Congress Eyes CU Conversions

WASHINGTON – A banking expert told staff members of the House Financial Services Committee Friday that credit unions converting to mutual savings bank are increasing the risk to the FDIC deposit insurance fund, and thus to taxpayers. Consequently, said Dr. Haluk Unal, professor of finance at the University of Maryland and an FDIC consultant, credit unions should not be able to convert to bank charters. Unal was appearing with several other experts on the issue in an informal, closed-door education session for congressional staffers who are drafting legislation on credit union conversions, with only the lobbyists from CUNA, NAFCU, NCUA and the National Federation of CDCUs, among the only outsiders permitted to attend. Buck Sebastian, president and GTE FCU and head of the National Center for Member Trust, showed the staffers a series of articles published by The Credit Union Journal last week illustrating the increasing compensation among managers and directors of converted credit unions. “There is absolutely no reason for credit unions to convert other than insider greed and profit,” said Sebastian, according to one individual who was present. Alan Theriault, the long-time credit union consultant who invented the conversion to mutual savings bank, told the staffers that credit unions ought to have the option to convert if they find the bank charter more suitable. The CU Regulatory Improvements Act, introduced into the Financial Services Committee, would make it harder for credit unions conversions by requiring at least 30% of members vote and by proposing the conversion to members and allowing them to discuss it before the board votes.