NCUA Chairman JoAnn Johnson followed up on criticisms lodged by members of Congress with a letter to a key lawmaker asking Congress to require that a credit union's net worth be distributed to members after conversion-similar to what is required in the demutualization of insurance companies. Johnson urged that lawmakers, who were critical of the agency's efforts to invalidate the ongoing conversions at Community CU and OmniAmerican CU, note the vast financial benefits top managers and directors have earned after converting their credit unions, first to mutual savings bank, then to stock form.
"If Congress further restricts NCUA's already limited authority over these conversion votes, the only disclosures members receive, when asked to support a structural change that may result in the loss of their ownership of the institution's capital, will be disclosures from the individuals who stand to benefit most," said Johnson in a letter to Rep. Spencer Bachus, chairman of the House Financial Services subcommittee on Financial Institutions. A conversion to a mutual savings bank, then stock form, by a credit union with $50 million in member capital, could result in free stock grants of more than $10 million over five years for the CEO, and an additional $10 million of free stock to be shared by the directors, according to Johnson.
NCUA's action to invalidate the conversion votes at the two Texas credit union giants came under fire during Johnson's testimony on regulatory relief before the subcommittee last week, with one lawmaker calling the actions "re-freaking-diculous."
