ALEXANDRIA, Va. — NCUA Board Member Michael Fryzel recentlycompleted 13 months as board chairman during a tumultuous time forthe economy in general and credit unions in particular. He recentlysat down with Credit Union Times to discuss hisexperiences as tenure and what his plans are now that Debbie Matz,an appointee of President Obama, is the new chairman. Beforejoining the board, he was a lawyer in private practice and beforethat was the chief regulator of financial services for the state ofIllinois.

Credit Union Times: You came to the board at a timewhen the economy was going from bad to worse and there were signsof trouble for corporate and natural person credit unions. Whatwent through your mind at the time and do you have any thoughts inhindsight about how the board and agency handled things?

Michael Fryzel: The last 12 months have been the mostdifficult that credit unions and the NCUA have endured. The otherboard members and I saw early on that we'd have problems with thecorporates and the natural person credit unions in the sand states.We moved quickly to get Congress to raise the CLF's lendingauthority to $41 billion. Later on, as the situation became moresevere at U.S. Central and Wescorp, we guaranteed the deposits ofnatural person credit unions, infused $1 billion in capital intoU.S. Central. Everybody pulled together, and Congress was verycooperative in giving everything we needed.

CU Times: What went through your head? Did you everwonder, 'What did I get myself into?'

Fryzel: It was very intense. When I started reviewingthings with the staff, I felt we had to act quickly and decisively.The staff responded well to my requests for information and forproposals, and when I had concerns about certain things, they cameback with alternatives. I encouraged everyone to step back and lookat all the alternatives and examine things in a differentlight.

CU Times: Given that Republicans are known for beingskeptical of regulation, did you ever receive resistance to youractions from the Bush administration when they were in officeduring the first five and a half months of your tenure?

Fryzel: Since assuming the chairmanship, there weren'trequests to change decisions from either the Bush or the Obamaadministration. Everyone saw we were handling things and weregenerally helpful.

CU Times: Even though you had experience as a stateregulator, running an agency like the NCUA involves dealing withsimilar issues but on a much larger scale. What surprised you themost?

Fryzel: How we had to go through a lot of different hoopsto get things done. We had to get approval from Treasury or from[Federal Reserve] Chairman [Ben] Bernanke. We couldn't always makea decision and the next day start implementing it. But that's thefederal government and what we had to deal with.

CU Times: How much of a challenge is it to strike abalance between protecting safety and soundness and giving creditunions the maximum ability to innovate?

Fryzel: The board always recognizes the need for creditunions to compete, but our primary goal is to make sure theyoperate safely. We always strive to have as much regulation asneeded but not an excessive amount. It's a fine line and at timesfairly difficult. I don't think we put greater pressure on [creditunions,] but we enforced the regulations that were there. We dowhat we have to do and do it fairly.

CU Times: How often during the crisis-especially whenit became likely that the board was likely to levy a premium-didyou hear credit union leaders complain about having to pay for themistakes of others?

Fryzel: Quite a bit, but you remind them that this is acooperative movement and everyone is responsible for the overallsafety of the system. But we solved corporate credit union problemand spread out the payment over time. Not a penny was lost andthere was no bailout. The credit unions solved the problem.

CU Times: Everyone is waiting for the board'sproposed rules on corporates to come out. What are your thoughtsabout what they should include?

Fryzel: I am looking forward to hearing the comments atthe upcoming town hall meetings, and this will give the board andstaff a chance to receive input before issuing rules. Obviously,the rules will include direction about proper investments and theappropriate governance rules. We want the corporates to have boardmembers with experience and a good sense of their fiduciaryresponsibility. The board is well prepared to handle thischallenge. Chairman Matz brings experience to the board as do I andBoard Member [Gigi] Hyland. Together, we have more experience thanany other board has had in the past.

CU Times: What do you think you'll miss about beingchairman?

Fryzel: Being called Mr. Chairman. It's too short a timesince I left the chairmanship. I've been getting acclimated to mynew role and focused on issues like the corporates, member businesslending and alternative capital. I want to do all I can to makesure credit unions are ready to go and to take advantage when theeconomy gets better so they can serve their members.

CU Times: What do you think about the proposals forraising the cap on member business lending?

Fryzel: I have no problem with the cap being raised and noproblem with credit unions doing [business lending] as long asthere are strong rules in place. There have been some credit unionsthat have done well in this area. and those are the ones with thetechnical expertise while others haven't done as well. But with theproper safeguards in place, more credit unions could enter thefield and serve the many entrepreneurs who are credit unionmembers.

CU Times: What do you think the agency's positionwill be?

Fryzel: We haven't reached one, and when we do, I am sureChairman Matz will send a letter to Congress.

CU Times: What's your position on the issue ofsupplemental capital for credit unions?
Fryzel: Over a year ago, I asked NAFCU, NASCUS and CUNA to come upan agreement with what they want it to look like, and we're notthere yet.

CU Times: What are your thoughts?
Fryzel: I am open to any ideas as long as they are reasonable,realistic and legal.

CU Times: Are there other issues you and the boardwill focus on?

Fryzel: Overall, the success and continued survival ofcredit unions. I see great opportunities for credit unions.

CU Times: Will you focus on any particular issue,like Board Member Rodney Hood did on risk management?

Fryzel: I haven't decided on anything yet.

CU Times: What impact did the Sunshine Law, whichforbids two members from meeting together, have on your ability todo your job?

Fryzel: It takes more time to get things done because youhave to communicate with other board members through staffs.

CU Times: Would you favor expanding the size of theboard to ease that situation.

Fryzel: No, a three-member board works well for theNCUA.

CU Times: As a Chicago Cubs fan, how do you feelabout serving on a board with two Yankee fans?

Fryzel: I have great respect for the Pinstripes. Just lastnight I watched the game where Derek Jeter tied Lou Gehrig'srecord. And if Chairman Matz or Board Member Hyland got tickets tothe World Series, I would be pleased to go with them.

CU Times: Wouldn't such a gathering be a violation ofthe Sunshine Law?
Fryzel: Not necessarily. We could put [General Counsel] Bob Fennerbetween two board members and [Director of the Office of Public andCongressional Relations] John McKechnie between two.

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