WASHINGTON - The numbers say it all: the average number of credit card debts in U.S. households is nearly triple what it was 10 years ago (see chart on page 18.) "The typical consumer who applies for a credit card doesn't intend to carry a balance, or if they do they think it will be minimal or an infrequent occurrence," says CUNA Chief Economist Bill Hampel. "As a result, they don't pay attention to the interest rate and then they wind up carrying balances that exceed what they expected." Hampel refers to this as the "money illusion." In truth, says Hampel, two-thirds of credit card-holding households carry a balance on their accounts. What's more, he said, they tend to treat one card as a debt management device and keep a balance on the credit card with the lowest interest rate, while running up and paying off transactions on another credit card they treat as a transaction management device. According to CUNA's 1998 member survey, the average number of credit cards (MasterCard, Visa, Discover and American Express) per household for credit union members was 2.5; for non-member household, the average number was 1.5 credit cards. The situation is exacerbated by how differently credit card companies and consumers treat a credit card: when a consumer applies for a credit card, the card company considers they're applying for a loan. When a consumer applies for a credit card, they're thinking in terms of a transaction device, and this perception is encouraged by the credit card companies. Hampel cites credit card companies' affinity marketing and rewards marketing programs that distribute the merchant's discount back to the card holder as an example of this trend. By tying credit card usage to perks like frequent flyer benefits and rebate plans, the (credit) card companies encourage consumers to run up their credit card balances. The sheer number of credit cards per household is not the only issue, posits John McKechnie, vice president, legislative affairs for CUNA, because "responsible borrowers will continue to be responsible no matter how many credit cards they have or how they borrow. "On the other hand, the consumer who's less responsible will continue to use bankruptcy as a financial planning tool, no matter what kind of debt is incurred," McKechnie added. The good news, said Hampel, is that even the credit card lenders are behind some form of bankruptcy reform because of the ease of declaring Chapter 7 or Chapter 13 bankruptcy. The irony is one of the reasons for the rise in bankruptcy filings over the past 15 years is easier access by consumers to credit cards. Rather than miss a payment on a secured loan such as a mortgage or a car, consumers are more likely to run up debt on their credit cards. "The credit card becomes their lifeline before they go under," said Hampel. "The problem is it's only a temporary solution." While credit unions' total loan portfolios have increased 12% from 1998 to 1999, credit card balances outstanding only grew 5%, CUNA reports. Moreover: * In 1998, 189,000 members declared Chapter 7 bankruptcy and 59,000 declared Chapter 13; * In 1999, 162,000 members declared Chapter 7 and 55,000 declared Chapter 13 bankruptcy; Consumer debt and bankruptcy figures are being interpreted in the eye of the beholder, McKechnie warned. On one side are opponents of bankruptcy legislation who've accused the credit card companies of preying on consumers and flooding them with credit card offers. On the other side are bankruptcy legislation proponents who argue that the real enemy are consumers who abuse their borrowing powers. "The bankruptcy issue is a mature debate," said McKechnie. "Lines have been drawn, now it's down to give and take." McKechnie also cautioned that bankruptcy legislation is not as cut-and-dry as some suggest. There are even some legislators on Capitol Hill who've admitted that if credit card companies are not allowed to offer credit cards in certain low income areas, they stand the chance of being accused of redlining. "There's a lot of gray area," he remarked. Despite the unresolved issues, McKechnie remains optimistic Congress will pass bankruptcy legislation this session, and that even though the Senate is weighed down with "procedural morass"-minimum wage and tax cut bills attached to the bankruptcy measure-a solution is in sight. He expects the bankruptcy will to get to conference within the next two weeks. -...

WASHINGTON - First it was online lender E-Loan which announced its new policy to hand over to consumers their Fair, Isaac "FICO" credit scores (CU Times, March 29), arguing that consumers have a right to know how their mortgage loans are processed and their credit worthiness. In the latest attack on Fair, Isaac's credit scoring system, Fannie Mae's Chairman and CEO Franklin Raines is calling the system "opaque" and announced the company's plans to wean itself from the FICO credit score. Speaking at the March 20 meeting of the National Community Reinvestment Coalition about "taking the mystery out of loan decisions," Raines said he believes "consumers have a right to know what's in the system. So last January, Fannie Mae revealed the 14 decision factors used by our underwriting system, Desktop Underwriter. But we're going to go farther than that. Our next step is to stop relying on the FICO credit score, which is too opaque. We're going to develop our own credit-assessment model. We won't have a black box or even a glass box. We will have a completely open book. "Consumers have a right to understand what is behind a lender's decision. They have a right to know how they are being judged, on what basis...consumers are still too much in the dark about how these systems work," he further commented. Consumers typically do not see their FICO score unless they're turned down for credit. Craig Watts, consumer affairs manager Fair, Isaacs says just having their credit scores in hand is useless unless consumers understand how the scores affect lenders' credit standards. He explained one of the misconceptions consumers have about their credit score is they think it's a static number. Quite the contrary is true, Watts said, credit scores are dynamic. "Every time a creditor adds information on that consumer, their credit score changes." In 1998, Fair, Isaac revised the FICO score formula so that consumers who made multiple credit applications would not be penalized for making multiple inquiries. As a result, any credit inquiries that appear on a credit report 14 days before a loan decision is made that have to do with the same type of loan, are counted as one inquiry. This policy does not apply to credit card searches, since consumers typically make credit card decisions faster than loan decisions. Watts said Fair, Isaac agrees that consumers have a right to any information and tools lenders use to make their loan decision. But it's just as important understand how the tools are used. -...

OLYMPIA, Wash. - Towing companies in Washington State can no longer deny payment from consumers drawn from credit union checking accounts and credit cards, as a result of a new law initiated by the Washington Credit Union League and signed by Gov. Gary Locke. H.B. 2343, sponsored by state Reps. Brad Benson (R-6), Brian Hatfield (D-19) and Luke Esser (R-48) requires towing companies to accept personal checks and credit cards drawn on all in-state branches of any financial institution. The new law is effective June 8, 2000. Prior to the new law, towing companies were only required to accept checks and credit cards from "major in-state banks." H.B. 2343 defines acceptable "commercially reasonable tender" as "cash, major bank credit cards issued by financial institutions, or personal checks drawn on Washington state branches of financial institutions..." Most towing companies accepted payments drawn from credit union accounts before the bill was signed by the governor, but a few refused to recognize credit union accounts....

Stanford FCU CEO Warren Marshall has resigned after 15 years of service to head up Internet banking CUSO.............Page 3...

NEW YORK - Americans are saving less, while spending more, latest reports show and credit, debit and business cards increasingly the most common forms of payment being used by consumers. Consumers increased their spending 1% in February, the Commerce Department said, a pace representing more than double their income growth. Personal income, including wages, interest and government benefits, increased by only 0.4%. The rate of personal savings fell to 0.8% in February, a record monthly low. While the rate of savings is at an all time low, credit, debit and business card use is at an all-time high. According to a Visa International payments panel study, 26 cents of every $1 in U.S. discretionary consumer spending is on plastic. About half of that is on Visa cards. Visa says it processed 40 billion transactions in 1999, the equivalent of about 1,268 transactions per second. These transactions were in traditional categories such as consumer goods, to non-traditional areas such as movie theaters and fast-food restaurants. In addition, about 2% of Visa's 1999 volume was from transactions over the Internet. -...

ALAMOGORDO, N.M. -Almost three years ago, Otero Federal Credit Union began offering members Visa/check card service. In Feb. 1999, the $94 million credit union joined with STAR Systems, one of the largest ATM and retail merchant card networks in the U.S. In the next 35-40 days, the credit union's members will have access to one more plastic service - debit cards. Approximately 1,100 of OFCU's 21,000 members hold an "old" Visa/check card, said OFCU's Billie Kizziar, assistant vice president, MIS/card services manager. Those cards, she explained, can only be used at ATMs members cannot use them with merchants to make purchases nor get cash back. "With the new Visa/check/ debit card, one card does it all," said Kizziar. "Our members need only one card to complete all their transactions either at an ATM or a merchant location. We don't know if all our members will want the new card, but we're going to offer it to them anyway." Members who do not want debit card service and prefer to keep their old Visa/check card will be able to hold on to them until Otero's contract runs out with the company handling that program. -...

TALLAHASSEE, Fla. - With three weeks left until the state legislature is scheduled to adjourn (May 5) representatives of credit unions, consumer groups, social services groups and bankers met in Florida Comptroller Robert Milligan's office April 3 along with Attorney General Bob Butterworth, to devise strategy and proposals that can be presented to the state legislature on the subjects of fringe lending, title loans and so-called payday loans. For the fourth time in as many years, legislation is working its way through the Florida legislature on each subject (CU Times, March 29), but as of April 3 no legislation had been taken up and passed by either the state House or Senate. S. 1834c1, creating the "Fair Accountability in Interest Rate Act of 2000" was introduced by state Sen. Jack Latvala (R-19), Kendrick Meek (D-36), Patsy Ann Kurth (D-15) and Burt Saunders (R-25). It was referred to the Senate Governmental Oversight and Productivity Committee where it was combined with committee substitute bill S. 694. It remains in committee. On the House side, Rep. Bill Sublette (R-40) introduced H.B. 301. That bill is also in committee, the House General Government Appropriations Committee. Representing credit unions were: Aletta Shutes, executive vice president of the Florida Credit Union League; Mark Ivester, vice president of communications for the league; and Chalker W. Brown, vice president of the NAS (Naval Air Station) Jacksonville branch of Jax Navy FCU. Speaking to the assembled group, Milligan and Butterworth stressed the need to design legislation to combat payday lending that would prove to be acceptable to a majority of the legislature. Speaking for himself, Milligan said he wants to see something done to end the constant roll over of payday loans, but he did not want to specify an interest rate or fee. He suggested a requirement that a payday advance would not become a loan unless it was for more than 14 days. After that, he said, it should be a loan subject to the same requirements as any other loan, including interest rate. Continuation, or rollover of the loan, would not be allowed unless it was subject to the more favorable rate. -...

ARLINGTON, Va. - Gavin Gee, credit union regulator for Idaho was recognized as this year's winner of the NASCUS Pierre Jay award in recognition of his contributions to the state credit union system and his service and commitment to NASCUS and the dual chartering system. The NASCUS Pierre Jay award is named after the first Commissioner of Banks in Massachusetts who was appointed in April 1906. Jay learned about the cooperative credit union movement in Milan, Italy and, over the objection of the banking industry, worked with Edward Filene to champion the development of the credit union movement in the U.S. Mike Fitzgerald of Michigan was the first recipient of the NASCUS Pierre Jay award in 1997. Gee was chairman of the NASCUS Performance Standards Committee from 1992-1998 and was instrumental in the development of the NASCUS accreditation program. For six years, he was NASCUS' voting representative to the Federal Financial Institutions Exam Council; he served as vice chair during the redefinition of NASCUS in 1992 and then served 18 months as the first chair of the "new NASCUS." - ekingoff@cutimes.com...

Fort Worth, Texas-area credit unions continue to operate in face of devastation from tornadoes................................Page 23...

GUADALAJARA, Mexico - Lured by interest rates of 45% a year, thousands of credit union members with deposits in The Puerto Vallarta People's Credit Union may have been swindled by the CU's founder for as much as $160 million....

NONE...

WASHINGTON - CUNA has joined the National Partners for Financial Empowerment coalition being spearheaded by the Treasury Department....

MILWAUKEE - eFunds Corp., an EFT company spun off from Deluxe Corp. in January, has filed for an initial public offering with the Securities and Exchange Commission....

MADISON, Wis. - Gateway Community Credit Union, a $7 million CU serving 1,800 members, has merged with Dane County CU, a $40 million CU with 7,200 members....

WASHINGTON-Representative Bob Barr's (R-Ga.) requested hearings on the subject of "The Fourth Amendment and the Internet" were scheduled (at press time) to be held on April 6 by the Constitution Subcommittee....

MADISON, Wis. - CUNA Mutual Group will be working with New Resources Corporation, Chicago, to refresh its Web site (www.cunamutual. org) Officially dubbed the Web Site Refresh project, it will overhaul CMG's site, including content enhancements and design changes. The new site will also allow users to personalize their site experience. The new site is expected to go live in the summer of 2000....

VALLEY FORGE, Pa. - Credit union data processor USERS announced that it has signed 50 credit unions to migrate to the Cache' post-relational database from InterSystems Corporation. Thirty of those CUs are now live with Cache'. "The ability for credit unions to choose an open database that is affordable, SQL compliant, optimized for on-line transaction processing, and uses object programming tools offers obvious advantages and opportunities," said Joe Barry, vice president of marketing for USERS. Cache' is a post-relational database that has been heralded for its efficiency in handling large volumes of transactions. It is in the mold of those from Oracle and Sybase, but cheaper, according to USERS. It is an open, non-proprietary database. USERS' clients are utilizing Cache' in a number of areas, but it has many benefits for supporting e-commerce applications. Carrie Mansueti, manager of information systems for 1st Advantage CU, Newport News, Va., said Cache' has helped the CU cut back-office processing time by 40% initially, and 20% reductions over time as the database has grown in size. USERS is a Fiserv subsidiary. For more information visit www.users.com...

FORT WORTH, Texas - State National Companies added 21 new clients to its 24x7 call center division, Loan Link Lending Center, in the third and fourth quarter of 1999. Together the 21 credit unions command $5.4 billion in assets. The CUs will receive 24-hour call center lending services in addition to Loan Link's new Internet lending service introduced last summer. State National also announced that it has enhanced its Internet loan approval system to make decisions in 60 seconds or less. For more details visit www.statenational.com and www.loanlink lending.com...

ATLANTA - Netzee, a provider of Internet banking and e-commerce solutions for financials, has formed a strategic alliance with financial services firm TD Waterhouse to provide TD Waterhouse's online brokerage services to Netzee clients. Netzee officials said the alliance will help financials position themselves as one-stop-shops for consumers. Netzee was founded in 1999 as a subsidiary of the InterCept Group. Netzee went public in November of 1999, raising $61.6 million at the IPO. For more information visit www.netzee.com....

INDIANAPOLIS - Credit union data processor re:Member Data has just announced its 2000 education schedule. The Indy 2000 Technical conference to be held in Indianapolis from June 19-22 will focus on technical issues revolving around re:Member Data's cuStar solution. At that conference re:Member Data will give away a Harley Davidson motorcycle, as part of a promotional charitable campaign in conjunction with Riley Hospital for Children in Indianapolis. re:Member Data's second conference this year is the Strategic Partner Conference taking place in San Diego from Oct. 18-20. According to re:Member Data this conference is geared to credit union executives and board members. The conference will feature a presentation by Elizabeth Rech of the Peppers and Rogers Group. "Instead of addressing two unique training requirements with one general conference, we determined that two events would provide the best forum for learning," said re:Member Data President Terri Renner....

CHICAGO - For credit unions looking to gauge how their electronic services are going over with users, the Bank Administration Institute may have some help. BAI has introduced eCustomer Benchmarketing Online, a Web-based survey tool that allows financials with transactional Internet banking services to measure user satisfaction. The survey captures users' evaluations of the financials' Web site effectiveness, satisfaction with Internet banking products, quality of customer service, delivery channel preferences, and other factors. Users will be invited to take the survey from the financial's Web site, but the actual survey and data capture will be hosted through BAI, allowing financials to participate without installing special software. - pgentile@cutimes.com...

FORT WORTH, Texas - EDS and Educational Employees CU's unused Y2K disaster plan helped the CU continue to operate in real time after the CU's headquarters were severely damaged by a tornado that devastated parts of Fort Worth (see related story page 23.) Who would have thought that anybody would have been thankful for the Y2K computer glitch? Leaders at Educational Employees CU here certainly are. "Thank god for Y2K," said Bob Rogers, Chairman of Educational Employees CU. The credit union's unused Y2K recovery plan finally got a workout. It helped the credit union coordinate efforts and get systems back online. EECU's data processor, EDS, also was key to keeping the credit union running in real time. EDS sent a team in to help move computers to a branch that was not damaged by the tornado. "We immediately moved the servers and by 2 a.m. (the night of the tornado) everything was hooked up, and by 4 a.m was going," said Dana Rowlett, president of EDS' credit union division. "The ATMs worked through the night in a positive balance mode." The EDS team was in-touch with key credit union contacts throughout the night after the tornado hit. "It was a seamless transition," said Rowlett....

ATLANTA - HomeCom Communications, a provider of Internet software solutions for the financial services industry, announced a strategic alliance with FundsXpress Financial Network, Inc., a provider of Internet banking services. Members and customers of the 270 credit union and bank clients of FundsXpress will have access to Internet insurance products available through HomeCom's InsureRate, including personal auto, homeowners, fixed annuities and term-life policies. Through InsureRate consumers receive comparative quotes from leading insurance carriers. FundsXpress has a standing strategic alliance with CUNA for providing Internet banking solutions to credit unions....

MONETT, Mo. - Data processor Jack Henry & Associates has signed a definitive agreement to acquire BancData Solutions, a co-operative data center providing core processing and item capture for 22 community banks in California. "This acquisition gives us a very strong presence on the West coast for the first time and provides a great opportunity to build more relationships with California's growing community bank market," said Michael Henry, chairman and CEO of Jack Henry. While Jack Henry predominantly serves banks, the company made an entrance into the credit union industry in December 1998 when it acquired data processor Peerless Systems, Richardson, Texas. Peerless serves community banks and credit unions....

NEW ORLEANS - With identify theft increasingly one of the more popular forms of fraud perpetrated, Equifax has introduced a second tier level of its fraud prevention tools to attack the problem. FraudScan Plus includes all the features of the company's core FraudScan product, plus it uses the social security number in the verification process. In a matter of seconds, officials say, the product simultaneously searches multiple databases and determines if the applicant's name, address, phone number and Social Security number can be matched with a number of data sources and indicates the number of data sources which verified the applicant-provided information. The service provider can choose the level of service by indicating how many data sources are to be searched and to what degree of detail. Equifax says the verification rate is typically about 85-93%, depending on the level of service the provider chooses....

DALLAS - Some people celebrated the new millennium with a party. TNB, a full service card processing provider owned and directed by credit unions, commemorated the century turnover by redesigning the credit and debit cards it offers credit unions. The four new card designs are manufactured by Oberthur Card Systems Inc., formerly De La Rue Card Systems and one of the leading producers of credit cards in the U.S. The newly designed cards can be customized with the participating credit union's name and logo and printed in a wide selection of colors. The card design options include a blue block design for MasterCardT standard and VisaT classic; gold block design for Gold MasterCardT and VisaT gold; platinum block design for platinum MasterCardT; and a green "money" design for MasterMoneyT and VisaT checkcard. In addition to the new designs, credit unions still have the option of creating their own customized card, as well as have access to TNB's group of eight standard card designs. TNB provides plastic cards to about 400 credit unions. Participating CUs are not required to purchase their inventory. Instead, TNB maintains inventory levels so credit unions can issue cards as needed for members. -...

SAN RAFAEL, Calif. - Credit approved on the Internet is expected to increase 74%, says Forrester Research, and with consumers clamoring for instant credit approval, that's what Fair, Isaac's new decisioning technology, LiquidCreditT has been developed for. It's not enough to use the Internet simply to make faster decisions, said Tom Grudnowski, president/CEO, Fair, Isaac. The right credit decision means more than approving a single transaction, it means finding the customer who will be profitable and loyal in an ongoing relationship. Forrester Research estimates that by 2003, more than $160 billion in consumer credit will be extended online. LiquidCredit instantly evaluates applicant risk, returns suggested credit decisions based on product-matching analytics and the grantor's strategy, and matches scored applicants to various credit grantors' lending criteria, presenting applicants with a variety of credit options. The product offers a Web-based decision engine, credit reporting agency interface, association transaction management tools and the ability for businesses to design their own decision criteria and strategies. LiquidCredit will be available beginning May 17 at Fair, Isaac's InterACT conference in San Francisco....

NEW YORK - Visa International plans to create a separate company that will solely handle credit and debit card processing. Announced April 3, the new venture will be a direct subsidiary of Visa International and be known temporarily as the shared services organization. According to American Banker, the new company will initially just offer settlement and authorization functions that have been handled by VisaNet. Eventually, the services the company provides will expand and potentially compete directly with First Data Corp., Electronic Data Systems Corp. and other outsourcing companies....

Thanks Mike for "telling it like it was." When I returned to my credit union from CUNA's GAC in Washington, D.C., I tried to explain what a ludicrous situation NCUA Chairman Norm D'Amours created at the conference, but my description did not "do it justice." Mike Welch's column (CU Times, March 8) hit the nail on the head. How ironic was it that the other two NCUA Board members appeared professional, articulate and "in touch." It's a shame that Mr. D'Amours felt a need to create controversy where none really existed, presumably to deflect attention from his internal agency mismanagement practices. At a time when Mr. D'Amours should be concerned about the legacy he will leave behind, the only thing he left behind was the foul odor of sour grapes. Danile J. Vogler Chief Administrator Officer Anheuser-Busch Employees' Credit Union...

Mike Welch's February 23, 2000 column on change or die was not only patronizingly offensive but wrongheaded in its inference that you can't survive without share drafts, credit cards, risk based lending, indirect lending, ATMs etc. You can survive as a plain vanilla operation - not only can you survive you can do well by the credit union, your members, your staff and of course by yourself. My staff salary structure is about 20% above national average. We have one employee per 925 members as compared to a national average of one employee per 365 members. Our weighted average rate on loans is 7.8% and we pay a flat no minimum dividend rate of 4.25%. Sixty-eight per cent of our loans reprice quarterly. Our capital to risk assets ratio is 11.5% but more importantly only 6% of our outstanding loans are on an unsecured basis. We no longer enjoy significant growth but it isn't because we don't push affinity services. It's because we won't violate conservative lending policies for the sake of growth alone. To buttress the discredited theory that you can't survive unless your growth rate is exponential, Mike infers that credit unions that failed to adopt the all things to all men (full service) approach make up the majority of credit unions that have "disappeared." In point of fact the majority of credit unions that failed to continue as legal entities in the past 30 years did so due to sponsors going out of business and their attempts to become full service providers, not because they choose to remain plain vanilla niche marketers. In short Mike you've got it just backwards. Attempts to ape commercial lenders' strategy and tactics have caused more failures and concurrent losses to the NCUSIF than our imputed myopia in sticking to basics. And the best (worst) is yet to come. Your mega buck credit unions and their wanna be contemporaries will bankrupt the NCUSIF with their growth at any price lemming-like rush to failure. Mike, somebody, NCUA examiners, my peers, industry observers, (sometimes mislabeled experts) have been telling me for close to 25 years of my 44 year career that I couldn't survive reasonably well with a plain vanilla approach. Well Mike, I am still here and doing well and I am still tired of snide smarmy remarks labeling those of us who will outlive industry innovators, as the Colonel Blimp of Finance. By the way you are equally off base in laying the turmoil and divisiveness at NCUA at Chairman D'Amours' door step. Try scrutinizing the actions of Wheat and Dollar in their naked power struggle and their populist posturing. John U. Barker CEO Hudson River Teachers FCU...

When it comes to truly understanding the nature "inside" the credit union marketplace, Mike Welch consistently gets it right. His Feb. 16 column, "Hiring right CU CEO most important decision" is an excellent example. One of the most valuable assets in credit unions never shows up on an organization's balance sheet. I'm talking about the intellectual capital contained in the minds and hearts of today's credit union CEOs (and senior management teams). We have seen first hand that the most important job that a board of directors can do in fulfilling its fiduciary responsibility is to properly hire and retain the competent professional leader we call the Chief Executive Officer. After consulting with credit union boards, committees, and paid professionals of credit unions of all sizes and sophistication for the last 20 years, a continuing (and somewhat disturbing) common denominator for a credit union's success is the relationship a board has with their CEO, and the CEO with their board. We have found that there is a direct correlation between the overall value the credit union provides its membership and the attitudes and working relationships between the boards and their CEOs. The strength of professional relationship between the parties goes hand-in-hand with the organization's ability to perform at its optimum, thereby generating maximum member benefit. We have the great opportunity of working with some of the finest boards and CEOs in North America. They all exhibit common traits and characteristics that lead to their organizational success, and ultimately, the most significant positive returns to their memberships. These credit union boards and their CEOs continually "do it right," by actively implementing all "Ten Commandments of Positive, Productive Board/CEO Relationships." They are: 1. All parties (board and CEO) correctly understand their responsibilities, and the responsibilities of the other party, both from a conceptual and practical standpoint. 2. Both the board and CEO work diligently to discover together, where they want the organization to go (strategic direction), and know why they want to get there (vision and values). 3. After getting the facts and truthfully assessing the environment and specific situation, both board and CEO are decisive in their decision-making and actively measure their follow-through. 4. Both boards and CEOs have a high degree of respect for each other, and actively solicit and listen closely to the concerns, needs, wants and desires of the other. Each party works to emotionally place themselves into the shoes of the other party, and works hard for the other. 5. The board appropriately leaves the tactics (Who, How, When, How Much) to the CEO. The board leaves "how to get there" to the paid professionals. 6. Good, healthy, honest listening (not just talking) takes place on an ongoing basis between and among the board and CEO. 7. Both board and CEO continuously avail themselves of outside information, education, expertise, experience and counsel. 8. Both the board and CEO are wise (and humble) enough to seek the other's advice, opinions, and feedback, prior to making a major decision. 9. When misunderstandings arise, both board and CEO actively seek to resolve the issue, before it grows into a real problem. 10. Both board and CEO "assert their authority, power, and control" over the other, only as a last resort, when all other avenues have been fully exhausted. When these simple commandments are fully understood and actively followed by all, the organization is much more effective and results driven, thereby creating greater positive member benefit. Isn't that what we are all working for? Ron C. Nice President Nice Enterprises, Inc....

Congratulations on your 10th anniversary! I became CEO of Virginia Power/North Carolina Power Credit Union at almost the same time as the beginning of Credit Union Times. I read (or skim) most everything printed in our industry but yours is prized most for its quality and independence. Keep up the good work! Michael C. Swalley President/CEO Virginia Power/North Carolina Power CU...

Speaking for myself, I agree with NCUA Chairman Norm D'Amours' statements that Mike Welch chose to ridicule. In Welch's March 8 publisher's column, "D'Amours' last hurrah should be his last," Welch strongly criticized, mocked, and launched a personal petty attack on D'Amours for his astute observation that the national boards are made up of paid credit union staff. I'm surprised Welch didn't think through his comments before he played to his audience, paid credit union professionals. I am a volunteer. When I attend credit union meetings, I need to come in early or make up the hours elsewhere in the week. When I attend a credit union conference, I use my vacation. Volunteering means that I give up time from my personal life. When Welch states that the entire CUNA board is made up of unpaid volunteers, he is being disingenuous. How many of these "volunteers" took vacation time so they could come to this conference? I'll bet they are being paid for being there by their employers. I remain concerned about the long term viability of the credit union movement. Without member involvement, a credit union is just a bank. Mocking someone's message doesn't make it less true. Alan Merriam, Chairman Supervisory Committee Star One FCU...

Paul Gentile's article, "The marketing potential of providing members Internet access" (CU Times March 22,1999) spurred discussion on an issue we've been looking at here for some time. We believe providing members with Internet access is a great idea with great potential if it works properly. We started by discussing the possibility of expanding field of memberships with local ISPs. Management and the board both felt it would be an excellent way to grow and expand with our online banking capabilities. During those discussions it also led us to the possibility of contracting with an ISP to provide service to our members or even the next step of an e-based CUSO for development of an ISP for member/potential members and other e-commerce related businesses. Our initial request to the Missouri Division of Credit Unions for FOM expansion to include ISPs was denied. They said that those ISP users would not meet regulatory requirements as a community or group. So we're working on plan B now. John M. Hopkins Jr. President Spirit of St. Louis CU...

"To improve the general financial stability by meeting the liquidity needs of credit unions." It's a simple purpose and it has been the operating cornerstone of the Central Liquidity Facility (CLF) since its formulation in 1978. Capitalized by its shareholders and cooperatively administered by NCUA and the corporate credit union network, the CLF stands ready to provide needed liquidity to credit unions for short-term, seasonal and protracted emergency liquidity needs. As a special industry lender, the CLF is concerned only with credit unions' liquidity needs. The CLF cannot lend to a credit union for the purpose of expanding a credit union's portfolio. Moreover, corporate credit unions can't access the CLF - they serve administrative and delivery system functions, deriving no benefit from credit unions' use of the funds. In the past, the CLF has effectively provided emergency liquidity to credit unions. An example? In 1982, the Comptroller of the Currency closed the Penn Square Bank, an institution in Oklahoma with over $500 million in assets. One hundred thirty-nine federally-insured credit unions had uninsured deposits of $111.4 million in Penn Square. Financial regulators determined that 22% of the uninsured deposits ($22.3 million) should be written off as having no value and the FDIC issued receiver's certificates on the remaining uninsured balances. Credit unions carried these certificates as non-earning assets on their books. The impact of the non-earning assets coupled with the possibility of further devaluation prompted several corporates to request advances from the CLF on behalf of their members. Within weeks, 29 advances totaling $29 million were disbursed from the CLF. The funds were used to provide credit union managers an opportunity to restructure their shares to absorb the loss without panic, fear or loss of member confidence in the credit union system. The failure of Penn Square was highly publicized and the list of uninsured depositors was widely published. There was an urgent need to maintain the confidence in the credit union system and more particularly, in those credit unions reporting large losses in relation to capital. The CLF loans were a crucial part of the system that kept any crisis of confidence from occurring. Credit union boards and staff seldom talk about the CLF or how it functions. So why bring it up now? The CLF's lending activities are funded by its capital and by borrowing from outside sources. The Federal Credit Union Act imposes a limit on the CLF's borrowing authority - 12 times the CLF's subscribed stock and retained earnings which equates to approximately $21 billion. In 1981, Congress imposed a $600 million cap on the CLF's new borrowing for loans to credit unions. Each year, NCUA testifies before the House Appropriations Subcommittee on VA-HUD and Independent Agencies (Subcommittee) to request appropriations for the CLF. Last year, NCUA asked the Subcommittee to omit the CLF's borrowing cap from the appropriations bill in order to allow the CLF to fill its role as a backup liquidity provider to credit unions in the event of extraordinary liquidity demands during Y2K. As a result, in May 1999, President Clinton signed into law an emergency appropriations bill which contains a provision that lifts the CLF's borrowing cap from $600 million to its full $21 billion statutory authority. NCUA recently testified before the Subcommittee regarding fiscal year 2001 appropriations. NCUA has again requested the Subcommittee to omit the CLF's borrowing cap from the appropriations bill to allow the CLF to borrow up to its full statutory authority. A consensus appears to have formed in Congress regarding the CLF. It enjoys broad bi-partisan support for continuation as a source of backup liquidity. The Treasury Department's well-articulated opposition to the CLF in its 1997 Study on Credit Unions has found few if any adherents. And yet there is an equally clear Congressional curiosity about the CLF, manifested by the House Banking Committee leadership's March 9 request that the General Accounting Office (GAO) conduct a six-week study of the CLF, its year-end borrowing activities, and its general operations. Congress gives no indications of passivity when it comes to guaranteeing the safety and soundness of financial institutions, even ones as well-regarded as credit unions. That explains why the Subcommittee adopted a "wait-and-see" attitude regarding the proper level of borrowing authority for the CLF, pending the results of the GAO study. So why lift the CLF's borrowing cap to the full statutory authority? No value can be placed on the confidence generated in a system that has its own liquidity backstop. That certainly was true for Y2K. While massive Y2K-related withdrawals did not materialize, the knowledge that the CLF was available as a backstop was an important factor in lessening actual liquidity demand during the Y2K event. Moreover, the CLF did actively lend during the last quarter of 1999. In response to credit union liquidity needs, the CLF, through the corporate credit union network, made a total of 157 short-term, mostly overnight loans totaling $666.2 million. In other words, the CLF worked during Y2K. Y2K, however, was a well-anticipated event. The credit union system knew Y2K was coming and it was prepared. Credit unions set aside extra cash to fund their ATMs and other cash withdrawals. Corporate credit unions anticipated and met larger liquidity demands from their members. In fact, the proportion of assets in net loans at corporates went up by a factor of ten from December 1998 ($126,587,563) to December 1999 ($1,278,623,066). What happens, however, when the system is not prepared? As stated in NCUA's testimony before the appropriations subcommittee a few weeks ago: "The imposition of an inadequate borrowing cap on the CLF could prevent it from fulfilling its statutory mission to promote credit union stability by providing liquidity and could potentially destabilize member confidence during an abrupt, unanticipated emergency situation." Here's an example: Suppose a credit union's members, concerned about their employer's merger with another company, decide to pull funds out of the credit union. Using their PCs, members can move money instantaneously at any time of the day. The credit union has precious little time to act and may be in danger of restricting withdrawals or close its doors without the ability to move quickly to obtain needed liquidity. The CLF must have its full statutory borrowing authority to meet this and other liquidity needs. This is particularly true given the 7/12 fold increase in federally-insured credit unions assets (from $54.9 million to $411.4 billion as of year-end 1999) since imposition of the 1981 borrowing cap. The CLF serves an integral function within the credit union system. It is meant to be a lender of unfailing reliability when credit unions need liquidity. A $600 million borrowing cap is simply not sufficient to assure that the CLF can carry out its statutory purpose. As Congress assesses the appropriate borrowing cap for the CLF, it need look no further than the formula originally enunciated in the Federal Credit Union Act when the CLF was established....

Is any one else getting as overwhelmed and confused as I am with all the new players entering the exploding world of credit union high-tech and the growing list of complex services they are developing and bringing to market? Is it just me, or does it seem like with each new day comes another announcement that some start-up organization has found a new and improved way to meet needs that many credit unions haven't yet figured out they have? Add to them, the new approaches being taken by existing national groups serving credit unions that have recently jumped on the dot.com and e-bandwagons with offerings that appear to be beyond their original purposes. And if all of those aren't enough, add the growing number of providers well established in the banking industry that have only recently discovered the booming credit union industry and are anxious to tap into the perceived gravy train. Despite comprehensive news reports and regular backgrounder pieces in Credit Union Times, it is getting difficult if not darn right impossible for some of us nontechnical types to keep straight who does what, how, with whom, at what cost, and how it all fits in with whatever else a credit union is already doing to remain competitive. Simply put, you can't tell the players without a program. Someone ought to develop and make available a comprehensive listing of all today's players. It should list who they are, and tell who owns them, with whom they are allied, what makes them different, and what exactly it is they do. To be of any value, such a list needs to be kept up to date on a daily basis. Old descriptions no longer apply. Even established organizations like CUNA and U.S. Central already have, or are just now, launching new programs. And there are many brand new, in-house, players. For example, MEMBERS Development Company LLC is one of the newest and most ambitious efforts. As its name clearly says, its purpose is to develop broader financial products and services for credit union members that can compete with emerging competition. That competition has recently been made stronger with the enactment of banker-friendly laws and regulations. Although just getting underway, MEMBERS Development Company seems to be doing most everything right so far. It is structured to be nonpolitical. It is unique and not, as some observers have already suggested, a recreation of the old CUNA Service Group. MDC is controlled and partially financed by credit union owners (31 CUs and six CUSOs own 51%). It also has the financial backing of the national credit union organization with the most financial and staff resources, the CUNA Mutual Group (49% ownership). MDC's agenda of possibilities for development is already a full one. It ranges from a broker/dealer ownership and direct channel low-load mutual funds, to a member-directed asset allocation program and off-balance sheet lending program. The organization has excellent potential to quickly bring competitive and state-of-the-art credit union member offerings to market that are attractively priced and packaged. There are some potential roadblocks, however. MDC's CU owners need to remember that the credit unions, not the credit union CEOs, are the actual owners. Also, the group's leadership needs to get off its secrecy kick. Credit unions have a right to know how their money is being spent. And finally, MDC, like all the other new and existing groups wanting a slice of the expanding credit union industry pie, need to avoid duplication. For example, scratch "branding" off the list of possible initiatives. There are already enough other credit union organizations proving that they don't understand the concept of branding. MDC resources could be better spent elsewhere. Also new on the scene is the Center for Credit Union Innovation (CCUI). It was known as the "incubator project" as it was being put together over the last year or so. The thrust for this one comes from CUNA, but the CUNA Mutual Group, Filene Institute, the American Association of Credit Union Leagues, and a handful of high-profile credit union CEOs also play key roles. CUNA CEO Dan Mica describes the new venture as a way to move away from just publishing papers (as in Filene Institute) to actually developing products. Like MDC described above, the new group's management also has ties to CMG. MDC's CEO is a current employee; CCUI's is a former CMG staffer. Unlike MDC, the CCUI appears to have a cumbersome structure, too many masters to please, a potential for politicization, and no clear program of work. It is, however, still one more new organization to keep track of that is looking for innovative ways to keep credit unions competitive. Meanwhile, U.S. Central has created a new subsidiary (Corporate Network eCom, LLC) to develop an e-initiative on its own and by partnering with other organizations also already involved with credit unions, some still to be revealed. Just announced, however, Payment Systems for Credit Unions (PSCU) is now in an alliance with CNE to market and support its Internet banking product, Memberstreet. Some feel that this is just the first step in the emergence of a major new player. CUNA itself is of course already well immersed in e-commerce with their up and running alliance with FundsXpress. And then there is what's left of the old CSG and its new offshoot, CUNA Strategic Services. Of course the number of outside players continues to grow very rapidly. This is especially true in such high-tech areas as portals, home banking, aggregation, Internet access, on-line transactions of all types, customized content, and tons more of similar developments. If all this sounds like I'm confused, I think I just proved it. No wonder I didn't understand half the commercials aired during the most recent Super Bowl. Quick, where's my program?...

NONE...

Concentrex, Portland, Ore., a provider of technology-powered solutions for financial services delivery to more than 5,000 clients nationwide, has made the following appointments: Helen "Rusty" Beckel, vice president of product & technology alliances; and Scott Fenton, vice president of information systems. RSM McGladry, Inc., St. Paul, Minn., a national financial institutions consulting group, has named Cristin Burnett senior consultant/supervisor. Premier Systems Inc., W. Des Moines, Iowa, a data processing service bureau for CUs, has named Dan Cormeny workstation specialist. Service Centers Corporation, Southfield, Mich., a CUSO owned by 240 CUs with 20 shared branches in Michigan (and four in Virginia and Maryland), has named Tobye S. Stein senior vice president. United Datatronics Inc., Tallahassee, Fla., a CUSO provider of data processing support services to local CUs, has named Ray M. Wright executive vice president/chief operations officer....

Arizona State Savings & CU, Phoenix, has made the following appointments: Ruth Gaon, regional vice president in charge of Phoenix, Safford and Scottsdale; Fawn Terwilliger, vice president of credit services with oversight of the lending and loan adjustment areas. Patelco CU, San Francisco, has named John Shields senior vice president of e-business....

Empire Corporate FCU, Albany, N.Y., has made the following appointments: Linda J. Hillman, vice president of PR/marketing & sales; and Francis R. Fleury Jr., vice president of project management. First Atlantic FCU, W. Long Branch, N.J., has made the following appointments: Irene Hoosack branch manager of the main post office branch in Fort Monmouth; and Beth Strollo, vice president of support services. Mon-Oc FCU, Toms River, N.J., has announced that President L. Edward Brzozowski has been appointed to the Federal Reserve Bank of Philadelphia's Credit Union Council....

Bay Gulf CU, Tampa, Fla., has named Marilyn Bolling vice president of marketing and research. Jax Navy FCU, Jacksonville, Fla., has announced that William Patty, a director for 20 years, has retired. N.C. Local Government Employees' FCU, Raleigh, N.C., has named Maurice R. Smith president/CEO. Pinellas County Teachers CU, Largo, Fla., has named Leslie Galea vice president of marketing....