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
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
- 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
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.