NCUA Copes with Heavy Congressional Criticism, Ongoing Banker Attacks, and Even CU Trade Association Complaints

ALEXANDRIA, Va. - NCUA has taken its fair share of lumps recently from the bankers, legislators, and even the credit union trade associations.

"I would distinguish," CUNA Deputy General Counsel Mary Dunn explained. "I do think that NCUA has been attacked by the bankers to hurt credit unions." The recent barrage is part of their "big plan to really clip the wings of NCUA."

CUNA's recent swipe at the agency for the last-minute cancellation of the May board meeting, where the agency was expected to issue its final rule barring non-multiple common bond credit unions from adopting underserved areas, was part of the "normal course of business." Dunn explained, "In our view, CUNA's going to have disagreements with NCUA.I do think it would be inappropriate if we always agreed with NCUA.But I think that's in credit unions' best interests." She pointed out that the move "perpetuates uncertainty" in field of membership.

NCUA Chairman JoAnn Johnson explained of the cancellation that the agency wanted to "craft the best regulation we could." She added, "As soon as it's ready, it will be on the agenda."

The rule came out of a lawsuit filed by the American Bankers Association in a Utah federal district court; just a couple years ago, the same court remanded a community charter decision back to the agency, which led to the repeal of a six-county community charter. "I think they will be going through the final rule with a fine tooth comb. It's shameful," Dunn commented.

NCUA Board Member Gigi Hyland agreed. "Any increased scrutiny focused on the credit union system makes it more complicated" for credit unions to tell their own story and for the agency to outline for itself how it regulates credit unions. However, she acknowledged, "There are certainly some items on the agency's plate that are complex and merit thoughtfulness." The complexity has "engendered more attention." The agency must be deliberative and ensure its actions are justified and in accordance with the law.

"It's not surprising that there's criticism," the chairman said of the bankers. "Anytime you're moving forward on a pro-active agenda there might be some criticism.It certainly doesn't detour any type of work we're doing." Johnson added, "When the noise is the loudest sometimes, I think there's some desperation and frustration coming out on their part." Banks' market share is the same and they are earning record profits, so the problem for community bankers really is other market forces, but credit unions are a convenient diversion.

"We certainly don't want a regulator that's embattled so certainly we don't welcome the attacks from the ABA," NAFCU Senior Counsel Carrie Hunt said. She said that a lot of the critical noise that has been generated has come from the bankers' more aggressive posturing. "There are no secrets about that," she said.

NCUA has even taken some hits from prominent and highly relevant legislators. "A lot of criticism that comes from the Hill, some of that came from the rhetoric from the bankers," Dunn stated.

Hyland also pointed out, "The bigger credit unions call attention to themselves and get the attention of the legislators as well as the banks."

In that vein, when two billion-dollar-credit unions had to take NCUA to court to convert to mutual savings banks, it caught the eyes of their own state congressman Jeb Hensarling (R-Texas), who also happened to be drafting the regulatory relief legislation in the House, and Financial Services Committee Member Patrick McHenry (R-N.C.).

"The banks have gotten some traction on conversions by the mere fact that hearing even happened," Dunn said.

On the other hand, Hunt said, "Even McHenry, he poked fun at his own comments."

Also, in a hearing late last year, House Ways & Means Committee Chairman Bill Thomas (R-Calif.) was openly critical of the agency and has requested a Government Accountability Office study into its corporate governance. "In terms of Chairman Thomas, he.looked at a whole host of things from a critical standpoint. Any agency can be called upon at anytime to justify how it's running business," NAFCU's Hunt said.

Hyland said of the two issues, "We have to go on, literally, the record that is before us." At the conversions hearing, she emphasized, the subcommittee took a wait and see approach. The Ways & Means hearing highlighted that there is no appetite to tax credit unions right now. "We have to take whatever the record has said.as a predictor," according to Hyland.

"Good policy makes good politics," Johnson said. "I'll worry about the good policy and let them work on the politics."

Credit unions and their trade associations have also worked to raise their visibility on Capitol Hill while the agency has collaborated with other parts of the federal government on common goals. "We work to develop relationships and being able to have good communications.I think it's been a very successful effort on our part," Johnson said. Hyland reinforced the agency's open communications policy, which she said "parallels what you see other agencies doing." "The folks on the board now are very well-connected and very well plugged into political nuances," Dunn said, as well as senior staff. -scooke@cutimes.com