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The Real Problem at Arrowhead Credit Union is Working With Common Purpose, Not Lack of Capital
July 23, 2012
Arrowhead Central Credit Union
Don't forget about all the employees that lost their jobs because of the takeover. Some of those employees had 20+ years on the job and they were kicked to the curb by the NCUA. What the NCUA did was wrong and they justified it all by saying they were protecting the members. I think they were making a point ... watch out Altura you could be next.
Chip and Callahan and Associates are among the very few who are taking NCUA to task for their rogue actions. It seems almost everyone else in credit union land are afraid, because speaking up may bring retribution from NCUA down on their heads, Thanks, Chip, for saying what needs to be said.
Great article, Chip! I'm curious and have even more questions. You refer to the NCUA as the regulator, but in this case is Arrowhead not a state-chartered, but federally insured credit union? Conspiciously absent from this whole conservatorship is the State of California Department of Financial Institutions. Makes one wonder if this would've happened if Arrowhead was privately insured. In other conservatorships or mergers concerning state chartered credit unions the State took it over and then appointed the NCUA as conservator. In this instance, there is absolutely no mention of the state. Why is that? Where is the state? What happened to the dual charter system?
Definition of "own" from dictionary.com:
"to acknowledge as one's own; recognize as having full claim, authority, power, dominion, etc."
The dispiriting truth is that the regulator "owns" the hard-earned net worth of every credit union in the country and they can seize it any time of their choosing. The members and their elected officials are simply caretakers of their credit union while the regulator really "owns" the net worth and ultimately the future of each and every credit union in the U. S.
As it is structured today, this is a dead and dying industry. With no viable means of renewal or any mechanism to encourage capital formation and the resulting growth that capital provides, it becomes a zero-sum game. Simply extending the current rate of attrition, there will only be 10-15 credit unions left in 20-25 years. Even with their larger size, they will unlikely be able to compete effectively with their larger bank brethren. In addition, creativity and innovation at the remaining 10-15 credit unions will be completely strangled because the regulator will become overly concerned about the failure of even one the remaining 10-15 credit unions. They effectively become "too big to fail" and are over-regulated to the point that they will no longer be relevant to their membership.
shame on NCUA, but double shame on all who do nothing about it!
It is difficult to focus on the facts because the bias is so evident. Instead of ranting, have you sought to clarify any of your observations? We had a CU in Ohio whose numbers looked fabulous, but was closed. Upon closer inspection, the numbers were falsified and there was dubious lending activity. When the dust settles, the truth will come out (I hope, anyway).
Shame on the NCUA for its heavy-handed treatment of a great community financial resource. Debbie Matz...let's hear from you. How could you let this happen on your watch? Arrowhead has been a friend and leader in your industry and deserves better!
A Friend of Arrowhead
To Comment #5 Above,
This article starts out by saying "On Thursday, July 22, the NCUA released June 30 call report details to support its conservatorship of Arrowhead Credit Union and issued a press release in which it repeated the assertion the credit union was in “declining financial condition.” "
These are the agency's own data points -- their own numbers!! That is what is so amazing about all this to me. Bravo to Chip and the team at Callahan for taking the time to do this important analysis and share with the entire industry. We need more of this oversight from independent firms and then it is up to us to take action -- call your league, call CUNA/NAFCU, call your elected reps, tell your members. NCUA is on a crash course to ruin this incredible industry that is doing so much good for so many people.
The numbers are their own facts that NCUA cannot hide behind -- reckless action by out of control (or out their league) regulators. You pick which one it is.
I'm sure the NCUA will now make some new excuse for why they did this -- now that their flawed/misguided reasoning is exposed. Just watch, some "new" revelation will be exposed by agency staff that will ultimately be a very subjective opinion. The reality is that this was already a turn around story. The new management at Arrowhead have an easy job ahead -- just keep executing what the member-hired management team was already doing!
What an unnecessary loss for the community and waste of our NCUSIF fund. Shame.
As an former NCUA employee I can tell you that there has to be more to this story than what the numbers or ratios show. I'm not defensing them just stating an opinion because even NCUA understands how important it is to "protect the NCUSIF" and NCUA's actions to conserve this credit union will only cost the funds dollars so this action would've/should've been the last action item left for them to do based on problems at the credit union other than the numbers/ratios.
Thank you for shining a light on the heavy handed actions of Regulators in this difficult economic time. Decisions are made hastily and without thorough evaluation. I believe that it is time for us as an industry to fight back. Where was the League during all of this?
One area that seems to be missing from the article is the reputation damage done to the employees that have been terminated or laid off. The NCUA swept in and treated them badly and no one is talking about that. Many of these people had worked within Credit Unions for over 20 years. The "experts" who are managing Arrowhead had nothing good to say about Credit Unions in general and if you look at their resumes there are some former bankers that seem to have a general dislike for credit union people.
I hope at some point someone looks at how the NCUA treats the general employees of an organization that they take over. These are people that have done nothing wrong and they are being treated like dirt. I thought the NCUA was suppose to be working for or at least with Credit Unions. In the case of Arrowhead they were on a mission and there is no turning back.
There's no question that NCUA was heavy-handed in their taking over of Arrowhead. However, the fact remains that management took too much risk, and in the end, it bit them. I'm also very concerned with our alleged industry leaders (Chip Filson and Dave Chatfield, to name two) that came to Larry Sharp's defense so quickly without knowing all of the facts. Why haven't you defended other CEOs in similar circumstances? Would you defend me? Or do you only defend your golfing buddies? This is a very dangerous precedent you are setting.
Chip ... congratulations on your analysis of what NCUA is and has done at Arrowhead. Glad to see someone asserting efforts to control a "run-a-way" Federal Agency.
This seizure is a puzzle to be sure. As an old timer, I am aware that Larry and the NCUA have had their moments over the years. Larry took the NCUA on from time to time and my guess (without knowing much) is that this relationship may have had something to do with it.
Like many, I am following the numbers at the key CUs at risk. Arrowhead, while in a tough geographical area, was certainly not the worst.
an old timer
Thank you Chip. You are our conscience. No one does more for the CU Movement than do you.
It is an unfortunate thing when the NCUA chooses to only provide the data that supports their action rather than "all the facts."
To those who say most of the credit unions will be out of business in 20 years; you should pray that they aren't. Big banks are in control even now after playing Vegas with peoples' money and getting bailed out. If no bailout would have come who would be there for the people? Credit unions are there for the people. To the rich go the spoils and crumbs for the rest. Thanks Chip.
Thank you for sharing this information. The NCUA is wrong for what they have done to Arrowhead. The NCUA is pointing fingers and really the fingers need to be pointed back at them. Larry and his staff were working hard to get the credit union back to being a strong credit union. If any one is to blame it shoudl be the NCUA for coming in during a good economy and giving great reviews about the same loans that they are screaming about now. Wake NCUA and take the fault of having auditors that do not know what they are doing and leave Arrowhead alone. I think that the NCUA should have to pay the salaries of all the staff that were laid off.
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