America has never needed credit unions more. However, systemic reform is necessary to fulfill the mission set forth by Congress and to satisfy the growing needs of members.
Reform would divide NCUA's responsibilities into three independent bodies: a regulatory body (modeled after the OCC within the Treasury), the insurance fund, and the Central Liquidity Facility.
Credit unions need access to the reasoning and the methodology that will shape reform. They need to know what individual institutions as well as the industry in its entirety can do to support the cooperative financial model. Three ideas come to mind:
- Creating a 21st century credit union system: The process starts with establishing an office of credit union administration within the U.S. Department of the Treasury. The opportunity to address a fundamental flaw in the cooperative structure is ready and available. Credit unions can use their pent-up energy to take action now using options that are already in place.
- Re-establishing the role of the Central Liquidity Facility: Between the creation of the Central Liquidity Facility (CLF) and the Great Recession, the CLF lost its ability to respond to credit union needs in the way it was designed to. This is not a management issue; it is a structural flaw the credit union system can correct.
- Restoring cooperative confidence through a national cooperative insurance fund: Today the National Credit Union Share Insurance Fund (NCUSIF) is used as a fig leaf for regulatory failures. There is an inherent conflict when the regulator claims to be acting to protect the fund yet its own regulatory shortcomings are an integral part of the problem.
The financial system of the nation is at a very promising point.Economic recovery is bringing business opportunities and loan demand. Higher earnings will restore capital and, more importantly,"institutional self-confidence." But the final shape of the system is still being debated.