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Call it what you will... ethics, integrity, honor, accountability...NCUA and state agencies lack it. The most urgent conversation we should be having in America today is ethics now! If NCUA and state regulators had a core values statement to do no harm, like a doctor, their actions could be measured agianst those core values. Having a sticker on the front door that says your savings are insured to $250,000 is of diminished value when the underlying guarantee forces us to be governed by an unethical, and mis-guided federal agency who has no accountability.
Maybe NCUA's Board should adhere to the same standards they dictate for natural person credit union Board's, ie. unpaid volunteers! Another case of lawmakers knowing what's best for their constituents but not good enough for lawmakers.
This article goes to the heart of the very reason why all credit unions that are not trying to be like banks should wake up and take notice. Especially the small credit unions under 100 million who are being forced out of business. If this is a spark that starts a movement, sign me up.
Take some time to read and respond to this post by Gary Bell,
"This article goes to the heart of the very reason why all credit unions that are not trying to be like banks should wake up and take notice. Especially the small credit unions under 100 million who are being forced out of business. If this is a spark that starts a movement, sign me up."
I think there are many who would agree with Gary that credit unions under $100 million are being forced out of business.
Why are they being forced out of business? My view is that the change from a sponsor based credit union system to one in which most credit unions are now community based has changed the rules that govern success. We can't blame NCUA or anyone else. And the other significant change is that members don't act like owners they act like customers. The real owners are the Board and management. Board and management are acting in their own self interest and that in the long run is forcing credit unions out of business.
My credit union served McClellan Air Force Base until the base closed and we were forced to switch to a community field of membership. A sponsor supported credit union has lower operating costs, a closed field of membership that limits competition from other credit unions and in many cases from banks too; a sponsor based credit union has easier access to new members; a sponsor based credit union has the halo brand of its sponsor (often sharing the same name); a sponsor based credit union has lower defaults because no one wants to offend the employer.
Sponsor based credit unions have lower expenses and do well with less than $100 million in assets.
The change to a community field of membership means that scale matters. It means you have to have branches or other delivery channels that add a lot of operating expenses. It means you compete with everyone and you don't have a halo brand and you don't have exclusive access to an employers employees to sign up new members. You have to promote and market and tell your story to get business.
The loss of sponsor support puts small credit unions at risk. SAFE has 21 branches. We feel that a branch with less than $30 million in deposits is probably not viable. Yet there are thousands of credit unions with less than $30 million in assets.
The financial statistics support this view. In the aggregate, credit unions with assets of $100 million or less have lost members over the last three years. Their operating expense ratios point out the fact that they are far from the efficiency of larger credit unions that can spread overhead over more assets.
The mantra of "save the small credit union" doesn't make sense. The mantra has to be "serve the memb er". The fact that some credit
I'll cast a vote in favor of requiring financial literacy for the NCUA Board. That isn't to say I oppose financial literacy requirements for credit union board members. We need both and I disagree that NCUA should not have imposed that requirement. But what is good for the goose is good for the gander. Make NCUA's Board and senior management pass the same test. Maybe the NCUA Board won't have to make excuses the next time the Inspector General finds major deficiencies in the NCUA's financial accounting.
The Chairman's report you cited in your article contains another mistatement. I refer to the statement that 28 credit unions failed. There were a lot of failures that NCUA did not count because the credit union was merged into another credit union. There are many other failed credit unions that are only operating due to forebearance by NCUA.
The fundamental issue with regard to NCUSIF is the "estimate" of future losses. How does NCUA estimate future losses? That calcuation should be made public and put to the test of independent review. Show us the analysis for the various corporate securities. Show us the Clayton or Pimco (0r whoever did it) analysis--we paid for it.
We need to stick to GAAP accounting for NCUA, the insurance fund and credit unions. That means we don't expense actual losses but rather we expense losses based on management's estimate of the current expense based on the impaired assets in the portfolio.
We need transparency so that we can evaluate our insurance fund, our insurance fund premium assessments and the estimates of future losses. That means we need to see the detail behind actual losses; we need to see the detail calculations for loss estimates and we need to stop the arbitrary over head transfer from the insurance fund to the NCUA. All of NCUA's budget should be paid by credit unions directly in the form of an annual fee. That assures accountability. We don't have accountability now because of the overhead transfer that obscures how much we are paying to support NCUA. And if we want to fully reform our insurance fund, the we should expense the 1% over the next ten years and go to a premium based insurance fund.
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