WASHINGTON — With many credit unions hurting, the NCUA's rescueof corporate credit unions and economic woes causing CUNA toannounce furloughs and layoffs, this has been an especiallychallenging time for CUNA President/CEO Dan Mica.
Credit Union Times recently sat down with Mica, who has run CUNAsince 1996, for a wide-ranging interview.
Credit Union Times: Assess the state and health of the credit unionmovement as of the middle of 2009.
Dan Mica: Well, compared to other financial institutions we aredoing extremely well. On a historical basis for credit unions, wehave just come through a very difficult 12-month period. The goodnews is that our membership growth is beginning to turn around.It's the best in five years. At the end of March, it was 1.5% overthe previous year. And our lending has been strong under thecircumstances, too. And third, our savings are strong, and that'svery interesting because it's a great plus for credit unions and achallenge on the ratios. People have more confidence in creditunions than they have in any other institutions we are aware ofright now. The bankers did a [confidence] survey for 21 years, andwe won every year so they stopped doing it. On an anecdotal basis,we'd probably win again this year based on everything the bankshave gone through.
Credit unions are doing better than many people would haveimagined. Does that mean everything is rosy in credit union land?Absolutely not. We have some pockets of some very difficultproblems: Southern California, Arizona, Nevada, Florida and someparts of Texas. And some areas are going strong, like New Jersey.On all the averages, things are doing pretty well. But we have alot of challenges.
The conservatorships [of U.S. Central Corporate FCU and WesternCorporate FCU] has created a lot of problems. But I'll tell yousomething, it has taught me a great lesson. I have been workingwith credit union folks for 13 years, and I come away with a greatdeal of admiration whenever we have problem like this. They areworried, concerned and without a doubt fearful, but in a matter ofweeks, they learn to deal with it. Many have figured out exactlywhat they want to do and are prepared to move on.
It's very interesting to watch the credit union spirit. They say,“We don't like it, we wish it hadn't happened, but we're movingforward.” It's an amazing spirit to see. In the first quarter ofthis year, I felt a vibration in the credit union movement and nowI am feeling a sense of stability. We've never worked harder duringmy time here-with Congress and the regulators and the old and newadministrations. We were able to get the Corporate Credit UnionStabilization Fund approved and were able to make the regulatorgive us some additional data and numbers. And because of theproblems, we [at CUNA] have had to do some belt tightening. We aregoing to do what credit unions do, which is to keep our chin up andmove forward.
CU Times: You've been outspoken about how the NCUA has handledthings in terms of transparency and in terms of the policies it hasissued. What's your overall assessment of the agency and what wouldyou like to see it do differently? How do you think the agency willchange under the chairmanship of Deborah Matz?
Mica: If I am going to criticize, I am also going to compliment.Over the last 75 years, credit unions have had great success withan independent regulator. They have flourished. There will alwaysbe differences between the regulator and the regulated and we willhave those differences. Many times we work those out without a lotof public uproar. Unfortunately, in the last few years we've hadsome instances where we've had some public disagreements, but thatshould never be read that we don't want to work together or wedon't want an independent regulator and we don't have mutualrespect.
Having said that, I think there has been a sense on the part of thecredit union system that the regulator has been too insular inmaking its decisions and by announcing its decisions on what somemight term a trust me basis, as opposed to the kind of transparencywe've seen more recently. And if there is a word for the newchairperson, it's that we want a good, solid and fair regulator,but we also want transparency and innovation. Other regulatoryagencies in the financial services area have been very creative andvery willing to look at new approaches, new ideas and newlegislation. And the credit union system has felt for some timethat the agency has been much more traditional and reluctant, andit's often that they are conservative, they are concerned withsafety and soundness and therefore they don't make changes. I feelyou can be conservative, have strong safety and soundness standardsand make all kinds of changes to improve the environment for creditunions and thus the consumers. So I guess, innovation andtransparency would be the key improvements.
CU Times: When I've spoken to people at the NCUA, they have saidthey always listened to what you've said, but listening doesn'talways mean they will agree with you. They also say that whenthey've run some of the suggestions by their contacts on CapitolHill, they've been nonstarters. One of those issues is allowing theCentral Liquidity Facility to lend money directly to corporatecredit unions.
Mica: It's in the best interest of consumers that when the tradeassociation and regulator are trying to maintain their appropriateroles and work in a concerted way, that transparency critical. Ifwe think it's salable on Capitol Hill and they don't, we need toget to the bottom of those differences. Sometimes that doesn'thappen.
CU Times: You worked with Chairwoman-designate Matz when she was onthe board from 2002-2005. How do you expect things will change atthe NCUA under her stewardship?
Mica: Well, she has always been open and willing to discuss ideasand suggestions, and she has been very direct in indicating whenshe might agree or disagree. But she has always been willing tofind common ground. Deborah, as much as anyone I know, has safetyand soundness and the consumer in mind. She is also interested ingood public policy, and I believe she will take transparency to thenext level. And there has been some progress on that in the lastfew months, I must say. At one point, the regulators were not goingto release anything on anything, so we got into a little push andpull. They banned me from their office forever, just kidding.
CU Times: Credit unions have had a pretty good run so far this yearon Capitol Hill. You got the Stabilization Fund through andprevented cram-down legislation and kept interchange out of thecredit card bill. What's next on your wish list and what about theareas you'll play defense on, such as the Community ReinvestmentAct and interchange?
Mica: We do have to worry about those two defensive actions. Onoffense, there is some interest in some form of alternative capitaland member business lending. Those are two areas we will look atclosely. A third area, and we don't know if it's going to beoffensive or defensive until we see what form it is going to take,is the streamlining of the regulatory structure.
CU Times: You don't hear much about the fate of the NCUA in theleaks that come of the White House, perhaps because it is toosmall. What do you think is likely to happen, and are you concernedabout the NCUA's status as an independent regulator?
Mica: You know, I don't know that concerned would be the word I'duse. We've had so many assurances that we aren't going to have aproblem and that everybody's with us. I don't see a major advocatefor doing away with us, and I do see a number of champions sayingthey are going to make sure that it doesn't happen. But to go intoa complacency mode would be absolutely wrong. But I do believethere is going to be a major restructuring in the next six to 12months. I think it's almost guaranteed.
CU Times: Where do you come down in the tug of war between HouseFinancial Services Committee Chairman Barney Frank and SenateBanking Committee Chairman Christopher Dodd on the question of thesystemic risk regulator, with Frank wanting it to go to the Fed andDodd to the FDIC?
Mica: We don't have an official position on that. I have a personalthought, but I don't share it. At this time, we just want to watchand see how it would be structured and which powers are granted towhom. We would like to be at the table where they are makingdecisions that could negatively or positively impact credit unions.But that doesn't mean we would want to give up an independentregulator. Our folks want a regulator that commands respect and canhelp get the needs of credit unions met. And to date, withoutblaming any individuals, that simply hasn't been the case. And thatmay never change because of our size. But it could start to changebecause of our effectiveness.
CU Times: Will the fact that Chairman-designate Matz iswell-connected and has close ties to senior administrationofficials help the agency?
Mica: She has the ability to bring credit unions to a new level ofattention in Washington.
CU Times: When you've met with administration officials, have youfound them to be receptive to credit unions' views?
Mica: The newest folks we've talked to at the Treasury Departmentand White House have been extremely positive. Some of the warmestreceptions we've received in some time. I don't know where thatwill lead, but the initial conversations have been positive. Wespoke about our problems, and I didn't get a lot of 'thanks andgoodbye.' There was a lot of understanding about the good thatcredit unions do.
CU Times: Have you met one-on-one with Treasury SecretaryGeithner?
Mica: Not one-on-one. I've been fortunate to have been in a groupmeeting with him. There is still a lot of jockeying within theadministration about what form the [systemic risk] regulator willtake, whether it will be one agency or a council ofregulators.
CU Times: How does this period compare in terms of intensity andpressure, compared to earlier ones?
Mica: There are an awful lot of people on Capitol Hill who arepassionate about CRA, cram-downs and regulatory reform. And withthat passion comes a strong effort to get their views approved. Ican't recall seeing so many passionate individuals coming forth onfinancial services. I've seen it in health care, the environmentand energy. In financial services, they are coming out of thewoodwork with solutions.
CU Times: You've run CUNA for 13 years. Are you tired of thejob?
Mica: I love what I'm doing and love coming in every day, but Iwant to step down six months before they want me to leave. I lovethe team. It's like a second family. We're all different in termsof personalities and philosophies, but we work together for creditunions.
CU Times: Have there been any upsides to the recession and otherfinancial setbacks for credit unions?
Mica: It has increased our workload at CUNA, especially theproblems of the corporate credit unions. But it has highlighted theobvious, that we need to decide on a new corporate credit unionstructure.
CU Times: Could the problems of the corporates have been preventedby stronger oversight?
Mica: Nobody saw this coming. Not the private sector, not therating agencies. To single out one agency is not fair. Could theyhave done a better job? Sure. Are they to blame? No. Everybody isclosing the barn door after the horse has left.
CU Times: What are your predictions about the economy?
Mica: The stock market will gradually pick up, but there is alwaysthe chance of a second fall. Growth will lag and employment willlag. But hopefully the worst is behind us. It took 25 years for themarket to get back after the Great Depression. Credit unions willhave some residual problems, and there will be an increase inconsolidations. But those credit unions that have stuck to solidfundamentals and used good judgment and thought about the longterm, rather than the short term, will avoid some of thefundamental problems.
CU Times: What's your reaction to the banks' criticism of creditunions and their opposition to expanding CUs' ability to makemember business loans?
Mica: Banks have no business criticizing credit unions becausethey've left America in financial shambles. And we have a less than1% default rate on mortgages and member business loans. [Thebanks'] are in high single digits or double digits. We'd all bebetter off if banks and credit unions went to Capitol Hill andlooked at what we can do to help consumers, rather than have thebanks try to attack credit unions.
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