Taking The Longer-Term View
LAKE JACKSON, Texas — Not every CEO believes NCUA has failed in its task of regulating credit unions.
But in making an assessment of the agency, sources told Credit Union Journal, it is important to examine NCUA's performance over a long period of time, not just the last three years.
Ed Speed, CEO of the $1.7-billion Texas Dow Employees CU here, for instance, said NCUA is doing a good job. "Overall they have a good track record and this industry has done very well over the years. Banks have gone through three meltdowns and we have had this speed bump."
The CEO added that given the pressure being placed on financial institutions by Congress, lawmakers, and bureaucrats wanting to punish banking in general, that NCUA has been a "pretty good buffer for the industry."
Looking at the short-term, Speed said NCUA's solid performance has been masked by the agency not being more transparent about measures it takes to keep CUs from heading into trouble, efforts to save troubled credit unions, and its work with the corporates. "I think they have done a better job than they let the world know. But we are a pretty whiny industry and I guess NCUA did not want to put up with all the whining."
Despite giving NCUA a good grade, Speed believes that the agency has a skilled and deep examination team when it comes to average "every day" credit unions with core banking services, but with more sophisticated credit unions, NCUA's exam team is "stretched a little thin."
An Effective Regulator
Another source, asking for anonymity, said making a call on whether NCUA is up to the task of regulating credit unions based on a short-term snapshot is unrealistic. "The reality is that they have been very effective as a regulator. Credit unions have done well under NCUA guidance-their capital prior to the corporate debacle and membership growth were at all-time highs. Then, just like everyone else, were hit by the economic downturn. It is not fair to say they were up to task when things went well but not up to task when things went bad."
The individual conceded that there are a good number of credit union leaders who believe NCUA is not up to regulating the industry, but the majority of those taking that stance are doing so because they are upset with NCUA's "overcompensating" and being tougher on CUs due to pressure to show Congress the agency can regulate credit unions (see related story).
Responding to criticism by the industry of NCUA's handling of the corporate meltdown, the source noted that the same regulatory approach that allowed five corporates to fail has led to the survival of 22, some of which are merging. "So if 22 out of 27 make it under the rules, is it the rules or the business model at those corporates, or the corporates' own supervision and management?"
Perhaps the most telling reason NCUA is up to the task, according to the source, is that many of the department heads who were on the job during the good times hold the same roles today. "In all fairness you cannot say they forgot their ability to examine and regulate credit unions."
Rob Givens, CEO of the $420-million Mazuma CU in Kansas City, Mo, believes the leadership of NCUA is up to the task, but the field team may be resistant to direction from the top. "I think the board is doing what they can, being the public face and making the best judgment they can given the constraints that all of us are under. But I am not sure the philosophy of the board is filtering down to the field."
The obstacles, surmised Givens, may not be the examiners themselves but more likely staff at NCUA headquarters and the regional offices. "The reality is they may just be content in their little world or resistant to change." Givens offered that some NCUA employees possess a "government functionary mindset," rely on tenure, and just "wait it out" for a new board chair. "They do some of what is asked but know that new directions come and go."
Cliff Rosenthal, president of National Federation of Community Development Credit Unions in New York, chose not to debate whether NCUA is up to the job of regulating CUs, stating that NCUA "has to be up to the task."
Acknowledging "simmering discontent" with NCUA and talk of combining the office with the banking regulator, Rosenthal added, "I am still not convinced that transferring us to a banking agency would make any of us happier or that the performance would be better. They are the ones we got. I think we have to make it work. If they truly can't make it work the future of this movement is in tremendous jeopardy."