Credit union executives are becoming increasingly concerned that their regulator is casting a harmful shadow on their industry.
Allegations this month of hiring abuses at the National Credit Union Administration that resulted in the suspensions of two top officials are just the latest in a succession of problems at the embattled agency.
During the past year, the General Accounting Office found an atmosphere of "distrust and animosity" on the board, a federal judge called the NCUA a "rogue federal agency," and Congress questioned Norman E. D'Amours' effectiveness as chairman.
The most recent episode involved a report from the U.S. Office of Personnel Management, which charged, among other things, that the NCUA had intentionally hired at least 40 white examiners under a program intended to promote minority hiring.
Credit union executives said they are getting fed up.
"I wish all of this would go away," said Brian L. McDonnell, president and chief executive of Navy Federal Credit Union, Vienna, Va. "As an industry we don't need any more controversial news like this."
"It makes our industry look like some kind of Mickey Mouse operation when our regulator can't even get its hiring practices right," said the chief executive of another Virginia federal credit union. "Our credibility was already hurt, and this casts a dark cloud at the worst possible time."
Indeed, the credit union industry is at a crossroads. The Supreme Court is expected to decide early next year whether it should defer to the NCUA's interpretation of the Federal Credit Union Act. If the agency loses the case, all members of occupation-based credit unions would have to share a single common bond.
In addition, the Treasury Department is looking into the NCUA's supervision of credit unions. Several observers said the hiring controversy could significantly affect the outcome of a long-overdue report of the Treasury's findings. (The report, due Sept. 30, is expected as early as this week.) An administration official recently confirmed rumors circulating among industry officials that the White House is troubled by the latest problems at the NCUA.
Credit union officials said they are worried that the discord at the NCUA could lead Treasury to recommend that the agency be given some "adult supervision," as one CEO put it. In other words, the administration may suggest folding the NCUA into another financial regulator.
Credit unions have fought to keep the NCUA independent, arguing that their industry is unique and should not be supervised by a banking agency. However, it is hard to argue for independence when the agency's credibility is repeatedly questioned, said Charles A. Bruen, chief executive of First Entertainment Federal Credit Union, Hollywood.
"It's not hard to think, 'Who needs this? These guys should just be part of another regulator,'" Mr. Bruen said. "We want a strong, independent regulator whose integrity isn't going to be questioned.
"If NCUA is folded into another agency, credit unions are doomed," Mr. Bruen added.
In an interview Tuesday, Mr. D'Amours said that in conversations with White House officials he has heard no talk of reining in the NCUA. But Mr. D'Amours agreed that the report from the personnel management office has hurt his agency's image.
"Has there been any harm done to NCUA's reputation? Of course there has," Mr. D'Amours said. "Any time an agency is found to be in violation of due process or civil service procedures, that is not helpful."
Several credit union officers blamed the hiring abuses on the agency's executive director, Karl T. Hoyle, and its director of human resources, Dorothy W. Foster-both of whom have been suspended with pay pending further investigation. But several observers said Mr. D'Amours' management style has hurt the NCUA's image.
"D'Amours doesn't listen to anybody," said Ronald L. Snellings, president and chief executive of Pentagon Federal Credit Union, Alexandria, Va. "He has been running the board much as congressional chairmen run their committees."
Former board member Shirlee P. Bowne, who was succeeded this month by Dennis Dollar, chief executive of Gulfport VA Federal Credit Union in Mississippi, echoed Mr. Snellings' observation.
"This board used to operate like a board, but that changed with this chairman," Ms. Bowne said. "He has seen his role as more of a secretary of a department, rather than a board member."
Mr. D'Amours dismissed these remarks as "absolutely untrue."
"I have acted as the chairman of an agency-maybe that bothers certain people," he said. "Chairmen of agencies have responsibilities, and they must discharge those responsibilities."
