A Week Henceforth To Be Known As 'Cinco De Psycho'
We all know by now that you recall where you were when heard about a tragedy. The Kennedy assassination for one generation. The Challenger explosion for another. Where you were when you proposed or were proposed to for many others.
In my case, I was in a basement banquet room of a short-on-elevators Marriott Hotel near the Potomac River in Rosslyn, Va. when it occurred to me the Credit Union World had turned upside down. I was acting as host/interviewer for an event put together by the Metropolitan Area Credit Union Management Association (MACUMA) that was aimed at putting a critical light on credit union charter conversions to banks. (It's a controversial topic to be sure, and I believe MACUMA's thinking was to get a host/interviewer who was already unpopular.) Seated to my right were Marvin Umholtz, a spokesperson for the Coalition for Credit Union Charter Options, and Bob Freedman, an attorney with Freedman, Silver and Taff, a D.C.-area law firm whose website says it "has led the financial services industry in charter conversions."
It was a night of such twisted logic and dubious claims that I was positive at any moment the Twilight Zone theme would sound and a stonefaced Rod Serling would emerge from behind me and intone, "Submitted for your approval..." The meeting came just three days after Cinco de Mayo, and kicked off a week that in Credit Union Land shall forever more be known as Cinco de Psycho.
First up, not surprisingly, both Mr. Umholtz and Mr. Freedman strongly advocated the right of credit unions to convert and, to demonstrate what reasonable men they are, even noted that a mutual savings bank charter is not right for 95% of credit unions. That still leaves approximately 400 fatted-calf CUs for the conversion consultants, who make hundreds of thousands of dollars from every conversion (and conversion attempt).
Second, both insisted that the motivation is not greed, with Mr. Umholtz going so far as to argue that there is "no such thing as insider enrichment," a statement he should share with Enron's former employees. That claim led two CEOs to stand up and report that they had been pitched to convert their credit unions in the past, and in both cases the "consultant" had made a point of highlighting that millions of dollars could flow to their own personal balance sheets.
At the MACUMA event, Mr. Umholtz had with him a tabloid-sized glossy brochure headlined, "Myths and Truths about Charter Conversions," and then promptly launched into an effort to twist the truth and create some myths, chief among them that NCUA-the coalition's favorite bogeyman-is the reason more information isn't disclosed to members. That is absolutely false. NCUA awkwardly cracked down on the ballots in some previous conversion bids, but there is nothing to keep a CU from announcing in its newsletter from Minute One, "Hey, we're thinking about becoming a bank. Here's why and here's what will happen to your one-member, one-vote status and our business mission. Hint, it ain't you."
But what made me really wish I had Tivo'd the evening were the statements from the War is Peace, Work Makes You Free, Reduced-Income-Plus-Increased-Spending-Will-Balance-The-Federal-Budget School of Logic, chief among them that once a CU files its conversion app, it's nobody's business but the potential new regulator, the Office of Thrift Supervision. Mr. Freedman even noted that the board of a mutual savings bank has an obligation to its customers. As for whatever happened to that fiduciary responsibility of the CU board to defend the people who elected them and trusted them, well, que sera, sera.
The MACUMA event was just the warm-up act for Cinco de Psycho. Incredibly, later in the week Congress held hearings on charter conversions in which credit unions actually had to defend the interests of the many against the interests of the very few. At some point during the hearings called by Rep. Patrick McHenry of North Carolina, someone should have walked this confused rep over to the branch of Congressional FCU in the Capitol building and explained how members of his own staff and every other office of Congress save a few dollars there, get their first loans there, and how generations of moderately-paid workers have made it all possible by building reserves a few pennies at a time. Would it be right, Mr. McHenry, if the cooperative wealth that now belongs to your staff and others' suddenly belonged to a handful? Could Patrick McHenry explain that to the statue of Patrick Henry without the statue holding its nose?
One question that demands to be asked is what are credit unions getting for all that PAC money they have raised for Congress? Is it now just about the chest-puffing, feel-goodedness over making those "Top 10 Money-Raiser" lists, because with this kind of support in Congress, credit unions are on their way to becoming the best-financed example of No Good Deed Goes Unpunished.
To cap off Cinco de Psycho, the board at DFCU Financial, which is the subject of a recall vote after seeking to convert that credit union, basically turned their backs on its own bylaws and dared the members seeking to recall them to do something about it. The pockets the board had hoped to line with a windfall from the conversion are deep, and they are now tapping the members own equity to pay for lawyers to keep those same members from exercising their democratic rights.
At the MACUMA event, Mr. Umholtz said that in opposing conversions, "The credit union industry is becoming laughable because people think you're nuts."
I agree there's something nuts going on all right.
Frank J. Diekmann is Publisher of The Credit Union Journal and can be reached at fdiekmann