The Regulations Views Expressed On Whether NCUA Needs To Step In Or Not

FEDERAL WAY, WASH. - While NAFCU's Fred Becker, as well as Continental CEO Tom Glatt, and others have called on NCUA to step in and put a stop to Wings Financial's attempts to appeal to members of Continental FCU, some are suggesting such government intervention is not only unnecessary, but potentialyl harmfull as well.

"Should there be immediate regulatory intervention? Perhaps not," said John Annaloro, CEO of the Washington CU League. "Many regulatory responses to an imagined crisis carry heavy costs or lasting restrictions on the 'uninfected' in need of no policy cure or additional regulatory burden. NCUA has a smart history of balancing actions against assured benefits to the sector as a whole. Intervening in the market process could likely create moral hazard and weaken institutional discipline."

Beyond that, he said, credit union leadership should not get to a point where it perpetually turns to NCUA to solve these problems, lest CUs abdicate their responsibility to their members.

"If credit unions begin to believe in the possibility of regulatory actions that will relieve them of some of the costs of poor decisions or operational mismanagement, there is reduced inclination to appropriately offset future risks, and weaker market discipline on CEOs and boards of directors-which can itself cause a future crisis for the agency and the system," Annaloro said. "Is NCUA action needed? No. Continental has an excellent new CEO, hired by the members through their board, who can adeptly create a high performance institution that can compete on many levels with any suitor. Mr. Glatt has asserted to his members that he and the board of directors determined the merger offer was not in their best interests. NCUA should let Mr. Glatt and the board of the credit union do their jobs. They are capable of managing market forces; they are capable of excellence."

One long-time credit union advocate who asked not to be named agreed, suggesting that the last thing credit unions should wish to see is more regulation, if the rules currently on the books are already doing the job. "Wings can't merge unless Continental's board agrees, what more protection do they need," he asked. "I realize it is ugly that one of our own would go after one of our own in this fashion, but I think Continental will hold its own, even if we let market forces decide."