(This article was excerpted from the February
2000 Callahan Report)
Of all of the
dangers imposed upon the credit union movement by the Congress and
NCUA, this recent one is possibly the worst and the most far-reaching.
Spurred by Congress, NCUA has labored to define "complex"
as it relates to credit unions, and in the process determined that
-- in NCUA's opinion -- a vast percentage of credit unions are indeed
"complex" -- whether from 30 to 70 percent is as yet unknown.
NCUA's labors include formulas that reveal a credit union to be
"complex" and formulas that purportedly allow a "complex"
credit union to escape some of the worst regulatory strong-arming
owing to its "complex" label. These labors at definitions,
formulas and methods of "relief" have no doubt been ardent,
But those who have labored have completely missed the point.
The danger is
not that some credit unions might wander a bit too far into, for
example, small business lending. The real danger is that a great
many credit unions are going to be stained with the label "complex,"
and that the term is going to be used against us -- and not just
by our vicious competitors, the banks, but also unwittingly -- though
nonetheless harmfully -- by our regulator.
Consider: Bankers will say, "See, these vast numbers of credit
unions are Ôcomplex.' But credit unions were set up to help
simple people, and simple people run them. Now these credit unions
have become complex. Can simple people really run complex institutions?
Our guess is that complex institutions run by simple people are
just a disaster waiting to happen, one that will empty the pockets
of taxpaying Americans. At the very least we have to keep these
credit unions from growing -- for the sake of the country."
Our own regulators
aid and abet such credit union critics by defining so many credit
unions as "complex," thereby putting such credit unions
on a kind of watch list (whether or not that watch list is a formal
one). The media, the Congress, the public are all going to be somewhat
uneasy about this long "list" of "complex" credit
unions. The very word sows doubt and hesitation at a time when we
need to be vigorously pursuing new strategies to follow the members
and serve them better.
a Problem Out of Nothing
Of course, there never was a problem to begin with. The Congress
did not define "complex." It left it to the NCUA. When
the act was written there was not any hint that the credit union
movement was in trouble. We were doing just fine. Just look at the
history of the NCUSIF -- how much had it paid out in the last 15
years? Look at the spending record of NCUA.
There was not
a problem when Congress wrote its charge to NCUA to define "complex."
There was not a problem when NCUA undertook to define "complex."
And yet here is an embracing definition that creates whole new levels
of bureaucratic oversight and interference that may well wreak havoc
upon the whole credit union movement.
occupied of course with plenty of other weighty matters, at least
had the right to assume that the regulator would define "complex"
in a reasonable way and not, as it were, cry FIRE! in an auditorium.
But Congress was wrong. The regulator, seemingly without sufficient
understanding of how the credit union movement works and what it
needs to prosper, has sown the seeds of panic.
Their Own Folly
The other tragic part of this is that the NCUA regulators do not
even see what they are doing. They have attached to themselves so
much self-importance they are blind to their own folly. This failing
is never more in evidence than when a regulating body feels it is
firmly in control. Such is now the case, because there are fewer
checks and balances now on the regulator than in any decades past.
And the trend
is accelerating. The more credit unions are "complex,"
the more the regulator gets to say, "You are so complex you
cannot run your institution yourself -- you need our help to run
it, and we know just what to do."
Here's another tragic part. The term "complex" is not
only going to stain the movement by sowing seeds of doubt among
the public and abetting our enemies, but it is also going to harm
individual credit unions. It can come back to bite in a thousand
ways, and the worst will be where it can do the greatest damage,
that is, when a credit union is successful. It is when a credit
union grows and prospers that it will top the list of "complex"
so that it would then fall prey to Prompt Corrective Action. Success
itself -- including bigness and mergers -- will be punished. And
that is another death knell for the credit union movement.
In the Wrong
Our regulator should be our cheerleader. Unfortunately, owing to
a deep misunderstanding of credit unions it is playing into the
hands of those who would shrink us, keep us small, keep us hidden
from view. It does this when it allows others to help define "complex."
If they allowed us instead to define "complex," only a
small number of credit unions would be labeled so and the whole
movement would not fall under a cloud. But it looks as if that cloud
is lumbering into place, and that is bad news indeed for the credit