ALEXANDRIA, Va. - Corporate credit unions are getting some firsthand experience with an industry legend. H. Allen Carver, they are finding, is as tough a regulator as they come.
Since becoming the National Credit Union Administration's top corporate examiner a year ago, the 30-year agency veteran has made tough supervision and tough new rules the hallmarks of his reign.
This is nothing new. As director of the agency's Midwest region - and, later, the Southeast - Mr. Carver was notorious for being a regulator with an iron fist.
Admirers praise the director of the Office of Corporate Credit Unions as a firm but fair; detractors accuse him of being a hatchet man and a zealot.
Mr. Carver, 52, sees himself as a man with a mission, one that sometimes requires him to step on people's toes. He takes his regulatory philosophy from congressional testimony given in the 1980s by Paul Volcker, then chairman of the Federal Reserve Board.
Mr. Carver offered a quote from the former regulator: "Laxity in supervision of financial institutions breeds short-term friends and long- term enemies," then added, "A day doesn't go by that I don't think about that."
Mr. Carver learned from experience to take a hard line. After 17 years in the agency's central and district offices, Mr. Carver in 1982 took over the Midwest region.
Faced with massive factory closings and layoffs, Rust Belt credit unions were suffering.
"We didn't have a recession in the Midwest, we had a Depression," he said.
Mr. Carver worked with credit unions he thought could survive and merged or shuttered the hopeless cases.
John Siefken vividly recalls contentious meetings as he and Mr. Carver cobbled together survival plans for Citizens Equity Federal Credit Union. In the early 1980s the Peoria, Ill., institution Mr. Siefken heads was rocked by a strike and layoffs at its sponsor, Caterpillar Inc.
"He was hard-nosed," Mr. Siefken said. "It wasn't a pleasant experience, but I give a lot of credit for the fact that we got out of that mess to Allen."
An NCUA official who professed admiration for his veteran colleague admitted that Mr. Carver sometimes crossed swords with institutions.
"He was the most innovative of the regional directors in using administrative processes (such as cease-and-desist orders) to get results," the official said. "Sometimes credit union officers would disagree with him in good faith, but I never saw a case where he took strong administrative action that wasn't appropriate."
Mr. Carver brought a reputation for toughness with him when he moved to Atlanta in 1990 to become director of the agency's Southeast region.
When the Office of Corporate Credit Unions was created a year ago, he got the call to Washington. He had grabbed the attention of newly appointed NCUA Chairman Norman E. D'Amours and his right-hand man, executive director Karl Hoyle, by cracking down on Puerto Rico's troubled corporate credit union.
"Allen's the best of the best," said Mr. Hoyle, a former high-level official at the Federal Home Loan Bank Board. If the now defunct thrift regulatory agency had had Mr. Carver in its western region, he said, the celebrated debacle precipitated by Charles Keating's Lincoln Savings and Loan never would have occurred.
Mr. Carver came to the attention of Mr. D'Amours and Mr. Hoyle at a time when they were disappointed with corporate supervision - then handled by the Office of Examination and Insurance.
They felt some examiners, many of whom were trained by corporates, were either unqualified or too close to the institutions they regulated. The officials also were troubled by late reporting from corporates, and by how often waivers from regulation were granted.
Mr. Carver has cleaned house, giving the boot to some examiners and bringing on others.
The extent of the changes can be seen by comparing the listing of corporate examiners in the agency's November 1993-February 1994 directory to its July-October 1995 one. Of the 17 examiners listed in the most recent directory, only four carry over from the older one.
Mr. Carver was still overhauling the office staff and operations in late 1994 when the industry's biggest failure blew up in his face: Capital Corporate Federal Credit Union.
The NCUA seized the Lanham, Md., institution on Jan. 31, 1995, after it was unable to meet depositor demands because its assets were tied up in mortgage securities devalued by interest rate increases.
Many in the industry - and even NCUA director Robert Swan - urged the regulator to hold off on killing Cap Corp, arguing it could be saved. Nevertheless, by April the agency had sold off its assets and sold the scraps to Pennsylvania-based Mid-Atlantic Corporate Federal Credit Union.
The agency's action created resentment throughout the industry, particularly because 251 credit unions lost $23 million in the dissolution of Cap Corp. The losses represented about 70% of their capital deposits in the liquidity center.
"His approach is best described as the Elliott Ness approach, being a tough cop," said William Brooks, a former NCUA examiner and now chief executive of Lafayette Federal Credit Union, which lost $231,891 in the debacle. "Allen Carver's approach is to hit people with a 2-by-4 and if they're still standing, he'll let them move on."
Mr. Carver said the agency did what it had to.
"I think we made the best of a bad situation," he said.
Congress was riled that the NCUA waited for Cap Corp to melt down before doing anything. A clear message from three days of hearings in the House and Senate was one Mr. Carver was receptive to: Get tough.
The agency has done just that - in spades. Examinations are more thorough and require more reporting, corporate officials said. This has caused some grumbling as well as praise.
"I don't want to be accountable for another corporate's problem" in the wake of Cap Corp, said Jane Sansone, chief executive of Eastern Corporate Federal Credit Union, Woburn, Mass. "I want a good exam and good regulation."
Performance ratings have been tougher than in the past. The NCUA rates corporates from 1 to 5 on the Camel scale - with 5 being the lowest grade.
So far this year, the agency has slapped ratings of "4" on Southwest Corporate Federal Credit Union in Dallas, U.S. Central Credit Union in Overland Park, Kan., and Corporate One Credit Union in Columbus, Ohio. Corporate One was upgraded to a 3 rating three weeks ago.
Western Corporate Federal Credit Union, San Dimas, Calif., also received a 3 rating.
Such low ratings - especially considering that U.S. Central, Wescorp, and Southwest are the three largest corporates - are a break from NCUA tradition. For instance, in early 1994 only one corporate had a 3 rating and only one had a 4. Twelve corporates received a 1 rating and 30 received a 2.
"We've been very tough with corporates because the credit unions' credit unions should be the best of the best," Mr. Carver said.
Preventing another Cap Corp was the motive behind the issuance in April of a proposed regulation tightening corporates' investments and boosting their capital.
Mr. Swan, the NCUA director, said when it was issued that the proposal was premature, and his opinion seems to have been vindicated. After pooh- poohing Mr. Swan's suggestion that a 60-day comment period wasn't long enough, Mr. D'Amours subsequently decided to extend the period until Aug. 25.
But last week the agency took the unusual step of pulling the proposal after receiving a record 1,000 comment letters denouncing it as too draconian.
The agency plans to issue another proposal later this year, although it might not be implemented on Jan. 1, 1996, as originally planned, Mr. D'Amours said.
An NCUA source called the whole process an embarrassment, and blames Mr. Carver for being inflexibly tough during meetings with staff and industry officials as the proposal was being drafted.
Mr. Carver said he is "pro-corporate," but some tightening is needed.
"There is a need for regulation in a lot of areas, but you have to be careful to have the appropriate amount of regulation," he said. "There's a need for a corporate reg, but let's get the right amount of reg. That's turning out to be a tremendous task."
Finding the right amount of "reg" is likely to be Mr. Carver's last task in his current position.
In order to attend to family matters, he will begin overseeing the corporate office from Atlanta in a few weeks - after a year of commuting between there and the NCUA's Alexandria, Va., headquarters. If he chooses to stay in Georgia beyond Jan. 1 - and odds are he will - he must relinquish his post and return to being regional director.
"I like being regional director," he said.
But for now corporates still have to deal with him. Mr. Siefken, one of Mr. Carver's old sparring partners, has some words of advice for fellow credit union officials.
"My advice is to tell him everything," he said. "Tell him in advance if next month isn't going to go well and for what reasons. Don't keep things from him, and you'll be fine."
