NCUA Defends Objectivity in Data Collection on Service After Thomas Expresses Further Concern Over Impartiality

WASHINGTON-NCUA Chairman JoAnn Johnson responded in a calm but strong manner to House Ways and Means Committee Chairman Bill Thomas’ (R-Calif.) accusations that NCUA might not be capable of impartial data collection on credit union service to those of modest means. Thomas wrote in a March 22 letter to NCUA, “As indicated at the Committee’s hearing, I have been concerned about the independence and objectivity of the NCUA. Your testimony at the hearing only added to my concerns that the NCUA has too often been a promoter and defender of credit unions, rather than a vigilant regulator. Given this background, I was concerned about the ability of the NCUA to conduct this data collection and analysis in an objective and independent way. Unfortunately, my fears have now been confirmed.” He cited a Credit Union Times online article (www.cutimes.com) from March 14 covering NCUA Board Member Gigi Hyland’s remarks to the California Credit Union League’s Big Valley Educational Conference. “`We need to view (the Ways & Means Committee’s request for information) as a chance for credit unions to frame the argument themselves. We need to tell stories of people helping people in a way that will appeal to Capitol Hill,’ Hyland said, explaining that Washington responds to feel-good sound bites,” the article read. Thomas continued, “The NCUA’s data collection project should be an effort by an impartial government regulator to collect objective information about whether credit unions are providing public benefits in exchange for their tax exemption.” He cited the 2004 court finding from when the American Bankers Association challenged, and won, NCUA’s approval of a six-county field of membership in Utah as a “well-defined community.” In the judge’s ruling, he stated that NCUA “cannot act as a rubber stamp or cheerleader.” “Similarly,” Thomas wrote, “we do not need a cheerleader collecting and analyzing information about whether credit unions are fulfilling the goals intended with their tax exemption. I ask that you be mindful of your proper role as an independent and objective regulator of credit unions as you move forward with your data collection project.” He added that he has asked the Government Accountability Office “to expand its current review of the credit union tax exemption to include an analysis of the independence and objectivity of the NCUA.” NCUA Defends Independence Chairman Johnson’s letter in response did not address the name-calling but went straight to the substance of the argument. She reassured Chairman Thomas that the information the agency presents to the committee and the GAO will be comprised of hard data without incorporating any anecdotal evidence of credit union service to those of modest means. “Let me state unequivocally that NCUA is entirely committed to responding to your request for information in a complete, accurate, and thorough manner, utilizing valid statistical methods to determine the income and service levels that federal credit unions provide to their members,” Johnson explained. “With regard to the questions raised on the total compensation of senior credit union officials, we are using the same carefully developed procedures to ensure you receive reliable data. The process NCUA is employing is random as to the credit unions involved, numerical and data-based, and is not designed to incorporate any anecdotal evidence in the statistical portion of our exercise.” Any information in addition to the statistical data will not be included in the report to the committee or GAO. However, she reiterated NCUA’s concern that “simply profiling the income distribution of credit union members may not present a full and accurate picture of whether Federal credit unions are meeting their public service responsibilities.” NCUA Director of Public and Congressional Affairs John McKechnie said of Thomas’ “cheerleading” comments, “We’ll leave the rhetoric to other people.” NCUA Board Member Gigi Hyland said regarding Thomas’ citation of her remarks that there are two sides to the coin when it comes to regulating credit unions. “Being a regulator, part of that is making sure the institutions you regulate have the opportunity to succeed,” she commented. Hyland added that she is “supportive of the very objective way NCUA” is handling the data collection process. The two points are not contradictory, she said. On the point of Thomas expanding the scope of the GAO examination of the tax-exemption into NCUA’s objectivity, Hyland said she would “defer to” the authority of the Ways and Means Committee chairman and is open to “helping GAO to respond effectively.” “As shown by the survey it has recently undertaken, we believe NCUA is moving in a direction that will respond to the concerns raised by Chairman Thomas about the need for quantifiable data on credit union service to people of modest means,” CUNA President and CEO Dan Mica defended the agency. NAFCU President and CEO Fred Becker commented, “We think Chairman Johnson’s response shows a clear commitment on the agency’s part to ensuring that data collection is conducted in an objective manner. The issues that she raises concerning the difficulty of presenting a full and accurate picture of credit union service are well founded and very similar to the concerns that we have made. “NAFCU believes that the agency should take into account the unique characteristics of credit unions, including charter type, field of membership and geographic location-as well as the overall difficulty of acquiring and interpreting member income data.” However, Mica emphasized Thomas’ intense scrutiny of NCUA and credit unions as opposed to other financial regulators and the industries they regulate. “We also do not think NCUA should be singled out for additional scrutiny based on what appears to be a comment in favor of supplementing, not replacing, quantifiable data,” Mica stated. “If anything, bank regulatory agencies such as the Comptroller of the Currency are more deserving of such scrutiny based on their track record.” Examples of the banking regulators advocating for their respective industries are certainly not unheard of. At the American Bankers Association’s annual convention last year, Comptroller John Dugan noted the advances the banking industry has made to incorporate securities, insurance, credit cards, and mutual fund products into their business and how they have prospered from these advances. “National banks have very often been at the forefront of that innovation, and the OCC has worked hard to keep the national bank charter strong and vibrant to facilitate this innovation,” he said. “This is a long, distinguished tradition that I warmly embrace.” Regulators have also worked with the industry toward regulatory relief legislation and deposit insurance reform. At America’s Community Bankers Government Affairs Conference in 2005, then-FDIC Chairman Don Powell called for the taxation of credit unions. ACB President and CEO Diane Casey-Landry said Powell’s remarks were his personal opinion and that was clearly expressed. With NCUA, she stated, it’s a matter of “form over substance” when it comes to adding underserved areas. “I think they’re confusing innovations and expansions,” she stated. ABA Senior Economist Keith Leggett said, “It is important [the data collection] be done in an objective fashion and I think that’s what he was saying.Clearly NCUA has tended to overstep the bounds. I think Thomas gave the proper reprimand.” Leggett expects the results of the data collection effort on service to those of modest means will be inconclusive which is bad for credit unions. “They need to have the affirmative,” he said. “This is something new to the industry and it may take some time to develop something on a regular basis,” according to Paul Merski, chief economist for the Independent Community Bankers of America. [email protected]