After the Berlin Wall came down, Congress decided to cash in thepeace dividend and began closing military bases. One of the basesthat closed was our primary sponsor, McClellan Air Force Base.

We decided to convert to a community field of membership.Unfortunately, our federal charter limited the field of membershipto such an extent that we had to switch to a state charter to servethe multicounty Sacramento region.

Charter choice is important for many reasons. The NCUA Boardrecently approved a new rule which permits the NCUA to designate astate-chartered credit union as “in troubled condition.” The ruleallows NCUA to override state regulator determined CAMEL codes.This is one more step by the NCUA to threaten the dual charteringsystem. I am concerned that credit unions who choose a statecharter are finding themselves under de facto federal regulation.That erodes the dual chartering system.

I sit on the Department of Financial Institutions advisorycommittee for California state-chartered credit unions. At our lastmeeting, the members of the committee, who representstate-chartered credit unions, shared their concerns regardingtheir recent examinations in which NCUA examiners acted as if theywere the regulator instead of the state DFI.

The NCUA has used its authority as the share insurer to takeover the examination process. In our SAFE Credit Union examinationlast year, the examiner in charge was assigned to our examinationfrom the East Coast. The NCUA examiner and his recommendations wereout of line and inconsistent with those of the DFI examinationteam.

We clearly saw that the NCUA examination team was trying tooverride the judgment of the state examiners. The NCUA examiner atone point recommended that we stop lending to members.

Clearly, the NCUA does not have confidence in state regulators.In California, that doesn't make sense. In fact, one could moreeasily have less confidence in the NCUA.

In California, our state regulator is well-funded and in myexperience (over 36 years as either a CPA for credit unions orcredit union executive) is well-qualified to regulatestate-chartered credit unions. On the other hand, there is a largebody of evidence that raises the question of whether the NCUA is acompetent regulator.

The NCUA is the regulator on whose watch occurred one of thelargest financial institution failures in the United States, thefailure of most of the large corporate credit unions, as well asnumerous catastrophic failures of natural person credit unions.

The dual charter system offers credit unions the option tochoose the best regulator. At this time for hundreds of Californiacredit unions, the better choice is a state charter. But thatchoice is meaningless if the NCUA controls the examination process,determines the CAMEL rating and dictates the findings anddetermines which solutions are acceptable to resolve thefindings.

The reason why the dual charter system is under threat is thatthe NCUA acts as both the regulator and the insurer. We need tochange that. In California, credit unions have the option forprivate share insurance. I consider that a bad option. The bestsolution for state-chartered credit unions is to have anindependent federal insurer.

I would recommend that we ask Congress to make the NCUSIFindependent from the NCUA or to allow credit unions to be insuredby the FDIC or to merge the NCUSIF and the FDIC. All three optionswould give state-chartered credit unions an independentinsurer.

An independent NCUSIF would end the overhead transfer rate. TheNCUA determines (who knows how?) an amount each year that istransferred from the insurance fund to pay for regulation ofstate-chartered credit unions. Without the overhead transfer, theNCUA would be more accountable for its budget.

An independent NCUSIF would not be conflicted when it comes timefor prompt corrective action. The NCUA has in my opinion failed topromptly address failed credit unions because failures are negativepublicity for the NCUA and raise questions about failed regulatoryoversight.

An independent insurer would have more incentive to investigatefailed credit unions to determine the causes of failure. Theinvestigation of why credit unions fail would in my opinion lead tobetter oversight and regulation. The NCUA has every reason to coverup failures that point to their own lapses in examination andoversight. No one at the NCUA was ever held accountable for thelapses in oversight at the corporate credit unions.

An independent insurer would improve problem credit unionresolution when failures occur. The NCUA badly bungled thecorporate credit union resolution process. It filed suit againstboard members and management before filing suit against the mostculpable party, the investment bankers who created and sold theflawed investments.

The NCUA's actions against board members prejudiced their latterclaims against the investment bankers. The NCUA cancelled thecorporate director's liability coverage and created a systemwideangst that to this day raises the question of whether volunteerswho follow the reasonable man rule are safe from the NCUA lawsuitsagainst their personal assets.

Henry Wirz ispresident/CEO of SAFE Credit Union in North Highlands,Calif.