ALEXANDRIA, Va. – NCUA’s newly passed corporate rules are expected to unleash a major restructuring of the corporate credit union network that will entail consolidation of the disparate group of 28 regional corporates. The question to be settled is: who will lead that effort?
NCUA repeated its position that it will not direct the restructuring, leaving those decisions to the corporates and their members. NCUA Chairman Debbie Matz emphasized after Friday’s takeover of three more failed corporates, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU, that the future of the system will be determined by the private sector and “not by any government dictate.”
But leaders of the corporate system have been wounded by their own roles in the meltdown of the corporate system, making it difficult for them to collect support. The leadership vacuum was most evident over the past two years as the corporate crisis emerged, first with corporate executives denying the seriousness of the problems, then avoiding responsibility, then failing to develop any type of a plan to deal with the growing losses and deteriorating confidence in the corporate system.
CUNA and the leagues, which created the corporate system, have been hurt by their own leadership of U.S. Central FCU (the trade group controlled the board of the one-time $52 billion corporate before its 2009 takeover by NCUA) and by their own recent report calling for a retooling of the corporates into little-more than pass-through entities for investments. CUNA’s position has created a major break with some of the surviving corporates that continue to operate as viable entities.
CUNA leaders on Friday said the group’s corporate task force issued its final report last week and is scheduled to disband. But the CUNA Board will discuss continuing it to discuss and potentially develop a restructuring plan. “It’s up to [CUNA Chairman] Harriet May. We’ll have to see what she wants to do,” CUNA President Bill Cheney told Credit union Journal Friday.
Leaders in the corporate system who may have helped reorganize have been affected by their own involvement, too. Joseph Herbst, the former chairman of the board at U.S. Central who proposed consolidation into a single national corporate last year, is CEO of Members United Corporate FCU, one of the corporates placed into conservatorship. Other longtime leaders of the system have been dinged by the crisis, including Bob Siravo, another former U.S. Central chair who was CEO of WesCorp until its NCUA takeover, and Francis Lee, the former CEO of U.S. Central, and before that Southwest Corporate FCU. The trio will be spending years fending off lawsuits filed by NCUA in connection with the failure of their corporates.
The corporate system was so intertwined that dozens of credit unions leaders share responsibility for the meltdown. The U.S. Central Board, for example, was comprised of one representative each from CUNA and its state leagues and five representatives of individual corporates. And the corporates boards were comprised of leading executives of credit unions. In the case of WesCorp, NCUA has filed suit against 12 directors, CEOs of some of the nation’s biggest credit unions, for their responsibility related to the failure of the one-time $34 billion corporate.
“The leaders of the nation’s consumer credit unions must make strategic business decisions about whether to recapitalize some of the remaining, viable corporates, switch to a different corporate, or seek services at some other type of institution,” said NCUA’s Matz.
