NCUA is Too Involved in Conversion Process, Assumes Greed is Motivator

Tom Dorety’s opinion column on credit union conversions in the April 19 issue deserves some perspective. America’s Community Bankers proudly represents about 90% of all mutual community banks in the country, and Tom’s observations on mutuality need correcting. Mutual savings banks are almost as old as our nation. They have thrived for nearly 200 years because they are known for two very special qualities – independence and community service. They have helped millions of families live the American dream by originating countless loans for homes, cars, education and small businesses. To suggest, as Tom does, that, “the only former credit unions that retain or plan to retain mutual ownership are quite small . . . a large mutual thrift has become . . . difficult to locate . . . . ” misses the point that mutuals thrive on self-determination. Please don’t tell Third Federal S&L, a mutual holding company in my hometown of Cleveland with $8 billion in assets, that it is “ difficult to locate.” And please don’t deliver the message to my friends at Dollar Bank FSB in Pittsburgh, which has $5 billion in assets, that it is difficult to locate. Assets like that are hard to hide. Mutuals like Third Federal, Dollar Bank and many more are visibly serving their customers and building their communities. Tom also notes that the “NCUA has become the major target” of the banking industry. Now, how do you suppose that happened? Let’s take a look. The United States has the strongest financial service system in the world because of diversity based on self-determination. Like the nation itself, our financial system is based on freedom of choice. There is one constant in the financial services marketplace, and that constant is change. Institutions must be free to change – to change strategies, to change business plans and to change charters if necessary to remain competitive and to fully serve their customers and communities. Institutions must be free to change from state to federal charters, from mutual to stock, from savings banks to commercial banks – as the need arises. Notably, the NCUA is the only regulator that directly inserts itself into the conversion process to preclude change. Encouraged by allies, it alone adopts campaign tactics, engages in rhetoric unbecoming of a regulator, and tries to stop a natural process that should ultimately be decided by credit union members. Why does the NCUA presume that the only reason for charter choice is greed? Why is it that the capable, hardworking management of a credit union one day is suddenly portrayed as greedy and deceitful insiders the next day when they are helping their members understand the conversion process? We believe the role of the regulator is to protect the right to charter choice, not inhibit it, and certainly not to campaign against it. The effect of NCUA’s regulations and its operations mislead credit union members about conversion, and they conflict with similar conversion rules established by other federal regulators. Credit union members under the leadership of their management and elected board have a right to seek the charter that meets their needs and that of their communities. A regulator’s role is to ensure that appropriate rules are followed, and that members receive full disclosure. That means credit union members must hear both sides of the story – for conversion and against. Regulators should not game the system in ways that prevent credit union members from deciding for themselves what is in their best interest. As CU Financial Services president Alan D. Theriault explains. “Credit unions convert to a bank charter because of pain or opportunity. Capital issues, product limits, and poor consumer awareness create pain. Expanding service to a growing community, filling voids left by banks and credit unions, and maximizing personnel and infrastructure potential provide opportunities.” It is time for Congress to help the NCUA understand its role. In a bipartisan approach last year, Congressmen Patrick McHenry (R-N.C.) and Ed Towns (D-N.Y.) introduced the Credit Union Charter Choice Act. H.R. 3206 which would make it possible for credit unions to convert using the process Congress established. Their bill would bring certainty and fairness to the conversion process. And, most important of all, it would protect the rights of credit union members to charter choice, a fundamental and core value in the U.S. financial system. America’s Community Bankers is committed to charter choice for all depository institutions. We believe that credit union members should be free to choose for themselves which charter to follow, and to do so on the basis of full and complete information. And when all credit unions have the same opportunity for choice that banks do, I will know that I have done my job and enjoyed doing it. As the old song says, “let freedom ring.” And let credit union members enjoy the full measure of their freedom to choose. Diane Casey-Landry President America’s Community Bankers Washington, D.C.