Today a significant rift exists between NCUA and many credit unions. The rift has multiple causes — unilateral decisionmaking, lack of details to support Agency actions, changing estimates and approaches to the corporate stabilization plan – all of which have contributed to a lack of trust in the Agency’s judgments.
Healing the rift is critical, but it is about more than public relations or better communications. Without confidence that credit unions have the best regulatory environment possible, it will be difficult for many stakeholders to have pride and faith in the future. Rebuilding goodwill is as important as capital if credit unions are to refrain from considering other charter options.
The mantra of safety and soundness commonly used to justify Agency actions is not a vision; rather it is a means to an end. Today the vision is sorely needed.
Reassessing Policy Priorities
Policy shortcomings can be of two kinds: errors of commission — doing a chosen task poorly — and errors of omission — failing to develop the full potential of a situation. Much of the industry's current concerns are about the first kind, but it is the second category where the largest potential for healing lies. To identify these opportunities, however, requires that the regulator share a common vision and values with the industry.
These first principles might be the following:
- In every action taken, the needs of the members must always be paramount;
- In cooperatives, all resources are common — no institution or purpose can appropriate shared resources solely for its own self interest; and
- Collaborative solutions, built on common values, provide the sustainable advantage required for good times and in crisis.
In short, healing the rift that has occurred between NCUA and its constituents requires a "reformation" of the Agency to create a shared belief in the future. If this reformation were fully embraced, transparency would be an everyday fact, and we would not have a dumbing-down process that denies the industry information or implies that credit unions do not have the intellectual competence to reach their own conclusions. Faith in a system that can prevent the circumstances which brought on the corporate failures is not about a new set of regulations; it is about the approach taken when the next crisis inevitably occurs. Secrecy breeds distrust.
Common resources are at the core of the cooperative model. Our credit union forebears willed us a legacy of capital for the future. Is the regulator committed to willing the common capital under their management to the future as well? Unbalanced use of common resources can only lead to an environment that can destroy the mutual interdependence on which each credit union and every system participant depends.
The leadership task facing the new chairman of NCUA is nothing less than restoring confidence that the Agency is a system asset that can truly differentiate cooperative capabilities. To accomplish that, NCUA's reformation is a critical priority.
Leadership Skills: What Will It Take to Succeed?
There are three different, if related, aspects of the leadership challenge:
- Articulating a new set of policy priorities focusing on member interests and addressing the policy omissions of the recent past;
- Institutional reform to change the bureaucratic practices of secrecy, lack of due process, unilateral decision-making, and an impression that the Agency is not a part of, but over and above, the credit union system; and
- An understanding of how cooperative leadership is more than managerial control.
Much of the source of the rift that exists today is NCUA’s failure to acknowledge a wider purpose and the interconnectedness required to achieve this purpose. It is this shortcoming that caused HAHARP to be stillborn and ignored precedents for corporate solutions.
Leaders exist to serve followers, not simply to use their power to move others. At a time of national crisis when a consensus on two or three legislative changes would have provided long-term enhancements to the cooperative system, NCUA was missing in action. Leadership requires judgment in establishing priorities, vision in finding opportunities to solve problems, skill in communicating solutions, and values and integrity in committing to action.
The Boundless Opportunities
For over two years the performance of credit unions in a time of financial crisis has been extraordinary. They have been "punching above their weight class" by lending in markets that others have left or cannot serve. The collective performance demonstrates their commitment to the public policy covenant to be involved when privately owned efforts are lacking.
Credit unions across the country have risen to the occasion. They have shown that they can take on members' and communities' problems, embrace change and enhance the public's confidence and trust in the credit union system.
NCUA now has the chance to join this effort. It need no longer stand on the sidelines blowing a whistle when a foul is committed or counting up the injured from the playing field.
This is a time of high hopes for new leadership at NCUA, a time of new aspirations and the possibility of high achievement for credit unions and the country. Welcome back, Ms. Matz.