WASHINGTON — Sometimes the life of a federal regulator is allabout preparing yourself for the question that never reallycomes.

NCUA Board Chairman JoAnn Johnson had been scheduled to addressCUNA's Governmental Affairs Conference during the general sessionon March 4, but instead found herself called to an oversighthearing of the Senate Committee on Banking, Housing and UrbanDevelopment. The Committee called the hearing to inquire into thehealth of the U.S. banking industry during the current difficultiesin the credit, housing, and mortgage markets.

Johnson's 24 pages of prepared comments for the hearing soughtto walk the narrow line between acknowledging the rough economicenvironment in which credit unions find themselves and reassuringthe committee about their safety and soundness.

“Despite the dislocations in the credit markets, and theattendant effect on the mortgage industry and now the broadereconomy, the federally insured credit union industry continues tobe financially strong,” Johnson said. “NCUA is very aware of theneed for close and diligent regulatory oversight in the context ofthe difficult environment cited above.”

But once her prepared comments were done, the rest of thehearing's questions centered on issues surrounding banks andbankers and carried little relevance for credit unions. Senatorsexpressed concern about a wide variety of questions, including theimplementation of capital standards and whether the new Basel IIcapital regulation system, which is gradually being implemented inthis country but is more advanced in Europe, would have helped orhurt banks struggling through the current economic situation.

Johnson interjected a credit union answer into the conversation,however, when she asserted herself in response to a generalquestion about those Basel II capital standards.

“I'd like to answer that,” Johnson said, fielding a questionfrom Committee Chairman Christopher Dodd (D-Conn.) on Basel II thatappeared to be directed toward Comptroller of the Currency JohnDugan. “While credit unions don't fall under Basel, we do have arisk-based capital proposal on the table for Congress to take alook at. I would ask your serious consideration. This would give usa real tool as a regulator to identify problems more quickly and itwould help credit unions manage their risk more effectively. Andit's our risk-based capital prompt corrective action proposal thatwe have been working three years on and I would ask yourconsideration.”

Chairman Dodd made no response and the conversation stayedfirmly fixed on bank issues for the rest of the hearing.

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