NCUA Board member Michael Fryzel defended NCUA examiners in a June 11 letter to the editor after an online editorial accused theregulator of “trying to destroy small credit unions.”

The opinion piece published May 23 by online industry newsaggregator CUinsight was written by Utah Credit Union Association VicePresident of Credit Union Support Stephen Nelson. It recreatedterse conversations between small credit union presidents andexaminers that Nelson said credit union leaders have recounted tohim.

The editorial recounted the following exchange:

“CU President: It feels like you're trying to kill me.

Examiner: Not you. You'll make it, but others won't.

CU President: I knew it! NCUA is trying to kill small creditunions!

Examiner: Yes, yes we are. But only credit unions of $XX millionand under.”

“There's no denying that all credit unions– not just smallones–feel like NCUA is trying to push them out of business,” Nelsonwrote in the piece.

Not so, Fryzel countered in his June 11 letter to CUinsighteditor Randy Smith.

“Only in [Nelson's] mind would such an exchange of words takeplace between a credit union president and an examiner,” Fryzelwrote.

Nelson said he attempted to bring the “aggregate spirit of thosesemi-private conversations into the open” in the editorial andpurposely included hyperbole.

“The point of the hyperbole was to hook readers so they wouldcontinue on to what I really wanted to say. I thought that certainparts were so obviously over the top and intended to be humorousthat no one would take them at face value,” he said.

And, Nelson said executives at many credit unions, not justsmall ones, have speculated that the NCUA would prefer the easiertask of regulating fewer credit unions.

Fryzel wrote that he begged to differ with Nelson's assertions.He called the editorial, with the exception of claims ofinconsistency, “unfounded, off base and just not correct.”

“NCUA has a commitment to all credit unions and to the system asa whole. Our goals are simple: protect the deposits of more than 92million Americans, a safe and sound credit union system, and astrong share insurance fund,” Fryzel wrote.

The Utah association leader said he was shocked that Fryzelresponded to his editorial, although he said he can empathize withFryzel's reaction. If someone wrote an article critical of the Utahassociation, Nelson said, he would respond the same way.

However, he said Fryzel's response indicates NCUA isn't aware ofhow some credit unions feel about their regulator.

“I was … surprised at [Fryzel's] reaction because that's howmany credit unions in my circles talk with each other about NCUAall the time. It's an almost weekly topic of conversation,” hesaid.

The Utah association vice president blamed the disconnectbetween the NCUA and credit unions on indirect, unspecific feedbackfrom trade associations, much like the anecdotal examples herecreated in his editorial.

Fryzel said the Office of Small Credit Union Initiatives “has aphenomenal record of working with small or troubled credit unions.”He added that OSCUI Director Bill Myers has said a lack of asuccession plan can present problems for small credit unions.

Former NCUA examiner and credit union executive Carolyn Wardenagreed with Fryzel in her comments below the editorial. Warden,located in Chicago, told Credit Union Times she's workedwith credit union boards that don't make a succession planning apriority and said available talent and competitive compensationalso make it difficult to find leaders willing and able to runsmall credit unions.

Hand holding isn't part of the NCUA's charter, she said. Creditunion boards are responsible for trained and engaged staff.

If credit unions are unprepared for exams, they won't feelcomfortable challenging an examiner, she said. Warden told thestory of an examiner who had incorrectly informed a credit unionthat its GAP measure was greater than 100, which she said ismathematically impossible. The examiner mandated the credit unionreduce long-term assets, including long-term loans.

“The CEO and board agreed it was easier to go along rather thanspeak up because they felt their regional director and examinerwould retaliate against them,” she said.

However, had the CEO and volunteers been more knowledgeableabout GAP analysis, they would have felt more comfortableexplaining the error to the examiner.

“That could have prevented the examiner from going off the deepend,” she said. “But, they weren't prepared enough to say 'there'sa math error here'.”

Fryzel's office said he was unavailable for an interview atpress time.