A natural tension exists between industry and regulator that can be healthy and helps keep both on their toes. But when a loss of respect occurs on both sides, it becomes counterproductive.
Several credit union failures have been spotlighted in recent years that have many in the industry wondering what is going on and placing blame. Accusations, usually made in private, have been hurled at the NCUA regarding its lack of expertise, while the agency says credit unions are to blame, too. Some in the industry have referred to the NCUA as "vindictive" and "bullies"-again in private, while the agency issues regs repealing RegFlex and establishing board member qualifications.
A lot has been made of the corporate problems because that's the immediate crisis, but a growing one is looming for natural person credit unions that have been piled upon by the poor economy, unrestrained growth strategies, ever increasing regulatory burden, and the corporate assessments among other things.
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In recent material loss reviews by the NCUA's Office of Inspector General, credit unions, boards, and state and federal regulators have been knocked for deficiencies that have led to major losses to the NCUSIF. These losses are just the tip of the iceberg.
Additionally, the NCUA's 2008 and 2009 unqualified audited statements found that NCUA did not have the necessary accounting expertise. Items pointed out by KPMG in the 2009 financial audit were as banal as workers' compensation liability.
Like all federal agencies, the NCUA is shrouded in the cloak of federal government employment. Note: most federal government employees are competent workers who do their jobs at least adequately; my father was one of them. However, instead of incompetence resulting in real consequences, such as loss of said employment, federal employees are just shifted around to other positions. According to the NCUA, there have been five performance-based removal actions against non-probationary employees, using performance-based action procedures, since 2005. The system is broken and breeds incompetence. Add to that many NCUA employees are organized under the National Treasury Employees Union, and they're untouchable-a real management nightmare when faced with troublesome or unmotivated employees.
And credit unions, private entities, have the responsibility for funding the agency. According to the U.S. Census, federal government employees earned an average of $67,052 per year as of yearend 2009. Under FIRREA, the NCUA and other federal financial regulators work from a higher scale than the rest of the federal government. By contrast, the Bureau of Labor Statistics reported that the weekly income for all U.S. workers in the first quarter of 2010 was $754, or roughly $39,208 per year. Again, most NCUA employees are certainly not lazy or incompetent, but how much of a premium are credit unions paying for those that are and cannot be eliminated?
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