Everything Old Is New Again
I was reading through editorials by my predecessors as I was preparing to write this week's column, looking for inspiration. There were a couple things that struck me. One, I realized that I'm only the third person to write this column and follow some substantial size 15s.
The second thing that struck me was that so many issues in credit unions remain the same. Expanding member business lending, attacks from the banks, industry consolidation, regulatory burden...the list goes on.
Credit unions yet again were unable to push legislation to expand member business lending through Congress last year. This year will be the eighth year legislation to expand credit union business lending authorities has been introduced, assuming legislation is introduced. The cause is a worthy one and will be high on credit union trade groups' radar this year. The bill will have to find another patron saint as Paul Kanjorski is no longer serving in Congress, but Ed Royce is a likely candidate given his previous support and credit union ties. At this point, lobbyists are hopeful to have member business lending legislation reintroduced but no guarantees.
The importance of member business lending to credit unions also means it will be receive keen scrutiny from the bankers. The American Bankers Association posted an action alert on the issue to its website during the last congressional session, providing sample language and a search identifying representatives and senators according to one's address. It can be personalized, and then you can send it to both of your senators and your representative.
It offers the same tired arguments that it would only benefit large CUs that no longer serve those of modest means we've all heard before. However, credit unions cannot permit this type of false and inflammatory rhetoric to be the first thing incoming members of Congress hear.
Lobbyists from CUNA and NAFCU were on the Hill at the opening of the 112th Congress to be sure, but members of Congress also need to hear directly from the institutions in their districts just as the ABA is encouraging its members to take action.
Communication with Capitol Hill and other political players and regulators must go beyond member business lending to other long-term issues for credit unions such as capital reform. It also should go beyond an issue-specific letter once in a while. Politicians love photo ops, so invitations to branch openings are a great way to draw them in. Join groups where you're likely to run into lawmakers and regulators, such as a local chamber of commerce or economic council. And if your credit union is ready and willing to take the plunge, try holding a fundraiser for your credit union friendly representative. This doesn't ensure victories, but relationships combined with money can take you places.
NCUA's outgoing director of public and congressional affairs, John McKechnie, and others at the agency were able to leverage their relationships to get legislation passed and signed into law containing a provision to allow NCUA to pre-assess for anticipated losses, similar to the FDIC. Depending upon how the agency handles it, this will be a positive in the long term in that it will save credit unions in borrowing costs for money from the Treasury Department.
Additionally, the NCUA will be able to provide so-called 208 assistance in assisted mergers; the agency can provide financial assistance to credit unions taking in troubled institutions, and it counts toward net worth. This, too, will prove a good move because it will allow the NCUA to resolve more troubled credit unions through assisted mergers, which should result in a lower cost to the NCUSIF. Expect an uptick in these actions in 2011, in part because of this legislation.
Industry consolidation is not new and necessarily a bad thing if done for the right reasons. When a bank merges, typically there are new (or the same) investors stepping in to start another; not so with credit unions for many reasons. Regulatory challenges, capital difficulties (due to lack of financial incentive), and finding directors who take on the same risks as bank directors without the same returns to name a few. And that's fine. If the current crisis has taught us anything it's that the U.S. as a whole is overbanked.
The current troubled credit unions that have no hope of returning to sustainability need to be merged. Unfortunately, over the last couple of years there has been less of an appetite to gobble these up. The NCUA has started a registry for interested credit unions and completed some transcontinental mergers to take care of business. Hopefully, as the economy rights itself and the uncertainty of the NCUA assessment amounts stabilize, credit unions will be able to find and afford to take on mergers of the fallen.
Another step the NCUA has taken in light of the corporate credit union and broader financial crisis is to set requirements for board of directors. There has been some moaning and groaning about the regulators getting too much into credit unions' business. However, I have to wholly agree with Main Street Financial Credit Union CEO Cary Anderson's letter to the editor that ran in the Jan. 12 issue (page 14). Who wants directors that don't have a clue about what's going on in the organization they're heading up? Setting a baseline standard will simply demonstrate the competency of credit union boards. It's protection for, not rejection of, credit union boards. Like Cary, I hope that this requirement will not run off good credit union volunteers. Credit unions have enough trouble recruiting board members, but if they aren't the well-qualified board members then what's the point?