Banks Claim NCUA Has Staffing Crisis in Oxley Letter

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Two community bank groups have sent a letter to Congress that claims a personnel shortage at NCUA may be the first step in a financial crisis among America's credit unions, and demanding that the Government Accountability Office (GAO) investigate.

The letter launched quick responses from the agency, the credit union trade groups, and the person whose comments are the basis for the letter. NCUA stressed that there is no "staffing crisis," as the bankers suggested, nor is there any threat to safety and soundness. CUNA CEO Dan Mica, meanwhile, said that if such a GAO investigation is to be conducted, its scope should be expanded to examine a host of other issues.

America's Community Bankers and Independent Community Bankers of America said in the letter to House Financial Services Committee Chairman Michael Oxley (R-OH) that there are staffing problems at the agency, basing their position on comments made by former NCUA Board Member Debbie Matz in her last board meeting before leaving NCUA. "The examination deficiency has occurred during the same time that the credit union industry has greatly expanded its lending products, particularly into more complex business lending products," the letter states.

Matz had said in September that NCUA had 35 staff vacancies and that its examination program was behind by 7,500 hours. The two bank groups have called on Oxley to request that the GAO study the staffing levels at NCUA. That request came the same week that Texas Rep. Jeb Hensarling also asked GAO to study whether NCUA is obstructing credit unions from converting to mutual savings banks.

NCUA Chairman JoAnn Johnson asserted there is no cause for concern. "The NCUA is strongly positioned from a staffing standpoint to address normal and any anticipated contingencies," she said in a statement. "Most recently, the agency reallocated resources after Hurricane Katrina and Rita without adversely impacting operational programs. The wise use of agency resources remains a high priority."

Matz said any suggestion by the bank trade groups that she believes personnel shortages at NCUA are leading to safety and soundness concerns are highly inaccurate. "The ACB and ICBA have mischaracterized my statements to suit their own ends," Matz said in a statement. "Upon the completion of my term, I was extremely proud to have served on the NCUA Board, and equally proud of the job done by the agency's talented staff. My comments regarding staffing levels were intended to ensure the agency prospectively continued its superb record of ensuring credit union safety and soundness. Any suggestion to the contrary is simply mischief-making on the part of ICBA and ACB, and patently false."

NAFCU's Carrie Hunt dismissed the letter as "just another attack from the banks." CUNA CEO Dan Mica agreed, adding, "Credit unions have nothing to apologize for when it comes to safety and soundness...Furthermore, it's astounding to hear any banker trades, especially ones that include the remnants of the thrift industry, express any opinions whatsoever about the adequacy of credit union regulation, given their record of failure in this area. Moreover, the banking industry's significant and costly violations of the Bank Secrecy Act show they still haven't put their own house in order."

Separately, Mica said that if Rep. Hensarling's proposal moves forward and GAO investigates whether NCUA is interfering with efforts by credit unions to convert to a mutual savings bank charter, the investigation should be expanded and take into account such issues as adequacy of disclosures to credit union members and how many conversions to mutual thrifts then go on to become stockholder owned institutions.

Such a review, said Mica, would "provide a more informed basis on which public policy decisions can be made...and will assist the GAO in assessing whether sufficient information was provided to members prior to their vote to convert."

The letter:

    Dear Chairman Oxley:
    On behalf of all our members, we first want to express our sincere appreciation for your leadership in protecting the financial services industry with strong legislation and oversight. However, we wanted to bring to your attention a potentially problematic safety and soundness situation that we believe is not being adequately addressed and may warrant more oversight from your committee.Former NCUA Board Member Deborah Matz publicly expressed her concerns about the status of NCUA's supervision before she resigned from the agency in September. During the July 21 2005 NCUA open board meeting, Ms. Matz indicated that the NCUA is struggling to address perpetual staff vacancies. In fact, as of June 2005, the agency was short-handed and was running 7,500 hours behind in completing credit union examinations. As of that time, there were 281 credit unions with a CAMEL rating of 4 or 5. Furthermore, the examination deficiency has occurred during the same time that the credit union industry has greatly expanded their lending products, particularly into the more complex business lending products. This is a situation that could become a potential crisis that should be reviewed. We recommend that you consider asking for a CBO or GAO study to determine the implications this deficiency may be causing to the safety and soundness of the credit union industry.

    Again, we commend you for your continued leadership and look forward to working with you and your staff in making the financial services industry even stronger for all consumers.

    America's Community Bankers
    Independent Community Bankers of America
    Washington, DC

(c) 2005 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.

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