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After the Berlin Wall came down, Congress decided to cash in the peace dividend and began closing military bases. One of the bases that closed was our primary sponsor, McClellan Air Force Base. We decided to convert to a community field of membership. Unfortunately, our federal charter limited the field of membership to such an extent that we had to switch to a state charter to serve the multicounty Sacramento region. Charter choice is important for many reasons. The NCUA Board recently approved a new rule which permits the NCUA to designate a state-chartered credit union as “in troubled condition.” The rule allows NCUA to override state regulator determined CAMEL codes. This is one more step by the NCUA to threaten the dual chartering system. I am concerned that credit unions that choose a state charter are finding themselves under de facto federal regulation. That erodes the dual chartering system.

I sit on the Department of Financial Institutions advisory committee for California state-chartered credit unions. At our last meeting, the members of the committee, who represent state-chartered credit unions, shared their concerns regarding their recent examinations in which NCUA examiners acted as if they were the regulator instead of the state DFI. The NCUA has used its authority as the share insurer to take over the examination process. In our SAFE Credit Union examination last year, the examiner in charge was assigned to our examination from the East Coast. The NCUA examiner and his recommendations were out of line and inconsistent with those of the DFI examination team. We clearly saw that the NCUA examination team was trying to override the judgment of the state examiners. The NCUA examiner at one point recommended that we stop lending to members. 

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