ORLANDO, Fla. — Individual credit unions and their trade associations need to generate greater consensus and a more in-depth plan for alternative capital if they expect Congress to take action anytime soon, according to NCUA board member Mike Fryzel.
The former NCUA chairman told a crowd of credit union leaders at a CUES CEO/Executive Team Network roundtable discussion that the two-page document recently crafted by CUNA and NAFCU was not enough for legislators to even consider a bill.
"The NCUA board needs to know how many credit unions could use alternative capital," Fryzel said, noting that the issue has divided many in the industry. If the trades and individual institutions are not on the same wavelength, Congress will not listen. And don't expect the regulator to go out on a limb for it, either. "Unless (Congress) asks, we don't say anything," said Fryzel.
A number of voices have expressed concern that alternative capital could endanger credit unions' tax-exempt status, but NAFCU vice chairman Michael Lussier tried to allay those fears saying that the trade group would not make a pitch for any legislation that could make CUs vulnerable to taxation. Alterative capital would also not be used as a magic bullet to help ailing institutions.
"This might be an opportunity for us to offer a new investment for our members" said Lussier. "(But) the last thing we want to do is have a lot of black eyes Just because you need (capital) doesn't mean you are going to get it."
CommunityAmerica CU CEO and CUNA Board Member Dennis Pierce pointed to a number of credit unions that are being forced to shrink their size because of capital problems. To find a source of greater funds, the trades are floating the idea of proposing that more than just natural persons, but also business members and SEG sponsors, be able take advantage of alternative capital investments.
Alternative capital would "allow credit unions who have growth opportunities to take advantage of them," Pierce insisted.
For his part, Fryzel seemed supportive of the concept, provided the industry could come to a strong and detailed consensus. "If it can be done, we'll do it," he told the crowd of credit union executives.
While the push for alternative capital in 2010 is very much up in the air, the number of credit unions that will be around to lobby for such legislation will almost certainly be fewer. All three men at the roundtable agreed that there would be more voluntary and forced mergers in 2010. Fryzel seemed confident that the cooperative movement would emerge a "smaller but stronger industry" but Lussier was not persuaded. Increased regulation and the pursuit of greater efficiencies make mergers inevitable for many smaller CUs, but Lussier believes the movement would be stronger with greater numbers.
For his part, Pierce suggested that each scenario is unique and noted that larger credit unions can provide more services, though he did note that the "intimate value of smaller credit unions cannot be ignored."
