In the newspaper business, the twist on the old cliché has always been, "When the going gets tough, the tough...start disputing the coverage." Readers are often right about that coverage, pointing out mistakes or editorial shortcomings. At other times newspapers are right about "shoot-the-messenger" syndrome and the emotions involved in what's being reported. But as is most often the case, what's really right is that the truth usually lies somewhere in the middle.
There may be no better example of the twist on that old cliché than the crisis in the credit markets and the reporting surrounding it. For the past several weeks editors at Credit Union Journal have been engaged in what we'll call a "lively exchange" with various sources involved (and not involved) in the Journal's industry-leading coverage of what the Wall Street blues mean to Main Street CUs.
Among those offering their feedback to Credit Union Journal have been some of the corporate credit unions. The message from some of the larger corporate credit unions has been pretty uniform: yes, a sizeable chunk of our investments are "currently" underwater, but that's the result of accounting rules and we fully anticipate these assets will perform as intended if held to maturity. In fact, they note, they are performing as intended right now. Some of the corporates have expressed concern that the Journal's coverage has provided a falsely negative impression of the health of their balance sheets, and that a deeper examination reveals these corporates will weather the storm-and weather it far better than some bigger boats.
On the other side of that issue are some analysts and even natural-person credit unions who have contacted Credit Union Journal to express their opinion that those investments are never going to resurface (short of a government bailout). There is even a website/blog dedicated to providing this view at www.unrealizedlosses.blogspot.com. At Credit Union Journal, we have sought to provide a balance between both viewpoints.
Providing another interesting perspective recently was Alan Bernstein, senior VP with EasCorp in Woburn, Mass. Bernstein challenges some of the assumptions being made by the whole concept of a "corporate system." For instance, he pointed to a recent statement by one person on www.cujournal.com that if ever there were a "run on the corporates NCUA may have to put the system into conservatorship."
Several people voiced their unhappness with that quote to me, stressing there is no possibility of any such "run" and that it was irresponsible to publish the statement. We have heard those voices, which is why I wanted to ensure that sentiment was included here.
But Bernstein objected to the statement for a different reason. "In EasCorp's view of things there is no corporate 'system,'" he said, saying the oft-made comparison to the Federal Home Loan Banks is wrong. With the FHLBs, noted Bernstein, "every one of the banks backs up the others' debts. That is not the case with the corporates; we do not back up each other's debts. If ever a corporate is placed in conservatorship, it will be done on a case-by-case basis."
"Nervous" has never been an adjective associated with credit union management. The career is often mundane, occasionally exciting, nearly always rewarding, and traditionally steady. Short of malfeasance, you rarely hear of C-level execs or even middle management being pink-slipped by job reductions. Even in mergers credit unions have always prided themselves on there being no layoffs.
But the credit crisis and the concerns over some portfolios has indeed made some, perhaps many, managers nervous. With that nervousness comes increased scrutiny of the news being reported, and rightly so. Credit Union Journal welcomes the scrutiny and we invite yours. We will continue to ask the hard questions, having been founded on the principle that the credit union community cannot prosper nor serve members with anything less than objective information. We look forward to hearing from you.
n Credit unions running the UltraData core system will continue to have that system available to them long into the future. There, that's been addressed. During Harland Financial Solutions' recent Connections Conference in Orlando, Raj Shivdasani, president of the company's Enterprise Solutions Group, again went to pains to reassure UltraData clients the company remains fully behind the solution, just as he did when Harland hosted the same meeting one year earlier.
Harland offers four core systems: Sparak for small community banks; Intrieve for savings institutions; UltraData for credit unions, and Phenix for larger banks. "We expect those first three to continue for a long, long time," said Shivdasani.
The reason for offering all the reassurances is that the company has been putting substantial resources into what it calls Phenix EFE, for Extended Financial Enterprise, which it will roll out in 2009.
"Boundaries between savings banks, credit unions and community banks have all but disappeared," he said. "We believe that in order to (command the market) we have to be on a single architecture, and when we roll out EFE we will be in a league of one. It's being rolled out under the Microsoft.net architecture and its tied to Windows. The platform will scale due to clustered computing.
Embedded in all of this will be automated decisioning. The middleware will all be XML, allowing for integrated connectivity. You will be able to communicate with the web and it will be seamless. You will be able to access the desktop in a single architecture, and you will have Business Intelligence on demand. You will be able to look at everything from a position of knowledge."
Still, Shivdasani was careful to add, "I want to emphasize that the other three sytems will continue to be supported, and you will see components of Phenix EFE in the UltraData system, for instance."
Frank J. Diekmann can be reached at fdiekmann
