WesCorp staff, like all corporates, has been devoting much time and resources to analyzing the proposed 704 corporate rule. Their 25-page analysis was published on December 22, followed by an email letter to WesCorp members on why they "must demand changes to Rule 704." One town hall meeting had been held and more were scheduled.
Then the call came from NCUA Headquarters telling WesCorp to stand down, cancel the town halls, do not speak to CUNA's Corporate Task group and others on the rule, take down the commentary.
I don't know who made the call, let alone who approved it. But this "request-demand" was a terrible mistake for NCUA and the cooperative system.
What WesCorp's Analysis Showed
The logic of WesCorp's three written communications is as follows:
- The draft rule would make it impossible for corporates to create value for their members sufficient to meet the income-retained earnings requirements;
- Because the earnings outlook is problematic, it would be very difficult to raise any new capital from credit unions;
- With no new capital, WesCorp and other corporates would have no future.
In summary, the proposed corporate rule was unworkable.
Why NCUA's Action Is A Mistake
NCUA's silencing of WesCorp undermines the legitimacy of the public rule-making process. The 253-page proposal is outside the scope of most natural person credit unions' professional and management experience. Expert commentary is essential. NCUA's action suggests they do not want to hear or see published points of view that are contrary to their assessment.
Secondly, the request that WesCorp's CEO not make public comment undermines his efforts to rebuild member confidence in WesCorp's leadership team as well as its future.
Thirdly, the process shows an Agency afraid of open debate and different points of view. If this is typical agency bureaucratic behavior, a critical question arises. On how many other issues has contrary evidence and opinion been overridden by senior Agency staff?
The Town Hall meetings, presented as a way for the Agency to listen to what credit unions are actually thinking, are now suspect. Have they just become a form of political theater covering for what the Agency has already decided it wants to do?
How To Correct The Error
There is a very simple way to correct this unfortunate action. A senior person in NCUA needs only to pick up the phone, tell the CEO the Agency made a mistake, and ask that WesCorp rejoin the dialogue.
That is how cooperatives succeed, through collaboration and transparency. Such an action would undo a mistake, which would be quickly forgotten and demonstrate an openness to alternative, and perhaps better, options.
Sample letter to NCUA on Corporate Regs.