During the Governmental Affairs Conference, Chip Filson announced his intention to seek an NCUA Board seat,which was the culmination of speeches and online postingscriticizing the NCUA's activities throughout the financial andcorporate crises. He has launched a petition designed to forcePresident Obama to consider him as a candidate. Chip knows creditunions inside and out, and he's fiercely intelligent. He's highlyqualified to sit on the NCUA Board as far as his résumé isconcerned.

But this is where I give pause to his idea of reforming the NCUAappointment process, as stated in the petition: “Appointed NCUAgoverning leaders should hold to the same standards credit unionsthemselves follow. They should be motivated by the uniquecontributions and needs of a cooperative business.”

The NCUA should absolutely consider credit unions' uniquequalities when regulating and overseeing the industry. That's theagency's duty. It is NOT, NOT, NOT, however, the agency's duty to“be motivated by” the seven cooperative principles. Recognizingexaminers for their chartering efforts, as Chip hassuggested,  is a VERY BAD idea. The credit union communityis no longer a collection of 22,000 small credit unions. Today itholds more than $1 trillion in assets and 7,000 credit unions. Theworld has said, we don't need any more financialinstitutions–perhaps different ones but not more of the same.

Unfortunately, Chip was out of the country when I contacted hisoffice to discuss his concept, but I did scrape bits and pieces ofanswers to my questions from his recent blog posts. In one titled,“How to apply the 7 cooperative principles to regulatory design,”he suggests that the NCUA should practice cooperative principlesand notes the insurance fund as an example. He suggests that thefunds should be used to the system's benefit. 

The NCUSIF and the work of the NCUA were the only things thatkept half of credit unions from going out of business overnightwhen five corporates failed. The agency wasn't perfect, but it gotthe job done fixing the corporate mess to the industry'sbenefit. 

Another post criticizes the agency's reporting of financialsrelated to the corporate crisis, which has been sketchy, but makesthe argument using reported capital at the corporates as ofDecember 2007, well before they were conserved and liquidated. Asof the month prior to each of the five conservatorships, thecombined capital was negative $1.3 billion for U.S. Central andWesCorp and $143 million for the other three. It was gone. At thetime of liquidation in the fall of 2010, the five corporates'equity was negative $14 billion. Additionally, the CLF was an assetof U.S. Central. There was nothing left. That's what happens in acooperative industry that's overly interdependent. It's all thesame money moved around to different pots.

In fact, very few natural person credit unions have ever wantedthe CLF or used it, so U.S. Central funded nearly all of it. Only96 credit unions are direct members even now, and the remainingcorporates will not be able to pony up the necessary stock fortheir members to join the CLF. Look at the initial funding of theCLF, care of a little arm-twisting from Chip Filson, who waspresident of the CLF at the time. The corporates didn't want theCLF. Credit unions didn't want the CLF. It was a solution lookingfor a problem. Railing against the NCUA for unilateraldecision-making in the corporate crisis–which is not true giventhat credit unions executives served on the boards of the creditunions and had the initial responsibility to oversee the creditunions–rings hollow in light of this type of “cooperation.”

NCUA Board members should have a strong grasp of credit unionsand their cooperative nature. Chairman Matz came from a creditunion and a previous stint on the NCUA Board. Board Member Fryzelwas the state credit union regulator in Illinois. Gigi Hyland, whooccupied the now open seat on the NCUA Board, worked as a creditunion attorney, a trade association executive and is actually aCredit Union Development Educator. While I don't agree with whatthey're doing all the time, no one can say these people do notunderstand credit unions' cooperative principles. Again, thispetition is a solution looking for a problem.

Chip has emphasized that, “We the people are the government.” Iagree whole-heartedly. If you don't like something, try to changeit. Like it or not, you have to play by the rules though, or theother players will kick you off the field. No one likes thatpolitical appointments are about scratching the back of the personwho just scratched yours, but at the NCUA the board members inrecent memory really did have a deep understanding of creditunions. Maybe credit unions (or I) didn't like some of what theydid, but it wasn't because they didn't understand creditunions.

Before petitioning the president (in a week and a half, Chip had1,800 of the 100,000 necessary signatures to gather within 30 daysto require a response from the president), related issues could beaddressed in a more traditional manner and be more effective. Forexample, eliminate the restriction that only one person with acredit union background serve on the board at a time. Not only hasit been flouted with the most recent NCUA Board make up, but it isnot consistent with the bank regulators. Second, expand the NCUABoard, which would help negate industry influence on the regulatorand better avoid situations like the current one where there areonly two board members of opposite political parties–and very soonpossibly just one board member who could act unilaterally.

I applaud Chip's advocacy for what he very passionately believesto be right for credit unions, admire his knowledge and voracity,but this movement's goals are not appropriate for a regulatoryagency.