Three noteworthy events took place on August 2, all of which have potentially significant consequences for credit unions:
- President Obama signed into law a compromise on the debt ceiling that will change the trajectory of government spending and revenue for the next decade.
- NCUA announced the cancellation of the voluntary prepaid assessment funding for the Temporary Corporate Credit Union Stabilization Fund after only 800 of 7,300 credit unions pledged to support it.
- The term of NCUA Board member Gigi Hyland expired, opening up the position at NCUA.
These seemingly independent events are actually interconnected. In aggregate, they provide the opportunity for credit unions to set a new direction that will benefit the country, credit union members, and the entire cooperative financial system.
This is the first of several articles that will examine the implications of these events. The change in the federal government’s fiscal priorities means a new possible role for credit unions, but new leadership initiatives are needed — now more than ever — to fully take advantage of the opportunity presented by a change in the macroeconomic environment. This analysis is intended to encourage dialogue among readers about their leadership expectations.
First, a few questions to consider. How are the events of August 2 connected? How does the nomination of a new NCUA Board member relate to a macro-change in public fiscal policy? What does the credit union industry's lack of confidence in NCUA, as displayed in the response to the voluntary prepaid assessment, suggest about Board oversight at NCUA?
These events draw into question the cooperative system’s ability to fulfill its public policy role without a significant change in NCUA direction, bringing to light several issues, such as:
- How can NCUA better align its policy initiatives with the Administration’s, whether Republican or Democratic? Throughout the past three years, the actions of NCUA’s leadership have directly contradicted the Administration’s announced priorities. NCUA’s positions have not only undermined economic and regulatory recovery efforts, they’ve also prevented credit unions from fulfilling their public policy, credit-granting role. Two recent examples of misaligned initiatives include 1) the White House’s budget reductions versus NCUA’s budget increases and 2) the Administration’s dictum that federal agencies review and reduce regulation versus NCUA’s continual introduction of rules like those regarding CUSO regulation.
- How can member credit unions re-create the role of the Central Liquidity Facility so this essential pillar of safety and soundness is available to be a lender of unfailing reliability for credit unions?
- When will NCUA return the excess reserves in the National Credit Union Share Insurance Fund? According to the agency’s own numbers, when using the actual loss experience of the past three years, the NCUSIF’s allowance account has more than $1 billion in unneeded funds. Returning these reserves would improve the net worth positions of all credit unions.
- What steps will restore NCUA transparency, which is critical to effective governance, and thereby restore confidence to the credit union system?
- What actions will make the cooperative charter and its regulatory system more attractive to consumers looking for trusted alternatives?
- How can the tri-part structure of NCUA better reflect cooperative approaches? Many of NCUA’s solutions are “FDIC-emulation” tactics that are more appropriate to shareholder-owned institutions, not cooperatives.
These are just some of the issues crystallized by the events of August 2. Seemingly unrelated, they all point to one need: a new leadership vision for NCUA. What skills, experiences, and common sense approaches must a new Board possess to meet your leadership expectation?
The President, with Senate confirmation, makes the final decision, but the cooperative system should articulate the framework for understanding the challenges awaiting a new leader, and it should do so now. One of the oldest principles in politics is: In a democracy, the citizens get the leadership they deserve. What leadership do you deserve? What qualities does your credit union want to see in the person who fills the NCUA Board vacancy?
Share your point of view in the comments below.