Mississippi's Regulator Balances Oversight With Overdoing It For Katrina CUs

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Six months after Hurricane Katrina, at least one man in the Magnolia State sees better days ahead for financial institutions.

Mississippi Commissioner of Banking and Consumer Finance John Allison reports that all Gulf Coast credit unions affected by the storm are back online and providing members with virtually all the financial services offered before the disaster. Allison said 90% of Mississippi credit unions had contacted nearly all of their members, and that the Gulf States are a beehive of activity with the large amount of renovators and construction crews working every day.

"I'm not going to say it's back to normal, but it's getting better every day," Allison said.

The Mississippi regulator said his job has become a combination of providing credit unions enough room to operate while keeping tabs on them by telephone and e-mail, convincing the Federal Reserve not to play hardball with damaged credit unions, and then playing hardball himself by "rattling the saber" with Mississippi mortgage brokers who were set to demand full payments after a 90-day payment suspension.

In addition to giving Mississippi CUs sufficient breathing room, Allison said all were given forebearance regarding loans as the entire Gulf States region was shut down anyway. The extra time was needed as credit union officials and even some state regulators had to deal with the aftermath of the storm.

"Everything stopped for a 90-day time period," he said.

Allison said in recent months, the challenge facing him and his examiners has been one of cash management, given the huge deposit inflows from insurance settlements. Allison said the Mississippi Consumer and Finance Division has been offering seminars and advice on asset and liability management to help guide CUs through balance sheet scenarios they likely had not forecast. Allison said he felt like an intermediary who is constantly juggling the need to provide oversight while giving credit union staff room to operate on their own.

"We're helping them the best we can, trying to stay out of their hair. We pretty much backed off, other than the verbal part." Allison said. "If it's a bad loan or procedure, we'll call it."

Checking The Vitals

Allison had mailed questionnaires to CUs and examiners had worked the phones asking questions from a checklist. He compared the process to checking the vital signs of a hospital patient. Allison said he was particularly impressed with credit union committees, board directors and the Mississippi CU League officials who bent over backwards to help damaged credit unions.

"They were helping even when their homes were destroyed," he said. "Credit unions have always been responsive to their members and now more so."

Mississippi Gov. Haley Barbour recently announced that $4.5 billion in Community Development Block Grants from the federal government will be used to give residents who did not have flood insurance up to $150,000 for each home. Allison noted that this money will create yet another huge influx of cash to credit unions already trying to decide what to do with bulging vaults.

"That's a given. That is going to be another influx. Some credit unions have increased as much as 25%," he said. "They know it's going to be in there for another 10, 18 months."

Allison said even six months after Katrina, he hasn't begun to make physical visits to his credit unions, but expects to start late this quarter or early next quarter and then return to a normal 18-month visit cycle. Allison said CU members and sponsors are staying in the Gulf States with more construction every day and even new ship-building contracts to keep workers employed.

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