher purpose than making money, which it obviously needs to do, but it is driven by that same cooperative purpose that credit unions themselves still adhere to.
CUNA Mutual also provides behind the scenes support, making possible many efforts within the credit union industry. Between CUNA Mutual and a few other vendors, the groups sponsor many of the charity golf outings, the Cherry Blossom Race to benefit the Children's Miracle Network, took on the IRS with the UBIT lawsuits and many other things the company doesn't publicize. Why? Because the long-term impact is important to its clients, which are crucial to its very survival. It's a smart strategy.
A group of pass-through corporates are hashing out plans for throwing their collective weight around to better serve their member credit unions.
We all have an interest in credit unions continuing to be credit unions. One CEO at NAFCU's Caucus confided that his credit union had recently and very quietly merged with a decent-sized credit union. The reason for the secrecy was a local bank was eyeing a hostile takeover of the credit union.
Point is, we're all working toward the same goal and maintaining a level head and modicum of respect for all the moving parts and their unique and important roles is the only way we'll all pull through.
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