Mudville Redux: Putting the Regulators on Waivers
At first glance, credit unions and baseball do not have a great deal in common.
One is a cooperative service industry in business to help people-especially the underserved-navigate a complex economy. Those who work in credit unions are a sober bunch who view themselves as modestly paid individuals who often speak of their work as a mission. The credit union industry has branded itself as a champion of the little guy, and that's one of the reasons it came away from the financial overhaul relatively unscathed.
Major League Baseball, on the other hand, is populated by millionaire adult men who play a boys' game. Despite protestations to the contrary about the game's deeper meanings, it is in the end, only a game. Congress often threatens to beef up its regulations of the sector, especially after incidents like the increased use of steroids by players.
Those differences, however, should not prevent us from examining some of the similarities between the two industries. As a public service on the eve of baseball's post season, let's imagine what it would be like if the NCUA evaluated regulated credit unions as if they were baseball teams. To stretch your imagination even more, let's also contemplate what would happen if Major League Baseball took a page out of the NCUA's playbook when evaluating baseball teams.
Take the Baltimore Orioles. For much of the season, they have been at the bottom of the American League East and at one point had winning percentage of .366. They have not had a winning season since 1998.
This year they had both offensive and defensive performances that earned them the baseball equivalent of a CAMEL 4 or 5 rating. Fortunately for the team's long-suffering fans, the team's management realized that it needed to take prompt corrective action and implement a winning record restoration plan.
On July 30, the Orioles hired veteran manager Buck Showalter, and since he started, the team has had a winning record, though is still destined to finish the season in the cellar.
The Orioles came up with the plan on their own, without outside interference.
By contrast, troubled credit unions are usually forced into making changes by the NCUA.
Since coming back to the agency last year, NCUA Chairman Debbie Matz has made strengthening the examination process a top priority. She's increased the frequency of exams and ordered the examination staff to be increasingly vigilant to spot trends early on that could cause a credit union to have problems down the road.
If she and Board Members Michael Fryzel and Gigi Hyland packed up their offices and employed their talents on behalf of Major League Baseball, how might they change the operations of our national pastime?
One possibility is making the game more cooperative.
Currently, there is a luxury tax of 22.5% levied against teams with a payroll above a certain amount (which changes each year). This season, the tax kicks in at $170 million and usually only a few teams (the Yankees and a couple of others) must pay it. The tax enables less well off teams to compete. That's one of the reasons the Tampa Bay Rays have been able to build a strong team and stay competitive with the Yankees. (The teams' payrolls are $71 million and $206 million, respectively.) However, this redistribution of wealth isn't enough for some critics who want total parity.
Maybe in the true spirit of the cooperation Matz et al would institute an outright salary cap, with no exemptions. They might also levy a tax on big-market teams to subsidize the small-market franchises and close the gap in revenue from television rights.
The NCUA threesome might also try to limit teams' losses from risky trades by banning a team from investing in a player considered past his prime. Think of it as the baseball equivalent of limiting risk concentration.
By contrast, if Baseball Commissioner Bud Selig took over the NCUA you might see Navy Federal and other large credit unions be forced to pay a "bigness assessment," to help smaller credit unions fund their operations.
In addition, Selig might try to persuade fellow board members to support rewriting the federal regulations to allow credit union executives to avoid tasks at which they don't excel. Maybe the new position would be called a designated troubleshooter.
There is, however, one big difference between regulating credit unions and regulating baseball.
If Selig and his new colleagues at the NCUA mess up the oversight of credit unions, the implications for the nation's financial system could be far reaching.
By contrast, if Matz et al don't oversee baseball properly it might mess up the game but won't likely cause a societal catastrophe.
It might, however, cause some literary wags to change the final line of the classic poem "Casey at the Bat."
Fans everywhere will utter: "There was no joy in baseball, Matz, Fryzel and Hyland all struck out.