WEST PALM BEACH, Fla. - No matter the fate or final form of the federal financial bailout plan, it will affect how a CU needs to be managed.
Credit Union Journal spoke with a variety of experts for strategies, advice and words of wisdom to help credit union executives navigate through the economic tempest. Learn what they had to say inside.
Beware Of Coming Era Of Reregulation, Dollar Warns
BIRMINGHAM, Ala.-Boasting time as credit union CEO as well as his tenure as NCUA chairman, consultant Dennis Dollar said credit unions need to keep a watchful eye on what could become a trend toward "re-regulation."
"The Treasury Blueprint was dead on arrival at Congress months ago, but given all that has happened since then, it seems it's been an eternity and it's a whole different ballgame," he told Credit Union Journal. "With the government stepping in with the $700-billion bailout, it's a recipe for increased regulation and, perhaps, combined regulation (merging the financial regulators). Credit unions really need to watch the political scene right now, because the tendency is always to regulate to the last crisis. The next 24 to 36 months could see some big regulatory changes."
As important as keeping an eye on Capitol Hill is going to be, credit unions must not lose sight of their members. "This is an opportune time for financial education and to help members and employees to know what a credit union is," Dollar suggested, noting that even some financial experts-much less the average CU member-don't really understands the difference between a credit union and a bank.
To ensure a consistent-and accurate-message getting out to members, credit unions must first take the time to educate their own employees about what the economic turmoil does and doesn't mean for the credit union, along with basic credit union fundamentals.
"You need to be able to answer your members questions. A lot of members are concerned about what is going on with the economy and the safety of their funds, so there's a lot of need for employees to have the ability to answer those questions," Dollar advised.
Other words of wisdom from Dollar:
* Any manager should look at ways to seize upon the market to offer good, solid mortgages. All of this angst is over 5% of mortgages going bad. That means there's still 95% that aren't.
* Do not change your strategic plan because of a snapshot at a single moment. If expanding your marketing was a viable plan six months ago, you should not pull the plug on it now.
* Don't be overly cautious. This is another swing of the pendulum-albeit a much more dramatic-but it will swing back.
* Don't allow an overreaction to the national economic picture to take your eyes off the local economy. A collapse of the entire system isn't going to happen, Dollar reminded.
Conservative, Cooperative Spirit Will Serve CUs Well
MADISON, Wis.-Credit unions have two big things going for them: by and large, they didn't create this economic fiasco, and they are stronger by virtue of being a cooperative movement, according to Barb Kachelski SVP-COO of CUES.
"Obviously this has been top of mind for credit union executives, and we're hearing from people who want help and people who want to help, so we are trying to act as a way to bring those people together."
There's been a lot of talk on CUESnet, the organization's listserv, about how to communicate to members that their funds are safe, but executives are also getting into some of the nitty-gritty stuff, too.
"On the operations front, there are some very specific things that they're looking at," Kachelski said. "Corporates are purchasing auto loans, going to the CLF for cheaper funds, outsourcing repossessions."
Indeed, credit unions in markets where repos haven't surged are reaching out to credit unions in markets where they have, creating something akin to a repo participation program, she noted.
"We're collecting information from our members about what they need and what they have to offer to create a forum for cooperation," Kachelski offered. "[Credit unions] who have been in hard-hit areas for over a decade are offering advice to others who are just now feeling that pain."
What are those hard-knocks veterans suggesting:
* There is a difference between bad people who do bad things and good people who have bad things happen to them; don't abandon those good people. Learn to recognize the good people and reach out to help them.
* Avoid foreclosing as long as you can because it's an expensive process, but if you have to foreclose, be sure to lock everything up tight, due to the threat of vandalism.
* Don't hide. When things go bad, the tendency is to want to close the door and shut out the noise so you can think your way through the problem, but now more than ever credit union leaders need an open door and an open mind so that credit unions can cooperate and work through it together.
Times Call For 'Above & Beyond' Communication
OAK BROOK, Ill.-Credit unions that have focused on getting the word out to members about the safety and soundness-and difference-of their credit union are only getting it half right, according to Bill Handel, VP-product development of the Raddon Financial Group.
"Communicating with staff is equally important," he told Credit Union Journal. "Don't assume all staff know and understand that we didn't do these things and that the credit union is fundamentally sound. The CEO may want to gather the employees together for 15 to 30 minutes to discuss what is going right now and what the credit union role is.
"What we've found, in the Northwest, for example, are fairly substantial in-flows of deposits because of IndyMac and Washington Mutual, but we're also finding that credit unions run the risk of being painted with the same brush. Communication with members is going to have to go beyond the traditional newsletter communication, and putting information about being feerall insured on the website often just isn't visible enough."
But credit unions also need to consider "above and beyond" communication. "One credit union in Southern California targeted its top depositors with a direct mail piece signed by the CEO," he related. The letter explained that the credit union has not been involved in any subprime lending, option ARMs, etc. and emphasizes that funds are safe and insured at the credit union.
"What's interesting is that the letter didn't include a sales pitch. There was no offer of any kind, and yet the credit union ended up with a massive in-flow of deposits after that letter went out," he said.
Handel also offered some insight from Raddon's most recent research:
* The percentage of people who consider deposit insurance as critical has surged.
* The FDIC is perceived to have a higher level of safety than it's less-well-known cousin, the NCUSIF. "This is why it's important to get the message out that the NCUSIF is just as strong, powerful and solvent as the FDIC."
* Private insurance doesn't appear to have much value in the mind of most consumers. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com/ http://www.sourcemedia.com/
