White House Finalizing Remaining NCUA Board Appointment

For this April Fool's Day, see what might happen if former SECU CEO Jim Blaine were to take a seat at the NCUA.

 
 

Sources at the White House disclosed today that the Trump Administration plans to send former North Carolina State Employees’ Credit Union CEO Jim Blaine’s name to fill Mark McWatters’ seat on the NCUA Board. Chairman McWatters’ term expires in August of this year. 

SECU is the nation’s second largest credit union at $38.8 billion. Blaine was CEO from 1979 until his retirement in 2016.

Even though Blaine is well known, the change took some credit union leaders by surprise. Blaine’s leadership of SECU was widely viewed as a textbook example of how to use a cooperative charter. Some leaders expressed concern, however, about how his business approach might clash with current NCUA policies. 

A spokesperson for the National Association of State Credit Union Supervisors expressed full support. “Jim was an active member and supporter of the state chartering option,” a high-ranking NASCUS executive said, speaking on the condition of anonymity. “While we have sought to have a state regulator on the board, Jim’s nomination is almost as good. As a CEO he actively employed former state regulators. We hope he will do the same at the NCUA.”

Some CEOs were ambivalent about what Blaine’s management philosophy would bring to the credit union industry. A top executive at a large mid-Atlantic credit union who also wished to remain anonymous said that, “Jim’s business tactics were from the last century. He did no risk-based lending, did not use FICO scores, and said that a capital level above 7% was ‘stealing’ from the members.”

“Placing Blaine as NCUA chair is like putting an Amish farmer in charge of the Department of Agriculture,” that CEO said.

While CEO at SECU, Blaine also notably rejected all merger overtures, relying on internal growth only and instead focusing on helping other, small credit unions survive on their own. 

One CEO who has actively merged in numerous other credit unions expressed unease: “Mergers are an important part of our growth strategy. If he should discourage voluntary mergers, that could dramatically slow the industry’s necessary consolidation. Should that happen, we would just have to spend more effort buying banks.”

One member of the Global Women’s Leadership Network expressed strong support for what she called Blaine’s “stand-up” leadership. However she expressed disappointment that the administration’s three board appointments of Blaine, Todd Harper, and Rodney Hood were examples of an outdated cooperative leadership culture.  “Let’s get some diversity here,” she said. “Jim is our Bernie. How about letting AOC name somebody?”

Both CUNA and NAFCU learned of the appointment only at the last minute. As CEO Blaine had left CUNA over policy differences, only to rejoin shortly prior to retirement. CUNA stated it looked forward to “challenging dialogues.” 

A NAFCU spokesperson expressed hope that if Blaine were to restart his blog to communicate directly with credit unions he could at least show a better side in the official agency site photo. 

Two recent NCUA chairs also reacted to the change.

One former chairperson said that Blaine was certainly well qualified. “He was always telling me how to do my job. Now that he is in fact the chair, he will learn how difficult it will be to fill my shoes. He will learn you have to go with Plan A because there is never a Plan B.”

Another former chair and board member said that Blaine knows well how to make tough decisions. 

“He will listen to agency staff, respect their singular expertise , and strongly support their seasoned judgments. His tenure will continue my leadership practice that NCUA knows what’s best for credit unions and their members,” he said.

Potential Policy Differences

The only muted concerns about Blaine’s choice was what policy changes he might make at the agency. This concern was expressed by one North Carolina credit union who wondered whether the two Tarheels on the board (Blaine and Hood) will stick together to pass whatever changes Blaine may propose.

One concern was Blaine’s rejection of indirect lending, which he opposed while CEO saying that the credit union must stay on the side of the member, not the auto dealer. For example, could he interpret the FOM to say that only preexisting members can be financed at a dealership. One Texas-based federal credit union said that such an interpretation would shut down their business model.

Blaine’s approach to mergers also could ruffle feathers. He believes members should be given the option of a voluntary liquidation with the net worth distributed directly to members rather than given to the surviving credit union. If members then wished to join another credit union or continue with whoever purchased the loans and deposits, they could have a choice.

He has observed credit unions are routinely buying banks for cash at 1.5 to 2.0 times book value (tangible net worth). In the voluntary merger that would mean an average payout to every member of between $1,000 and $2,000 of equity. 

As CEO Blaine also published his salary on the internet. At times he stated his belief that the CEO’s compensation should not exceed a specific multiple of the average salary paid to the credit union’s employees.

One critic suggested that for Blaine to force this disclosure on credit unions would be unsettling: “This is especially problematic at this time. All the credit union associations are trying to get the same tax treatment as bank CEOs so that credit union CEO salaries in excess of $1 million are not subject to an excise tax.” 

Another point: What will be Blaine’s stand on the risk based capital changes due to go in effect in 2020. One CEO is positive about Blaine’s capital position because of his support for secondary capital. “With industry net worth above 11%, I just hope he will declare everything above 7% to be secondary capital. Then the excess can be used however the credit union wants to reward or serve members.”

Former Colleague Gives Final Word

Tom Dorety, who worked with Blaine at SECU before leaving to eventually become CEO at Suncoast Schools, reacted when he heard the news. “You’ve got to be joking! Blaine would never take the NCUA job. The commute is too long.” 

Happy April Fool's Day!

We hope you enjoyed this April Fool's ruse from Chip Filson. What's no joke, however, is that today is the 34th Annivesary of Callahan & Associates. On April 1, 1985, Ed Callahan, Bucky Sebastian, and Chip Filson officially founded the company. Happy Birthday, Callahan.

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April 17, 2021


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  • Jim Blaine would certainly shake up things. His salary was an important statement on his part that the CEO's salary should be reasonable. It certainly should be disclosed and on the credit union's web site. Although these days members are not member/owners and I wonder if they would care whether the CEO is overpaid or underpaid. The story of the CEO at Municipal FCU in New York is a cautionary tale about how distant credit unions have become from their members. The Board oversight was poor and the CEO was grossly overpaid. He also was looting the shop because no one, including the regulators and auditors was paying attention. I worry that the CEOs today are very distant from their members. Their salary is closer to the 1% that it is to the members they serve. That means they live a life style that is foreign to that of their members. They are housing in headquarters that are no longer easily accessible to members (usually no member service). Members don't vote for the Board. The Board is appointed and elected by acclamation. Members don't attend the annual meeting. Members don't read the annual report or in most cases have any idea of the financial condition of the credit union. Jim was in many ways a trail blazer and he did things that were in the main good for credit unions and their reputation. His credit union remained close to the members and I believe he was in touch with the members in ways that many of today's CEOs are not. NCUA would be a better regulator if Jim or other's like him were on the Board. NCUA Board members with close credit union ties were the best (Ed Callahan, Bob Swan, Dave Chatfield to name a few). Unless something is done soon, I fear credit unions will lose their sense of direction and purpose as the Savings and Loans did. Credit Unions are today far better than banks. But the convergence is moving in the direction of banks. Direction comes from the Board and the management. JIm had direction! And that is no joke.
    henry wirz
     
     
     
  • Serve on the NCUA Board? About as likely as seeing a fire hydrant invite a dog over for a visit....
    Jim Blaine
     
     
     
  • I always love a good April Fool's joke, this was perfect.
    Todd
     
     
     
  • Well played chip, well played!
    Credit Union CEO
     
     
     
  • This April Fool's joke was good. But it does hit a critical issue and that is how board member's can have a big negative impact on a credit union's risk levels. Colorado is the only state that allows credit union board members to get paid. When you pay board members you get a better results in governance vs. free volunteers.
    Jim Bray
     
     
     
  • “Placing Blaine as NCUA chair is like putting an Amish farmer in charge of the Department of Agriculture,” Not funny
    Anonymous
     
     
     
  • Now that was funny. "Like putting an Amish farmer in charge of the DOA".
    Craig
     
     
     
  • We would have a food surplus and someone in the administration with values and morals.
    henry wirz
  • Chip, this was brilliant! You actually had me going for a moment - I think I woke the house up with my hooting and cheering! Once reality settled back in, I went back to enjoy both your sense of humor, and the underlying truth of what you're really saying. Bravo! Keep up the visionary disruption! - Leo Vaulin, CU*SOUTH
    Leo Vaulin