Being Big Doesn't Mean Knowing Better What Small CUs Need From Corporates

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With all due respect to Navy Federal Credit Union and the comments made by Mr. Dawson (Navy Fed Calls For Abolishment Of Corporate CU System, CU Journal Daily, April 3), I am the Treasurer of one of those "small" credit unions ($20 million in assets), and our corporate credit union is vital to our operations, providing many of our settlement, payment and liquidity functions as well as professional expertise in a wide variety of areas, services we depend on for our survival.

I am very happy for Navy FCU and its brethren that they have sufficient resources and economies of scale that they have the ability to be independent of the corporate system, but I would point out that he has no standing to speak for smaller credit unions any more than I have to speak on behalf of his organization.

Clearly there have been problems with some of the corporates, but many of those problems, not unlike those of the financial industry as a whole, are largely the result of market changes and there was not a lot that the corporates could do about them. It would be akin to blaming the credit unions in Nevada, California and Florida for the difficulties many of them are experiencing, when the collapse of the housing market is the major contributor to many of their financial issues, events over which they had very little if any control. The corporate I use has been very prudent in its management and very inclusive of its member credit unions, and I am very comfortable with their strategic direction and the partnership we have developed over many years. If our corporate ceased to exist, that would leave a very large hole that it would be difficult to fill.

Obviously everyone is entitled to his or her opinion, but I would ask that credit unions express those opinions as representing their own organization only and allow other credit unions the respect to speak for themselves about what they need or want. Just because someone is big doesn't mean they know better than others.

On a related topic (Momentum Builds To Eliminate U.S. Central, Consolidate The Corporates, CU Journal Daily, April 6), I am concerned about the growing call for all corporate credit unions to be consolidated into from one to four regional corporates, or eliminating the corporate system altogether. Aside from violating the free-market concept we're all a part of, I am concerned that it paints the entire corporate system with too broad a brush, lumping well-run corporates with those that may have taken excessive risk, though the level of risk many have taken may not have been inappropriate, given the accepted business models of that time.

Would we as credit unions stand for a movement to consolidate all natural person credit unions into one or a few regional credit unions because a number of them had loans that went bad due to circumstances beyond their control or because some feel "the business model is no longer needed and consumers have multiple alternatives available to them?" I can imagine the outcry from the industry. We would be championing the sovereignty of each credit union, rallying in Washington, deluging Congress and NCUA with correspondence, clamoring how wrong and irresponsible it is that we're not taking the time to look at each individual situation and evaluate each on its merits, painting the credit union industry with too broad a brush. Isn't that what we are doing with the corporates?

The corporates provide a necessary function for the industry, especially for those of smaller size like my credit union, and we need to maintain that alternative in order to keep all levels of the credit union industry viable and thriving. My corporate has been an innovator in many areas, providing cost-effective alternatives to other "for profit" providers to whom my credit union would be merely a name on a large list of clients they don't care about. Sounds familiar, doesn't it? We as an industry tout the "credit union difference" and rightly so. Speaking for the corporate I use, they have the same philosophy, and I am sure that many others do as well.

Clearly there are issues that need to be dealt with in the corporate credit union system, and we need to address those, but I think we need to be careful how we deal with this issue, because it is likely that we're going to be fighting a similar battle in Congress and our own states in the near future as the calls for increased regulation increase in intensity. NCUA needs to look at each corporate and evaluate its business plan, board, senior management, and business strategy to see where the risk in the corporate system really exists and address it specifically, the same way we expect them to deal with us. Natural-person credit unions need to do the same.

Robert Cleary, CEO

Secure CU, Melrose, Mass.

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