Carla Decker’s nomination to the NCUA board seat now held by Gigi Hyland must be confirmed by the full Senate. The Senate Committee on Banking, Housing and Urban Affairs hearing anticipated for this month gives Congress, the public and credit unions an important forum to openly discuss vital issues between credit unions and NCUA.
This public discussion about critical public policy issues is sorely needed. Confirmation hearings are one of the few occasions when Congress can exercise its oversight of an independent agency. Moreover the appointment process is a chance to learn what the Obama administration’s implied mission is for NCUA.
Relevant questions are potentially even more significant because Decker is CEO of District Government Employees Federal Credit Union, which, with $45.7 million in assets, is half the size of the average credit union. Her experiences and voice could be invaluable in presenting a smaller credit union’s perspectives. Some commentators view her peer credit unions as disadvantaged in the market place. As CEO, Decker has dealt firsthand with paying for NCUA’s insurance assessments and growing budgets, implementing new rules, responding to new exam priorities and reconfiguring options after the dismemberment of the corporate system. Her observations would be valuable in any public forum, even if she were not the nominee for the Board.
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 her business, and if so how? How do these apply to NCUA as a regulator?
Is her credit union a member of a corporate credit union? Did her credit union capitalize a corporate?
Does her credit union use CUSOs and how vital are they in her credit union’s operations?
(A full set of potential questions is provided below.)
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.
This specific nomination is about more than Decker. 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
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?
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?
Is your credit union a member of the Central Liquidity Facility? At this time the CLF has not demonstrated any operating capability but still retains $2 billion in credit union capital, an amount that far exceeds the total capital in all continuing corporates of $1.4 billion. 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?
The current NCUA board has failed to comply for the past three years with section 1752a § 102 of the Federal Credit Union Act on reporting to the President and the Congress. 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?
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?
NCUA’s reporting of its management of credit unions' assets has been neither timely nor transparent. The independent audits for 2008 of the three balance sheets under its control were over a year past due and much too late for oversight of NCUA’s actions. At the moment, the last independent audit for the Temporary Corporate Stabilization Fund set up by Congress is over 21 months old (December 2009). During this time NCUA has seized more than $50 billion of credit unions assets, set up a $30 billion Wall Street guaranteed note program using the full faith and credit of the US government, and yet issued no financial statements or accounting for any of these actions. Just 60 days ago the Agency assessed a $2.0 billion insurance premium because of a funding shortfall in managing the assets taken from corporates. What would you do as a board member to release a full accounting for these assets and their disposition as soon as possible? Are you in favor of disclosing the full amounts paid and being paid to all third party firms such as Barclays and PWC for the activities during these actions?
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?
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?
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?