Rep. Still Wants To Limit NCUA Powers
Congressman Patrick McHenry wants to limit NCUA's powers to regulate credit union conversions to bank charters.
The freshman House member said last week the credit union regulator should focus on overseeing the process of converting a credit union to a mutual savings bank, and leave the rest of the process-the lucrative selling of the institution in an initial public offering-to the banking regulators.
McHenry, at 29, the youngest member of Congress, ventured into the lion's den last week and agreed to address this controversial issue before about 400 credit union executives at NAFCU's annual Congressional Caucus. He said as the federal credit union regulator, NCUA should focus on requiring that voting to convert to mutual savings bank be done with complete and fair disclosure, but the process by which hundreds of credit union insiders have gotten rich over the past five years, the sale of the credit union to the public, is not within the NCUA's authority.
"The (Office of Thrift Supervision) has regulations on the books for conversion for a mutual savings bank to a stock-owned institution," said McHenry.
What The Bill Proposes
McHenry has become the leading critic in Congress of NCUA's mishandling of efforts by credit union giants Community CU and OmniAmerican CU to convert to banks. The North Carolina Republican, who referred to NCUA's actions in the two cases as "re-freaking-diculous," said he agreed with a federal court in Texas, which ruled last month that NCUA had been arbitrary and capricious by ruling against the balloting in each case.
McHenry said NCUA's newly enacted rules on conversions-enacted after the two Texas credit unions had applied to convert-exceeded NCUA's mandate for fair and complete disclosure. Requirements that a credit union disclose future plans for selling stock to the public or projecting insider enrichment are too speculative, he said. His bill would bar NCUA from requiring those kinds of disclosures.
But to the credit union movement, the sale of the credit union down the road, after the credit union agency no longer has authority over it, is the crux of the matter. During a question-and-answer period, Marcus Schaefer, president of Truliant FCU, in McHenry's congressional district, stood up and told his Congressman that that is the credit union movement's main concern, the selling of the equity of the institution at the gain of a handful of managers and directors. Financial disclosures filed well after the credit union has converted to mutual savings bank have shown hundreds of insiders at as many as 20 credit union converts earning millions of dollars of quick profits on stock, stock grants and stock options after the mutual savings bank goes public.
McHenry and other NCUA critics were mainly steered up by a lobbying effort by the thrift trade groups, which like to foster the idea that the thrift charter is more valuable than the credit union charter. McHenry has been joined by three other House members on his bill to restrict NCUA's powers on conversions. As many as two-dozen House members from Texas also expressed their dissatisfaction with NCUA on the Community CU and OmniAmerican CU conversions, but it is hard to tell if they are interested in McHenry's bill since NCUA agreed two weeks ago to lift its objections to the two giant conversions.
'This Is Whacky'
McHenry said he was moved to act in the matter by NCUA's reluctance to approve the Community and OmniAmerican applications. "I thought, 'this is whacky,'" he told the NAFCU crowd. "By the end, it got to me, I thought the real issue, the only issue, was the fold of the paper," he said.
"My philosophy of government is, the regulator should have a reasonable amount of power and should be fair and balanced to all parties concerned, and be reasonable. In this case, the regulator was not reasonable, and in fact, the Texas Magistrate agreed with that-it was not reasonable," McHenry said.