Perception and Reality Will Shape Decker’s Fate
The Obama administration announced on Oct. 21 the nomination of Carla M. Decker, CEO of District Government Employees FCU, to replace NCUA Board Member Gigi Hyland, whose term has expired. Reaction I’ve gathered from around the industry has been highly mixed. In general, a great diversity of thinking exists across the industry as to what’s important and relevant. That’s good. In formulating your own opinions, there are several pieces to consider.
News Update, March 13, 2012: White House Pulls Decker Nomination
I’ve heard quite loudly, Why would she be nominated when her credit union is in financial trouble? This is a valid point. The capital ratio at DGE FCU dropped more than 200 basis points over the last year. Delinquencies are 2.63% and charge-offs 2.12%. ROA was negative for 2010 but on target to end 2011 on the plus side after three quarters of profitability. Net worth is down 20%, marketing share is down 1.46%, loan growth is down 16.8% and asset growth is down 1.7%. However, in my mind an even more important number is that membership growth is negative 4.57%.
One West Coast credit union CEO I talked to is hopping mad. He wants someone nominated from a credit union but also a well-performing one. On the flip side, another CEO said you have to look at what the credit union is trying to accomplish. DGE FCU is trying to serve the underserved, who have been the worst hit class by the economic crisis. These types of efforts are exactly why credit unions came into being and grew tremendously during the Great Depression.
Keith Leggett, American Bankers Associations’ senior economist, took a cheap shot at the community development credit unions, including Decker’s, that received TARP money through the Treasury Department’s Community Development Capital Initiative. When there are dozens of pages of banks that took much more TARP money and under much different circumstances for return, he really shouldn’t have picked this rock to throw at credit unions. It lands with a dull thud.
DGE FCU received $1.5 million in TARP money, included in its $4.8 million in capital, which really stuck in the craw of another CEO at a large credit union. Politically, nominating Decker highlights the fact that, no, credit unions did not fix their own problems. The CDCI was there to boost economic development and DGE FCU took advantage, as did dozens of other credit unions, and it shouldn’t be faulted for using the funds. However, the credit union is now raised to a much higher profile and standard and that needs to be taken into consideration with this nomination.
Additionally, the CEO at the larger credit union was incredulous to think that the CEO of a $45 million credit union could possibly comprehend what goes on in larger institutions. DGE FCU has no mortgages on the books, a key problem area for the NCUA, credit unions and financial institutions overall. DGE FCU’s financials indicate that the credit union is not involved in business lending.
As credit unions lobby for expanded authorities and promises of tougher regulation from the NCUA if that happens, then this isn’t a solid match up. DGE FCU has little involvement in CUSOs, which is a key regulatory proposal for credit unions now and for the long term. The candidate doesn’t fit the profile for what the industry needs in these areas but a solid senior policy adviser could do the trick.
According to Michael Poulos, CEO at Michigan First CU, the size and financial shape of the credit union aren’t that important to him. In his view, you can’t go wrong with someone with hands-on credit union experience. Anyone who has run a credit union, particularly a smaller one, will understand and recognize over regulation is his theory. He much prefers credit union experience over regulatory experience from the head regulator and insurance fund overseer.
I am not at all knocking what Decker, who I’ve only met a couple times in passing at industry events, has chosen as her life’s work. I applaud people who dedicate their careers and lives to the credit union community. Former NCUA Chairman Dennis Dollar was from a small credit union. But the Decker and Hoenig’s resumes side by side will put credit unions and banks in stark contrast. Will that impact how credit unions are perceived in Washington?