Any NCUA Board Appointment Is An Opportunity

Credit unions should seek to ensure that the appointment process restores confidence in the political process.

 
 

The open NCUA “credit union” board seat  generated  much discussion this week  at the GAC.  This presidential appointment is a vital opportunity for:

  • The administration in demonstrating its awareness of the critical role of the cooperative system in public policy
  • Congress in its oversight role of the agency
  • The credit union community in ensuring its representative can present industry issues clearly and with a demonstrated record of accomplishment.

The appointment process is the ideal time to raise and debate the unique role of a federal cooperative regulator, the value of dual chartering, and the operational oversight of the industry’s collective resources.  The following are preliminary thoughts on the questions that could be a part of this public dialogue. 

Some Important Questions On NCUA Policy And Practice

To ensure that the important policy topics are discussed in the hearing, it is vital that the relevant areas be publicly developed. These then should be communicated to committee staff, trade groups, the nominee and the media. A brief summary of some of these include:

  • Does the nominee use the seven principles of cooperative practice in their business, and if so how? How do these apply to NCUA as a regulator?
  • Is their credit union a member of a corporate credit union?  Did their credit union capitalize a corporate?
  • Does their credit union use CUSOs and how vital are they in their credit union’s operations?

A Bi-Annual Process – Action Needed Now

NCUA board vacancies generally occur on a two-year cycle. The nomination of a board member should be an opportunity to enhance and restore confidence in this political process. Firstly, in how the administration selects their nominee and, secondly, with the insight provided from the Senate’s confirmation dialogue.

The current mood of the country about political processes is not good. The relationship between NCUA and credit unions is a microcosm of this larger, sour feeling. Regaining trust in the insurance fund’s oversight and use, in the role of the Central Liquidity Facility, and in how the NCUA board manages the bureaucracy are critical to rebuilding confidence in NCUA. It is a way for letting the Administration and Congress know that credit union issues are not just an open seat on the NCUA board.

Choosing regulatory leadership is a critical decision for enabling credit unions in the 21st century. Credit unions’ participation in this process, by communicating with trade groups, with Senators and Congressional representatives or even the media with their questions should be a top priority – now.

This is not a moment for being a spectator at a political sporting event, watching while some try to score points for or against a nominee’s background and credentials. Who would have ever believed that the current NCUA board members were anything but well-qualified? Yet the current state of things suggests that qualifications are less important than a grasp of how to manage a bureaucracy with policies designed to make an industry successful while also responding to national priorities.

The nomination cycle will be ongoing. Can we get the process on the right track this time around?

Potential Areas Of Questions On NCUA Policy And Practice For The Nominee

  1. Many credit unions use the seven principles of cooperative practice to design their business strategy. Did you use these in your credit union now? If so, how? How do you believe these principles should govern NCUA policy and practice?
  2. Are you a member of a corporate credit union? How have you used the corporate? Did your credit union elect to capitalize a corporate? What do you think the role of the corporate should be in the credit union system?
  3. Is your credit union a member of the Central Liquidity Facility?  Do you think there is a role for the CLF? What is it? Since the CLF is capitalized solely with credit union capital, what governance role should credit unions have in its oversight? Should this role be like the FHLB system or similar to the Federal Reserve’s advisory board’s role? Do you think credit unions should be able to withdraw their capital from the CLF?
  4. The current NCUA board failed to comply with section 1752a § 102 of the Federal Credit Union Act on reporting to the President and the Congress in multiple years. What would be your response to this failure? What would you do to ensure NCUA follows all of its reporting responsibilities under the FCU Act?
  5. Over the past four years NCUA’s policies have been out of sync with the administration's stated priorities including ensuring credit was available during the depths of the Great Recession, the encouragement of loan modifications for borrowers experiencing temporary economic hardship, the reduction in government  regulation and most recently the freeze in federal spending. What do you believe NCUA’s alignment with an Administration’s (Republican or Democratic) policy priorities should be?
  6. Does your credit union work with any CUSOs? What is your view of the value of CUSOs from your experience? NCUA has proposed extending its regulatory authority over CUSOs even with the specific limits on CUSO activity in the Federal Credit Union Act. What role do you think NCUA should have with CUSOs?
  7. NCUA has been very public in its efforts to sue personally the boards and management of corporates for their alleged misjudgments and mismanagement when investments, legally authorized and reported, then deteriorated resulting in significant loss provision expenses (OTTI). At all times, NCUA examiners were on site daily and as a general practice conducted full semiannual examinations which resulted in high exam ratings. What do you believe is the responsibility of the regulator in this situation and how should that accountability be reported?
  8. One of the phrases describing credit unions is that they are “different by design,” which refers to their member-owner structure, democratic governance, local funding and lending, and the singular focus on the well being of their members. How as a credit union CEO have you incorporated these concepts? How as an NCUA board member would you enhance the ability of cooperatives to thrive with its community of consumer-owners?
 

 

 

March 19, 2012


Comments

 
 
 
  • If anyone thinks this administration gives one whit about credit unions, forget it!
    Wendell Fountain
     
     
     
  • Chip, thank you again for keeping a sharp eye on the agency you know well. I am linking it as "Recommended Reading" to my readers in April's eZine "Challenge the Status Quo."
    Dan Clark
     
     
     
  • Great points Chip. I hope the movements leadership put this at the top of their lIst. Our regulation has become so "bank-like" that our cooperative distinction is at risk. The rIsk aversion of NCUA flies in the face of our purpose and charter. Many credit unions fear even considering reaching to B and C borrowers as they anticipate examiner backlash. We all know that market, properly priced should be a credit union "sweet spot".
    John Gregoire