Points, Power-Players & Pundits From GAC

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WASHINGTON-CUNA hosted more than 4,000 people here last week for its annual Governmental Affairs Conference (GAC). Below is a look at some highlights from the meeting.

Time For A Change of Tone In The Credit Union Message, CUNA's CEO Says
WASHINGTON-CUNA President Bill Cheney, at the trade group's GAC for his first time as its leader, told credit unions to change the tone of their remarks while on Capitol Hill.

"We have a big voice, we serve our members, we are not for profit, and we deserve our tax exemption," said Cheney, reminding credit unions that the new Congress has more than 100 new members. "Credit unions cannot let others define them. Credit unions promote thrift and provide valuable financial services to their members and their communities."

He urged CU reps to make sure they understand the difference between for-profit providers and not-for-profit CUs, and pointed to a number of statistics as evidence of the value that not-for-profit status brings to consumers.

Many of President Obama's Wounds Are 'Self Inflicted,' According To Author
WASHINGTON-Political pundit and author John Heilemann told credit unions that many of the problems being faced by President Obama are self-inflicted.

While saying the president's campaign in 2008 was "extraordinary" for its margin of victory and for winning over independent and even some Republican voters, the initial belief was the president was "on the verge of changing the office in a major way."

But instead, the real change occurred in November of 2010 with sweeping victories by the Republicans, reminded Heilemann. The president is now attempting a midcourse correction, Heilemann said and it remains to be seen if he'll be successful.

"He has governed in a partisan way," said Heilemann, who has known President Obama for more than two decades. "He has lost the thread," and as a result, lost the support of the country, according to Heilemann.

However, Heilemann said the president has learned quickly and has moved even more quickly than President Clinton did in his first term to get to the middle. On the other hand, Heilemann said Obama still hasn't shown a good understanding of the business community.

Credit Union Champion Kanjorski To Be Remembered At All Future GACs
WASHINGTON-CUNA brought back former Rep. Paul Kanjorski of Pennsylvania back to be honored during GAC. Kanjorski, the co-sponsor and credit union champion of the historic HR 1151 legislation of 1998, was recognized by CUNA CEO Bill Cheney as a "true credit union champion" and was given a standing ovation by the audience. In Kanjorski's honor, Pennsylvania CU Association CEO Jim McCormack said the PCUA will sponsor in Kanjorski's name a credit union that could otherwise not afford to attend GAC each year moving forward.

Credit Union Representatives' Message Comes In Two Parts During 2011
WASHINGTON-Each year CUNA sends its representatives to Congress with a different message. In 2011 the messages were twofold: pressing for delays in the Fed's implementation of new interchange rules, and emphasizing the reasons for the CU tax exemption. The latter is getting new attention as Congress has a significant number of new members and there is strong pressure to find new revenue.

CUNA VP-Legislative Affairs Ryan Donovan told CU reps that while the tax-exemption may cost the Treasury approximately $600-million annually, credit unions save consumers more than $10 billion a year in financial benefits.

Dodd-Frank Provisions 'Unworkable'; CFPB Creates Bifurcation, Says Rep
WASHINGTON-Rep. Ed Royce (R-CA) followed Elizabeth Warren to the podium and made it clear he was not a fan of the new Consumer Financial Protection Bureau.

After offering praise for credit unions for helping members to save hard-earned money" and for a business model that did not need bailouts, he said that the Dodd-Frank legislation includes a number of provisions that punish credit unions.

"Dodd-Frank's small issuer exemption is likely unworkable," said Royce, earning some applause for the audience, and then more applause after saying he would continue to fight for member business loan cap relief. But he saved his strongest remarks for the CFPB.

"I oppose the creation of this massive regulator that competes with other regulators and also creates bifurcated regulation," said Royce, who blamed part of the housing meltdown on such bifurcated regulators. "A new government agency with broad, undefined powers will over-reach and will increase the cost of credit and decrease its availability. It's not going to make consumers any safer. We've seen what happens with the judgment of the prudential regulator is overruled."

Egan Wins Farley Leadership Award From Association of Credit Union Leagues
WASHINGTON-Dan Egan, president of the Massachusetts, New Hampshire and Rhode Island state leagues, was named winner of the Eugene Farley League Leadership Award by the American Association of Credit Union leagues. The award was officially bestowed at a reception held in conjunction with CUNA's Governmental Affairs Conference.

Matalin Vs. Huffington? Not Exactly, As 2 Pundits Agree On Some Of Biggest Issues
WASHINGTON-They were billed as a "political point, counterpoint," but pundits Mary Matalin, the Republican strategist, and Arianna Huffington, editor of the left-leaning Huffington Post, admitted from the start they are dear friends. Any attendee expecting sparks to fly instead found the pair largely in agreement.

For her part, Matalin did refer to several recent "historical" moments, including the "historic election for the first black president, and then the historic misreading by President Obama of what his mandate was, and then the historic congressional elections of 2010."

Matalin added that the independent voter remains critical, and while neither Republican nor Democrat, most independents identify themselves as "philosophically conservative."

"What is going on is this electorate sentiment is bigger than economics," said Matalin. "It's about changes and trying to stop changes of the mobilization of the country. People feel the future is not as bright for their children as it was for them, and that has activated people. To win the future, we need to go back to the future and our original values and virtues. The question that was asked by our founding fathers was, 'Are we virtuous enough to do this?' And the answer then, as now, is yes."

Huffington largely agreed with Matalin on that latter statement, but only after first saying that a number of things are currently not working, including the concept of financial institutions that are "too big to fail," that the U.S. has created a "system that is only capable of suboptimal solutions to crises," and that the $2.8-billion per week the U.S. is spending in Afghanistan is for a "war we can't win and which is not in the national interests."

"We are dealing with issues representative of an empire in decline," said Huffington, whose company recently merged with AOL.

Huffington, whose moveyourmoney.org effort has championed consumers moving their savings from large institutions into smaller banks and credit unions, has now in conjunction with AOL rolled out a local, web-based initiative in 900 cities across the U.S. called Patch.com.

NCUA: No Corporate Merger Applications Received; March 31 Deadline Gets Near
WASHINGTON-Despite public announcements of three corporate credit union mergers, NCUA said during GAC it has yet to receive applications for any corporate combinations, with a March 31 deadline for every corporate to submit a business plan approaching.

"We've had no formal merger applications yet," Scott Hunt, director of NCUA's Office of Corporate CUs, said during a panel discussion at CUNA's Governmental Affairs Conference last week.

NCUA is leaving open the possibility of a merger between WesCorp FCU and Members United Corporate FCU into a nationwide giant, but only after the two failed "bridge" corporates have recapitalized and are re-chartered, Hunt said.

Three pending corporate mergers have been publicly announced: Mid-Atlantic Corporate FCU with Virginia Corporate CU; Corporate America CU with Louisiana Corporate CU; and, Southwest Corporate Bridge FCU into Georgia Corporate FCU, but Hunt said the paperwork has yet to be submitted to NCUA. Several other corporate mergers are believed to be in the works as well.

NCUA told leaders of WesCorp Bridge the regulator would not approve a merger with Members United Bridge, both of which are being run under NCUA conservatorship, because NCUA does not want to be in the position of engineering a corporate restructuring, Hunt said. NCUA also has concerns that such a far-reaching corporate, which could attract as many as 3,000 members across the country, could create too big of a systemic risk such a big corporate would pose, he said.

"NCUA is not in the position of creating or facilitating the corporate system," he stated.

The NCUA Board is expected to vote as early as next month, according to Hunt, on a rule that would limit natural person credit unions to one corporate and would extend the corporate assessments to non-federally insured corporate members, including privately insured credit unions, CUSOs and leagues. He declined to say whether his office will recommend that the Board adopt those proposals.

NCUA Chairman Says Agency's Tough Love Has Actually Saved Industry $1.5B
WASHINGTON-The tough actions taken by NCUA to regulate credit unions during the recession have saved the industry over $1.5 billion dollars.

NCUA Chairman Debbie Matz shared that figure with attendees at CUNA's Governmental Affairs Conference last week, telling delegates about the stories "they did not hear" regarding NCUA's administrative actions during the economic downturn.

"$1.5 billi is a big number," said Matz, who explained that NCUA estimated that is what the total for losses would have been from the failure of several large natural-person CUs that NCUA worked behind the scenes to save. "Instead, in 2010, 28 consumer credit unions failed for $221 million in losses to the share insurance fund. I am telling you this because you never hear the success stories, only the failures."

Matz went on to say that NCUA had to act creatively and quickly, tailoring remedies to unique situations at each troubled CU. "We used very prescriptive letters of understanding and agreement to commit certain credit unions to performance targets, with very close supervision."

Matz said that in some cases boards of the troubled CUs had to be "coaxed" into signing an LUA or "face losing their credit union...We also found merger partners for credit unions that simply could not survive on their own. These mergers were not always well received by the boards of troubled credit unions, but were necessary to protect the share insurance fund."

Matz concluded by saying the actions are "tough love," and noted that if credit unions are running their operations correctly and securely they have "nothing to fear from NCUA."

Matz added that in NCUA's recent discussions with Congress that the agency is supporting raising the MBL cap and the addition of supplemental capital to CUs.

CUNA Reports 2010 Net Of $2.2 Million, Continues To Add To Its Reserves
WASHINGTON-CUNA closed the books on the Dan Mica era last week, reporting a $2.2-million net for 2010, helping to rebuild reserves that two years of losses had severely depleted.

Last year's net, though down from a $6.8-million net in 2009, helped to wash away two years of big losses in 2007 and 2008 and rebuild reserves to $11.6 million. The 2007 and 2008 losses of $13.2 million had run down reserves to just $2.5 million at year-end 2008, from almost $16 million.

"CUNA continues to recover from its low point in 2008," said Dennis Pierce, the president of Kansas City's CommunityAmerica CU, who also serves as treasurer of the CUNA Board, during the association's 77th annual meeting last week.

The 2010 financials effectively closes the books on the 14-year tenure of Dan Mica, who headed CUNA until last July when Bill Cheney succeeded him as president of the trade group.

The financials for 2010 included $51.9 million in revenues and $49.9 million in expenses for a $2 million operating margin. A $200,000 gain for non-operating items created the $2.2-million net.

The bottom line was helped out significantly by the continuing decrease in unrealized losses on the stock portfolio CUNA has invested its pension funds in, according to Pierce. The end of 2010 showed a $400,000 unrealized loss on the funds, compared to losses of $1.1 million for 2009 and $2.8 million for 2008.

In comparison to CUNA, NAFCU is reporting a $300,000 net for 2010, up from $100,000 for 2009, and reserves of $9.5 million.

NCUA's Fryzel Says It's Time To Start Looking Forward
WASHINGTON-NCUA Board Member Michael Fryzel told GAC attendees that credit unions should "look back to why we have this system to begin with. We have it because people understood that if they came together in a spirit of cooperation they could do better for themselves than going to for-profit institutions."

After reviewing recent events, Fryzel told credit unions it's time to look ahead.

"We have to move on [from the resolved issues of the past] and concentrate on growth," said Fryzel. "We have to learn lessons and not repeat mistakes, and then we all have to put our shoulder to the wheel and push in the same direction. If we continue to think of ourselves as a cooperative movement, as a selfless effort for the benefit of members, people will use us in ever greater numbers, and our problems will fade as we grow."

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