NCUA has canceled its May board meeting, a rarity for the regulator. It only had one item on the agenda, albeit a controversial, important item-an amendment banning non-multiple common bond credit unions from adding underserved areas. This amendment was driven by bankers and their lawsuit challenging underserved areas, claiming CUs are using them to expand their FOMs and cherry pick the best potential members.
What's so sad about NCUA canceling the meeting is the fact that NCUA even has this amendment and how it got to this point. Once again NCUA has been forced to react to banker attacks, or at least it thinks it has to. This is a reflection of the sad state of political affairs today-now more than ever we see the credit union industry reacting to the bankers.
The amendment is just one example. The data collection pilot is another reaction to bankers. In the end I think the pilot will be beneficial for credit unions politically, but again it's a reaction. The bankers were able to fire up House Ways and Means Committee Chairman Bill Thomas enough for him to hold his infamous November hearing on the tax-exemption. After that hearing it was clear, credit unions had to do something to show they are serving the underserved. The bankers won that battle-they forced NCUA's hand on the pilot.
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The recent hearing led by Patrick McHenry on the Credit Union Charter Options bill was the work of bankers. The bill, which is dead, is designed to limit NCUA's role in credit union-to-bank conversions. The bankers got through to McHenry with their message that NCUA is trying to protect its turf and stymie conversions. Again, the industry has gone into reaction mode, arguing the case for member disclosure and rebutting banker claims of one more example of NCUA as a cheerleader. NCUA is also forced to defend its disclosure regs, and may bend in the future in a few areas.
NCUA, affected credit unions, CUNA and NAFCU are battling the bankers in the Pennsylvania FOM lawsuits. Once again industry resources are being wasted on legal battles that are thrust on credit unions by the bankers. The Pennsylvania CU Association, to its credit, has established a defense fund to fill its war chest to battle the bankers. The war chest is mostly for legal fees. Good for the PCUA, but again it is an example of credit unions having to waste resources and react to banker attacks.
So anyone who doesn't think bankers are gaining political ground on credit unions only need look at the last year to see the political advantage slipping away.
The bankers have been more rabid than ever under ABA Chairman Harris Simmons. Maybe things will die down when Simmons exits, but maybe not. Maybe credit unions will continue to be on their heels and react to banker attacks for many years to come-that would be sad.
What scares me is what strings bankers will pull next. As part of NCUA's data collection pilot, CEO salaries are being collected. I believe this will reveal that the industry has some well-paid executives, and deservingly so. Many of today's credit unions are sophisticated financial institutions that require seasoned financial leaders to make them hum-why shouldn't they get paid well?
The bankers have to be careful because no matter how much ground credit union CEOs have made up on compensation, bankers still earn much more when considering lucrative stock options. But don't put it past the bankers to start parading salary data up to the Hill as another example of how the humble credit union industry has expanded beyond Congress's original intention. Hopefully, credit union boards will realize that to survive today they need the best talent they can afford, and not put the brakes on salaries because of new scrutiny brought on by the bankers. Let's hope boards don't react to the bankers.
Now more than ever CUNA and NAFCU have to be on the same page politically, and they haven't been on some of the aforementioned issues. Now more than ever state leagues have to be lobbying their state representatives. Now more than ever credit unions have to be walking the walk and talking the talk with serving members of modest means. This is all necessary because now more than ever bankers are forcing credit unions to react.
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