NCUA has provided the architecture to address the corporate network's collective possible losses. Simultaneously it has set in motion at lease five processes to minimize those losses while maintaining full daily corporate activity and evaluating all future options. These processes include:
1. Independently tracking trends in corporates' investment portfolio market valuations by hiring PIMCO. This data can be used along with a corporate's pricing procedures and auditor's estimates to constantly "size the problem" before finalizing initial NCUSIF reserve funding by credit unions.
2. Meeting one-to-one with each corporate to implement supervisory agreements as a condition for share guarantees and to strictly control immediate actions;
3. Beginning the rule-making procedure to allow wide discussion and consideration on the best role and future structure of corporates;
4. Developing steps to assist credit unions facing the most serious delinquency problems, now burdened by the added costs of this action;
5. Initiating efforts, in parallel with trade associations, with appropriate committees in Congress and the Treasury to seek ways to enhance both credit union and CLF-NCUSIF options in the current financial crisis.
These actions were temperate, well thought out, and foreclosed no future options. The Agency has asked the entire credit union community to resolve the corporate challenge by being more than a source of funds. This structure gives credit unions an opportunity to affirm who they are and what their cooperative capabilities should be for the new world of financial services that will arise from the current economic crisis.
E Pluribus Unum?
With NCUA having taken this deliberate approach, the issue now facing some credit unions is reconciling their individual institution's self interest with the well-being of the movement. Some have initially answered this question by proclaiming there should be no corporate network in the future and asserting that their only responsibility as credit union directors or CEOs is to their own memberships. Certainly many credit unions have reached the stage of financial maturity that they could go it alone. This is a tribute to the leadership and progress that credit unions have achieved since deregulation by which market forces, not a government charter, determined the future of a financial institution.
But did we come through deregulation merely to become another set of 8,000 individual institutions competing with for-profit entities distinguished only by a different organizational structure? Will credit unions continue as a movement (unum) or will we just all go our many separate ways (pluribus)? What insight does the last hundred years of credit union history (and 75 years since the Federal Credit Union Act was passed) provide at this critical moment?
A Public Policy Covenant
Credit unions were started because of market failures. For-profit firms either could not or would not serve consumers on equitable terms. For over 100 years individual states and the Congress have passed credit union chartering laws as alternatives for consumers because of the shortcomings of privately owned, market-driven financial providers. Credit unions are supposed to grant credit when and where others will not and on terms that are in the member's interest. Credit unions are to encourage thrift in their member-owners, not gain on the part of a few shareholders or insiders.
For this role in society, credit unions have been given an exemption from one of the universal commitments of for-profit and even many mutual firms: the requirement to pay taxes on their earnings. Because cooperatives have a different structure with no capital except member shares, common values were required to succeed. Trust and dependence on one's fellow members have been a distinctive part of the credit union movement’s fabric.
These values continue today to be affirmed in many credit unions' mission statements. But these values that undergirded cooperation in the start-up years did not just replace private capital. Cooperation is how the movement thrived. We relied on each other to create organizations, CUSOs, insurance funds, and the corporate network that serve all credit unions– large and small–equitably.
These values are not merely an intangible emotional legacy or temporary partnering tactic. Real cooperative dollars finance the credit union insurance model; they provide the resources to start organizations as diverse as CU*Answers and CUNA Mutual, foundations and literally hundreds of local chapters, CUSOs and community contributions.
Cooperation is credit unions' competitive advantage. It is why a member with little resources but good character can come in to get a credit card, car loan, or even a first mortgage on the same basis as a well-to-do member. Cooperation is why a $3-million credit union in South Dakota can provide meaningful services and a choice in the way a billion dollar credit union does in Washington D.C.