Dr. KeithLeggett, a former executive of the American Bankers Association anda frequent commenter on credit union activities and the NCUA,recently posted a column on his blog site that I believe requiresclarification and correction.

While I admire Dr. Leggett’s vigilance and enjoy reading hiscommentaries, I find that his writing of Nov. 10 shows bias againstcredit unions and their regulators and for the bankingindustry.

Dr. Leggett is of the opinion that there are fewer credit unionsconverting to banks than banks to credit unions because ofdifficulties of such conversions imposed by NCUA regulations. Whilehe may feel that the conversion regulations are too stringent, hemust first recognize and understand the culture, philosophy andcommitment that exist in the credit union industry. In addition, hemust acknowledge the difference in the structure and ownershipbetween credit unions and banks.

Credit unions were founded to meet the needs of individuals ofmodest means; a group ignored by then existing financialinstitutions. They were created to provide financial services toall sectors of the economy who could not obtain those serviceselsewhere. They were founded on the principal of people helpingpeople. And most importantly they were established so that themembers of the credit union, each and every one of them, would bean owner and have a voice in its operation.

NCUA regulations mandate publication and disclosure of anyproposed credit union/bank merger as well as a proper appraisal ofthe credit union’s value. This is done for the purpose oftransparency, accuracy and to give the members of the credit unionan honest value of the institution they own.

The members are also given an opportunity to submit to thecredit union’s board of directors their thoughts and comments onany proposed merger. As owners they have a right to be heard.

If events move forward, NCUA regulations requires the directorsof the credit union to vote in the affirmative that the proposedmerger is in the best interest of the members and the selectedmerger partner is the best choice. This action by the board isproperly exercising their fiduciary responsibility.

Dr. Leggett also believes that the requirementthat credit union members are sent the terms and conditions of themerger should be stricken. He feels the language required in thedisclosure is meant to dissuade members from voting for themerger.

Dr. Leggett states the disclosure claims members will lose alltheir ownership in the business. They will. Banks are owned bystockholders not depositors which credit union members would thenbecome. The disclosure claims members will lose their right tovote. They will. Credit union members vote at annual meetings andhave a say in credit union operations. Depositors do not vote nordo they have a voice. They will not share in any liquidationprocess or extra ordinary dividends. They won’t.

Credit union members will lose not only their ownership interestbut also their right to attend annual meetings, to speak and offercomment and their right to vote for or against matters impactingthe operation of the institution.

The one point that Dr. Leggett makes that I agree with is that“mergers are business decisions.” Based on that premise, if acredit union wishes to merge with a bank they need to do what isrequired by law as every business must do. As excessive asgovernment regulations may be, some actually have a purpose andobjective.

In the case of the regulations governing credit unions into bankmergers, the required disclosures are one that I believe are notexcessive.

Ownership by a credit union member in their financialinstitution is cherished. It was given to them the day they joinedand made their first deposit. It is a privilege that should noteasily be taken away.

Michael E. Fryzel is a Chicago-based attorney and formerchairman of the NCUA Board. He can be reached [email protected].