The NCUA board took another step in the right direction Thursdaywhen it conducted a briefing on supplemental capital. Extendingsupplemental capital authority to all credit unions has beendiscussed for many, many years, but today the first step was takento make this a reality, and we applaud the board for itsactions.

The expansion of access to secondary capital is long overdue forcredit unions. With the exception of low-income designatedinstitutions, credit unions are the only financial institutions inthe country that do not have access to secondary capital sources.As a result, they must rely primarily on retained earnings to buildcapital and grow their asset base, which presents a philosophicaldilemma.

Building capital through retained earnings requires creditunions to invest profits back into the cooperative, rather thanreturning them to members in the form of lower loan rates, highersavings rates, more services or annual dividend payouts. Choosingbetween growth or rates isn’t good for members or the long-termhealth of the institution. And, the third option – charging higherfees to boost income – is even worse.