NCUA RAISES OBJECTIONS
TO UNIQUE INTERLOCKS
LANCASTER, Penn.-NCUA has told officials of Everence FCU, a credit union operated by the Brotherhood of Mennonite Churches, that the $124-million credit union's close coordination with a mutual savings bank owned by the group violates the agency's management officials interlock rules.
"We believe the rule prohibits management interlocks between the (credit union's) management officials and any common management officials involved with the holding companies and thrift within the enterprise," NCUA told the credit union's CEO in a recent legal opinion. "Furthermore, we are concerned the FCU's board is improperly controlled by Everence Financial, particularly with regard to Everence Financial's selection of the FCU's slate of candidates for its board of directors.
Everence Financial (formerly Mennonite Mutual Aid Association) is the holding company for a variety of companies that provide insurance and financial products for church members and their families. Everence Association, a fraternal benefit society, holds a controlling interest in many of the companies and shares common ownership and control with the Mennonite Foundation, a charitable foundation.
Everence Association also controls Everence Holdings, an insurance and financial services holding company that solely owns the following: Everence Securities, Everence Insurance Co., MMA Distributions, Everence Capital Management, and Everence Trust Co., a federally-chartered thrift with less than $5 million in assets. The depository holding companies (Everence Financial and Everence Holdings) and thrift (Everence Trust) are located in Goshen, Ind.
Kent Hertzler, president of the credit union, told Credit Union Journal that the various entities are designed to provide a full range of financial services to members of the Mennonite churches. While Everence Trust is chartered as a thrift, it does not offer depository products or any services in competition with the credit union. "We're obviously going to have more dialogue with NCUA on this," he said.
Among the possibilities are for the group to obtain an exemption from NCUA to continue the shared management/board structure, he noted. "We want to make sure that NCUA's concerns are addressed."
In citing its concerns, NCUA said the Depository Institution Management Interlocks Act allows management official interlocks between affiliates, but establishes certain prohibitions against the same individual simultaneously serving as a management official of two, unaffiliated depository institutions, as in the Everence case. The purpose of the Interlocks Act, said NCUA, "is to foster competition by generally prohibiting a management official from serving two nonaffiliated depository organizations in situations where the management interlock likely would have an anticompetitive effect."
"We are concerned the FCU's board is improperly controlled by Everence," said NCUA. "You stated that Everence's board of directors approves the slate of candidates presented to the FCU's membership for election to serve on the FCU's board of directors. The fundamental nature of a credit union is based in the ownership and control of the institution by its membership, as opposed to external influences such as holding companies or investors."
The Federal CU Act, said NCUA, states that an FCU's board shall "be elected annually by and from the members as the bylaws provide."
Hertzler acknowledged the potential conflict but asserted that both financial institutions operated by the group are independently run and are not adversely influenced by the other.
NAFCU TELLS SENATE U.S.
MUST GUARANTEE MBS
WASHINGTON-NAFCU told Senate leaders last week that continued U.S. government guarantee of mortgage-backed securities through Fannie Mae and Freddie Mac is critical for credit unions.
NAFCU told the chairman and the ranking Republican of the Senate Banking Committee that the continued government backing of MBS is among several "key principles that will ensure community based financial service providers are treated fairly during any housing finance reform process."
The NAFCU urgings came in a letter to the banking panel, which held a hearing on housing finance reform and the worthiness of a government guarantee on MBS.
"Housing finance reform involves consideration of many highly complex issues, including the role of the federal government, which shouldn't be changed quickly or without careful consideration," wrote Brad Thaler, senior lobbyist for NAFCU. "Fannie Mae and Freddie Mac own or guarantee a significant number of mortgages in the United States, and any piecemeal Congressional action could have serious unintended consequences for current and perspective homeowners. As you know, such a disruption could trigger a "double-dip" recession wreaking havoc on our country's economy and the broader global finance system."
OUT AT CFPB, WARREN
PLANS RUN FOR SENATE
BOSTON-Elizabeth Warren, the creator of the Consumer Financial Protection Bureau who was driven from Washington by Republican opponents last month, announced her candidacy for the Senate last week.
Warren will run as a Democrat and would run against incumbent Republican Scott Brown if she wins the primary in this heavily Democratic state.
If successful in her campaign it could make for strange bedfellows in the Senate, where Warren's candidacy was roundly opposed by Republican Senators who continue to fight to reign in the new consumer agency. With Republicans adamant against her leading the agency she helped create, Warren left Washington last month, presumably to return to her job as Harvard law professor.
The consumer advocate has had a checkered history with credit unions, which fought her for almost a decade over consumer bankruptcy reform and opposed creation of the new consumer agency. She was also an advocate for credit card and mortgage reform opposed by the credit union lobby.
But Warren has also long courted the credit union lobby, which she sees as a natural ally of her fight for consumer protection, and has met numerous times with representatives of CUNA, NAFCU and other credit union lobby groups to try to gain their support.
"The pressures on middle class families are worse than ever, but it is the big corporations that get their way in Washington," Warren said in a statement. "I want to change that. I will work my heart out to earn the trust of the people of Massachusetts."
The new consumer agency, which is based on Warren's idea, has been caught in stalling tactics by the Republicans in the Senate who insist they will not vote to confirm anyone as director of the new bureau until Democrats and President Obama agree to expand the governance to a five-member board and other amendments watering down its powers.
