GAO Report on CUs Subject to Interpretation

By now all interested parties have had ample opportunity to express their views on the 183-page report on the financial condition of the U.S. credit union industry which was issued late last year by the U.S. General Accounting Office. As expected, among the first to weigh in with a detailed written interpretation of what the so-called GAO Report means was NCUA. That was to be expected since a great deal of the report was actually devoted to NCUA and NCUSIF matters. NCUA’s response via its Chairman Dennis Dollar was a public relations masterpiece. It contained equal parts of “appreciate your hard work and recommendations” with carefully worded “we’ll get back to you” statements. Well thought out interpretative responses were also predictably received immediately from various credit union trade groups, separately and collectively. They were all very thorough and diplomatic, but also very firm. To almost no one’s surprise, lobbyists working for the national (and one state, Utah of course) banking trade associations felt compelled to put in their whining two-cents worth. With a couple of important exceptions, credit union representatives tried to put a positive spin on the report. The bankers interpreted it as still another opportunity to bring up every tired anti-credit union argument they have run up the flag pole in the past. In the view of the banking industry the report agreed with its decades-old claims that credit unions are getting too big. That CUs were meant to only serve those of small means. That NCUA is a “cheerleader” and a “wayward” regulator. That the time for credit unions masquerading as banks to be taxed and included under the Community Reinvestment Act (CRA) is long overdue. Bankers even went a step further. In addition to twisting the report’s observations and recommendations to suit their same old arguments, they next criticized credit union representatives, but especially NCUA Chairman Dennis Dollar, for what he had to say about the report’s contents. They were especially critical of his many positive statements regarding how credit unions have stepped up to the plate in the past 18 months to take in large chunks of turf where millions of low income persons resided who were now eligible for credit union membership. Based on what everyone has had to say about the report and reading between the lines, it basically boils down to still another costly government exercise to produce a hefty document to appease a couple of politicians before seeking its rightful place on a shelf somewhere in the bureaucracy to begin gathering dust. Have I read it word for word? No, but based on everything pro and con that has been said about it, and numerous news reports in this publication and those of the trades, it would appear that the long-awaited report contains nothing credit union folks (and the bankers) didn’t already know. Even just looking at its specific recommendations, it appears that the report has little likelihood of changing anything of significance in the short term. The last GAO report on credit unions was done in 1991. It, too, was a big yawn. NCUA and the credit union trade groups should be complimented for the way they responded to the report. They did so thoroughly with a point-by-point analysis. And they did so in a tone and manner that was respectful and wording that was politically correct. Special kudos to the CEOs of CUNA, NAFCU, and NASCUS for presenting a united credit union front and issuing a joint letter in which they noted the many positive aspects of the report while expressing serious concern over several of its flaws as they identified them. Such as the report’s misinterpretation of the Federal Credit Union Act regarding the formation of new credit unions. And the misuse of Home Mortgage Disclosure Act data to assess how the credit union industry is responding to the mortgage needs of low-income persons. Much of what was included in the joint letter bears repeating. For example, the letter said that the study made uncalled for and irrelevant comparisons between banks and credit unions. “We are concerned that credit unions not be viewed by the GAO, Congress, or others who read this report through a lens provided by the American Bankers Association.” In a separate statement, CUNA President and CEO Dan Mica made the point even stronger when he said: “.we know of no instance where the GAO has contacted CUNA or credit unions in connection with any study of the banking industry.” Right, and it’ll never happen either. Now that the dust has settled and the rhetoric on both sides has cooled a bit, it seems to me that overall credit unions came off looking very good in the report. The growth and health of the industry were duly noted in several key areas. An industry that is safe and sound was acknowledged. There were no “we-can’t-live-with-this” recommendations for credit unions to deal with. The door was left open on even the most controversial issues such as expanded membership, capital adequacy, the relationship between NCUA and NCUSIF, and on how credit unions have chosen to do business. In summary, the latest GAO Report painted credit unions as a whole in a very good light. In fact, it seemed at times report writers struggled to find anything even worthy of a slight tap on the wrists of the CU industry. To me, the biggest negative was the fact that the report gave banking lobbyists still another platform from which to spew their hateful venom against an industry that has done so much to help the very people banks have little or no interest in serving. On the other hand if the report had come right out and said that credit unions were like motherhood and apple pie, banking lobbyists would probably have shot back that credit unions need to realize that cherry pie is more patriotic and brings in more tax dollars. Comments? 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