Bill Cheney Interview Transcript
*Watch the video of the first segment of this interview above and click on the links below to watch the rest of the videos in the series.
Sarah Snell Cooke: Hello. This is Sarah Snell Cooke, editor-in-chief of Credit Union Times. I'm here in CUNA's Washington headquarters with new CUNA CEO Bill Cheney---not so new-here for his 100 days interview. Welcome, Bill.
Bill Cheney: Good morning.
SSC: So now you're 100 days in. What changes have you begun to make at CUNA, and what's your top priority internally?
BC: Well, the first 100 days have really been focused primarily on a smooth transition. Dan Mica has been here for 14 years and while he's with us until the end of the year, he's definitely in a part-time mode now. He's been great in terms of leadership during the transition and introducing me to the people that I need to know here in Washington, but he's moved on, in a sense, focusing on the rest of his life, and I've been focusing on a smooth transition, making sure that, as I said, I meet all the right people here, and they understand that we're not going to miss a beat, and we're going to continue to focus on creating the best possible environment for credit unions. So there haven't been a lot of changes. I mean, we do have plans to make changes to, again, create this better operating environment, but the focus has really been on transition, not on change.
SSC: You discussed increasing effectiveness at CUNA. Can you provide some details there?
BC: Sure, well, I think I've been pretty public in my comments that I think there's more we can do on the grassroots side. I've had a lot of discussions with our staff internally with the CUNA board and with leagues from all over the country through AACUL, the American Association of Credit Union Leagues. We've had a chance to get together a couple of times with their executive board, with their entire membership to talk about some of the things that have happened recently and what it means and how we can improve on that for the future. We've had some success this year, legislatively, in blocking things that could have been harmful to credit unions. We've had some success with CRA issues. We've had some success on credit-based interchange, and recently, though not this year, with cram-down and some other issues.
But looking forward, if we really want to be effective, we've got to have a better and more consistent response from throughout the country, and from credit union members, quite frankly, when we need help here in Washington. So what I've talked to the leagues about, what we've talked internally about is really taking a fresh look at what we can do, grassroots-wise. Not just with credit union employees and volunteers-they're crucial-but also reaching out to credit union members. Just last week we had some credit unions visiting here in Washington. We talked to them about the need to go beyond our employees and reach into the membership. During the interchange fight-a fight that wasn't aimed at us but certainly is going to impact credit unions-we found that we were able to generate quite a bit of support, somewhere between 700,000 and 800,000 contacts with Congress. But that response came very well from some parts of the country and not quite as well from others. Part of that is because different leagues approach things differently in terms of how they communicate with their legislators, but we need to know when we have a call to action what we can expect in response. We had some states that had close to 200,000 contacts, and we had states that had 50 contacts. Not 50,000, but 50 contacts. We need to understand that, and how we can improve on that in the future to win these battles. Even if they're not directed at us, we need to be able to win them.
SSC: It sounds like you want to involve credit union members more-something similar to an HR 1151. Do you think that sort of effort is going to be needed?
BC: I think long-term we're going to have to involve credit union members. In order for us to really be effective, we need to harness the strength of 92 million credit union members. And it's interesting-we've done research on both a regional basis and a national basis, and consistently when you ask credit union members if they're willing to get involved and help their credit union, the last numbers I saw: 65% of credit union members. That's an astonishing number. I didn't think you could get 65% of the people in this country to agree on anything. Look at what happens when you do polling on other political issues. But 65% of credit union members say they'll support their credit unions in a fight, and we need to use that responsibly to help credit unions improve their operating environment, both from a legislative perspective and from a regulatory perspective.
Watch the video: Cheney on His Selection as CUNA CEO
SSC: There were many candidates for the CUNA CEO top spot. Why do you think you were the best?
BC: Well, that's probably a better question for Harriet May than it is for me, but from what I've heard in their discussions and deliberations, they felt like, at this time, having someone who has worked in various capacities for 25 years in the credit union movement, but also has, for the last four-and-a-half years, experience in a trade association, in California and Nevada representing those institutions, that that mix was important. I don't know who the other candidates were, honestly. My understanding is, again, they were primarily politically based candidates. Dan Mica has done a fantastic job for 14 years, and his political experience has served us well, but I think looking forward, the board felt it was good to have that credit union background.
SSC: I realize you can't address the corporate lawsuits, but now that NCUA has taken over the WesCorp suit, some credit unions are asking, 'How can that affect your efforts with the agency?'
BC: Well it hasn't been an issue. We have addressed a number of things, as you know. It's been extremely busy from a regulatory perspective, and it promises to be even more so, more challenging going forward in terms of new regulations, not only from NCUA, but from Treasury and the Consumer Financial Protection Bureau. We're working very hard with the Federal Reserve on interchange and making some headway there to protect credit unions' interest, but it has not been an issue with NCUA, and I don't anticipate that it will be, going forward.
Watch the video: Cheney on Regulatory Advocacy
SSC: You talked about being over at the CFPB meeting with Elizabeth Warren. What's the effect of that agency going to be on credit unions?
BC: Well the impact will be huge. The question is: positive, negative, neutral? From our perspective, we think it's essential that we work closely with Elizabeth Warren, and whether or not she becomes the eventual director of that agency, she's the person today that the president has chosen to help set this up, so I've actually had four in-person meetings with her and one meeting on the phone in the very short period of time since she was appointed to that position-as recently as Thursday of last week. She's a credit union member. She's a member of the Harvard Employees Credit Union. She's had a long-term working relationship with Gene Foley, who's not only the president of that credit union, but is also a member of the CUNA board. So that gives her a working understanding of credit unions and gives us an ability to talk to her about the very specific issues that are of concern to credit unions.
The two things we've been emphasizing recently are, number one, if you want to simplify regulation, you can't just put new regulation on top of all of the old stuff. You need to peel away years and years of old regulation as you're bringing in the new, hopefully simpler-to both the institutions and the consumers-regulation. And she understands that. Her vision is much simpler disclosure, simpler products and services while still allowing for innovation. And from our perspective, let's get rid of the old stuff while we're bringing in the new stuff. Otherwise we're not really accomplishing anything, because we still have all these legacy-there's that word again-regulations to deal with. The other thing we've been emphasizing is: don't forget about the state regulators. They're an important part of this process. We have a very important dual chartering system, and I just recommended to her last week that they bring the state regulators in early, so that they have a vision that everybody can agree on of what the future of this regulatory environment should look like.
Watch the video: Cheney on Legislative Advocacy
SSC: Credit unions are working hard on member-business lending. What's the progress, or lack thereof, this year and into the future?
BC: Well things are fairly quiet right now because people are back home campaigning. We are encouraging our credit unions and our leagues to stay in touch with their lawmakers when they're back home and we want to continue to do that. We have made progress. I keep saying "we're not dead yet," and we're still not. There's times we've been on life support, but we're still hanging in there. We have a strategy in the Senate. Senate Majority Leader Harry Reid hotlined the bill, in order to raise any objections that people have had. There's been some people who've expressed some concerns about the bill and we're addressing those concerns, but we're still hopeful, even in a lame duck session, which is all we have left this year, that the majority leader will be able to find an appropriate vehicle to advance this legislation and try and get it done before the end of the year.
SSC: Capital's a big issue for credit unions. Discuss the future of risk-based and supplementary, or alternative, capital.
BC: Well capital reform is our top priority for next year from a legislative perspective. We've been very encouraged by Chairman Matz and her comments recently, in saying that she sees capital as a safety and soundness issue. We agree with her a hundred percent. We think we have a consensus now in the industry to support NCUA's efforts to get alternative capital as well as risk-based capital as well as additional tools for the regulator to use to help credit unions in this type of crisis. So even with a Congress that promises to be somewhat different next year than it is this year, we know that they're going to be talking about capital reform, and that is at the top of our list, and we want to make sure that we're at the top of Congress's list when they're considering that in the 112th Congress.
SSC: Why are the bankers able to hold such sway and block credit unions' lobbying efforts?
BC: Well banks have more money than we do. We've known that forever, and we've been able to say in the past, "They have more money, but we have more votes." And I still firmly believe that. Ninety-two million credit union members-65% of them are willing to help their credit unions. I can guarantee you that 65% of bank customers aren't willing to help their bank. I mean, they might like their local bank, but they're not necessarily-especially in this environment-supportive of banks in general. But they have more money, and community bankers typically are very involved in their community and have close relationships with lawmakers. We need to do a better job, as I said early on, of strengthening our grassroots, strengthening our contacts, and making sure that we have a seat at the table in every local community. A 535-seat strategy-435 representatives, 100 senators. We need the right people involved with those representatives in all 50 states, and the District of Columbia, in order to advance what credit unions need in the future. Banks have been around a long time. They have, as I said, a lot of money. They're well connected in their communities. They've lost some credibility in this crisis, and quite frankly, credit unions have, I think, enhanced our standing in Washington in this crisis, because of the great work credit unions have done in their communities-reaching out to members, serving them, continuing to meet their credit needs. You look at the statistics. There was even a Wall Street Journal article not too long ago that the decline of bank lending is the greatest since the 1940s. At the same time credit union lending has increased by comparable measures, I mean, on the upside. So it's going to be a better environment for credit unions, but in order to achieve that, we've got to get this grassroots support coordinated better.
Watch the video: Cheney on the Future of Corporates & CUs
SSC: The NCUA has come up with its corporate credit union regulation, come up with its legacy asset plan introduced on Sept. 24, as well as conserving three corporate credit unions. What do you see as the future of the corporate system?
BC: Well we're very involved in working with a number of groups at looking at a path forward. First of all, I do think that NCUA's legacy asset plan does a good job of containing the cost of the crisis, allowing credit unions to recognize that the credit losses on the legacy assets as opposed to any market losses. They worked very closely with Treasury. Obviously they needed Treasury support to get the full faith and credit guarantee on the notes. I also think that the ability to allow-if things work out better than expected, which we won't know until we have the benefit of hindsight-that the credit unions who took the capital losses and the conserved corporates will have an ability to recover some of those losses if things improve. I don't think anyone necessarily expects that to occur, but a structure is in place to allow that, and that's something that CUNA and leagues advocated for quite actively early on, so we have a path forward.
Now the question is: We have five conserved corporates; we have bridge charters; we have a new corporate rule; we have a new corporate chartering rule that's in the works. Where do we go from here? And there's some regional groups looking into that. There are individual credit unions and leagues who are looking into the future. I see CUNA's role as really coordinating as much as possible and facilitating communications between those groups so that we ensure that we have a credit union-owned system going forward. Exactly what form that's going to take, as Chairman Matz said, credit unions are going to have to decide that. But we play a critical role in communications, and we're going to make sure that we help lead that effort going forward and give credit unions the tools they need to make those decisions. We're just now getting started, but we've got a lot of work to do going forward, and we'll make sure we're actively involved.
SSC: Now that we have a semi-resolution on the corporates, what's the next big challenge for the credit union industry?
BC: You know, this crisis isn't over yet. I believe we've hit bottom and things are improving. If you look at the numbers at credit unions, delinquencies are declining, charge-offs are declining slowly. There's a lot of signs of hope and improvement. The question is, where do we go from here. Do we continue this slow, steady recovery? That's what we think is going to happen. Bill Hampel, who's our chief economist, believes that's what's going to happen. But there could be external shocks-things that we don't foresee today-that could either help us or hurt us. So I think the next challenge is just tracking this recovery very carefully, making sure credit unions are making the adjustments that they need to make to plan for the future, making sure, quite frankly, that in this unprecedented period of low interest rates, that we're aware of interest rate risk. Some have said we could enter a period of hyperinflation after this recovery. If that's to happen, that could be a problem if we're not prepared for it. So it's just being prepared for the next turn in this economy, and nobody can predict with any real confidence exactly what's going to happen, so we've got to help credit unions be prepared for that.
SSC: Given the economy, what are your lingering concerns for natural person credit unions?
BC: Well, in order for any real improvement in the economy to occur, the job situation has to improve. We can sort of limp along, like we have been, at 9.6% unemployment-I think that was the last number that was just released-but 9.6% really hides bigger problems in other areas. Unemployment's over 12% in California. It's close to 14%, I think, in Nevada, and it's even higher in other states. We need improvement in the jobs market. Until that happens, there's still going to be strain on natural person credit unions.
But even at some of the natural person credit unions who've been the hardest hit, credit unions that are currently within the bounds of prompt corrective action, whose capital has fallen below 6%, some of those credit unions are showing real progress. They are seeing their delinquencies decline, they're seeing their charge-offs decline. They're actually seeing their charge-offs make a dent in their allowance for loan losses. At one time, as fast as credit unions were charging off loans, new loans were coming through the pipeline. And that seems to have stopped at some of the hardest hit credit unions, so we're encouraged. We're not out of the woods yet, but there are definite, definite signs of improvement.
SSC: Thank you, Bill, for your time. This has been Sarah Snell Cooke, editor-in-chief of Credit Union Times.