President Reagan’s Impact on the Credit Union Movement

During the ceremonies honoring President Reagan’s tenure during last week, his impact on the country and government were much discussed. However, perhaps no aspect of the economy owes more to Reagan’s philosophy of deregulation than the credit union movement.

 
 
During the ceremonies honoring President Reagan’s tenure during last week, his impact on the country and government were much discussed. However, perhaps no aspect of the economy owes more to Reagan’s philosophy of deregulation than the credit union movement.

While deregulation was talked about before Reagan assumed office, he was the person who instilled this philosophy throughout the federal government. For credit unions his decision to appoint Ed Callahan NCUA Chairman in October of 1981 was the most important step in implementing this philosophy.

Ed had a sign outside his office in Washington D.C. which reminded visitors of his approach. It read, “We don’t run credit unions.” The sign was a gift from the Illinois Credit Union League upon his leaving the Director of Financial Institutions position to become NCUA chairman. The message captured Ed’s approach to supervision.

Ed would explain his philosophy as follows: The collective wisdom of the 150,000 directors and 15,000 management teams throughout the country should be responsible for making the fundamental business decisions for their organizations.

Prior to deregulation the government, through NCUA regulation, set the rates, terms and conditions for all savings accounts. The government regulators, not the leaders in the credit union, determined who could be served.

At the time of his appointment by President Reagan in 1981, the primary issue in the credit union movement was “survival.” Double digit inflation and short term interest rates of 12-16% had brought the economy and credit unions to their knees.
The NCUSIF had run out of money, problem credit unions which had invested in GNMA 8% bonds were getting worse, and the examination cycle was over two years.

In this environment Ed set his priorities of deregulation, decentralizing the agency’s staff to the regions for increased supervision, and increased communications at all levels of the credit unions system.

President Reagan believed in the power of the individual to do the right thing. Ed Callahan translated that belief into a series actions for the credit union system.

By mid-year 1985 when Ed left NCUA the credit union system had been significantly strengthened. Some of the most significant steps were:

  • The capitalization of the NCUSIF with the 1% deposit plan;
  • The opening of the CLF to all credit unions in a partnership with the corporate network;
  • A 64% reduction in the Agency’s operating fee over three years;
  • The evolution of the field of membership to reflect the changing economy;
  • Continued deregulation of all aspects of credit union product and business activity.

The bottom line is that credit union membership has flourished for the past 25 years. The Reagan legacy means that individuals can choose a cooperative form of financial services in most communities today.

 

 

 

June 14, 2004


Comments

 
 
 
  • GLAD THAT YOU REMINDED US OF HIS ACCOMPLISHMENTS.
    Anonymous
     
     
     
  • Those were important accomplishments, and the Callahan team (Ed, Bucky, Chip) transformed the agency and made it more responsive. In another important first, President Reagan also appointed the first CU executive ever to serve on the NCUAB.
    Anonymous
     
     
     
  • Callahan is among the architects of the NCUA culture of contempt for federal law as proven by the 1998 US Supreme Court ruling against the NCUA sponsored multi-SEG expansion scheme. This ongoing NCUA contempt has polarized the credit union movement creating the current gulf between large and small credit unions. It has empowered the growth of conglomerate credit unions in large part by allowing them to dine on the members of smaller credit unions which remain true to their roots.
    Anonymous
     
     
     
  • Thank you for enlightening me about this time in our history.
    Anonymous
     
     
     
  • Thank you for reminding us of these significant changes in our industry.
    Anonymous
     
     
     
  • Thank you for reminding us of these significant changes in our industry.
    Anonymous
     
     
     
  • You give NO direct indication of what Reagan thought about credit unions. Banks use th following Reagan quote: "in an economy based on free markt principles, the tax system should not provide a competitive advantage for particular commercial enterprises. These arguments apply with particular force to large credit unions." Ronald Reagan: The President's tax proposals to Congress for Fairness, Growth and Simplicity, May 1985.
    Anonymous
     
     
     
  • Reagan's administration also tried to get credit unions taxed.
    Anonymous
     
     
     
  • His great work continues.
    Anonymous