How Do We Get Out of This Mess; Where Do We Go from Here?

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In the four months between the time NCUA announced it would be docking all federally insured credit unions an "assessment" to bail out some of the corporates and the time the agency unveiled its stabilization plan, Fred Becker said he talked to more CEOs than he had in the nearly 10 years he's been president of NAFCU.

Chances are pretty good that when the trade group holds its Annual Meeting & Convention this week, he'll get to do plenty more talking, and it won't be about how long it took to travel from one's room to the convention center at the massive Gaylord National Harbor Hotel just down the Potomac from Washington.

"There was a lot of anger, frustration and dismay in Credit Union Land, and it was across the board, from credit unions that lost investments with corporates to those that did not," recalled Becker. Some of that anger has since dissipated; when NAFCU hosted its CEO Conference in April, Becker said resentment had given way to "How do we get out of this mess and where do we go from here?"

NAFCU's response was an all-out blitz to get the corporate assessment spread over seven years. Yet some of the CEOs Becker talked to were not pleased, saying they preferred to take their lumps in one hit and not have "this hanging around their necks for seven years."

Becker said he told those CEOs to recognize there was a bigger issue than their own necks at play. Without the ability to account for the assessment over a longer period, many CUs would have seen their capital ratios driven down to the point where regulators start looking at other options, and far from putting the problem behind CUs, it would just set the stage for another blow-up of the NCUSIF in late 2009 and early 2010. "Without (the extended accounting period), this would exacerbate the drive into mergers, and for billion-dollar credit unions the options are limited. So that would hit the insurance fund."

Not that the NCUSIF is getting anywhere close to the good old days when it paid a dividend. A dividend! "The agency does have the ability to go below 1.22 (NCUSIF ratio), but they want to keep it at 1.3 and will charge a premium this year. My sense is that is a good idea," said Becker, before adding a metaphor to be expected of a Naval Academy graduate. "We know there are heavy seas in front of us."

Yet when Becker speaks to his annual meeting this week, his message will not be bleak. "If you look at credit unions within the bigger perspective of financial services, we have done very well," he reminded, paraphrasing President Kennedy and offering that credit unions will be measured according to how they respond to the current crisis. "Sooner or later we will come out of this, and as we do, organizations that are smart and well-capitalized will be well positioned for the future and to pick up marketshare."

He pointed to considerable research and surveys showing the mood of consumers is strongly anti-bank. "Consumers have said stability and trust and service all outrank convenience right now," Becker noted.

'What to Do with the Money'

Becker agreed that credit unions as a whole have not done much to leverage that "advantage." He said the "huge hit" from the stabilization cost has led to a "pulling back." Thst will change as CUs re-account for their corporate-related tab. "Now they are going to get back 7/8ths of what they budgeted, and the question is what to do with it."

What they won't be doing with it, said Becker, is backing a national branding campaign. "I have heard that brand question a lot. I just don't see that there is the support there to do it," he said, adding that in a sense credit unions have gotten a national branding campaign by default, thanks to all the positive news coverage, much of which NAFCU has worked to generate. That included a plug for "," the service that helps consumers find CUs, on CBS' "The Early Show" (visits are up 25% this year, he added). NAFCU Services Corp. has also created video ads its member CUs can personalize on the cheap.

Despite being just a cab ride from Capitol Hill, NAFCU will save the lobbying for its Congressional Caucus later this year. Still, there will be plenty of attention paid to federal legislative issues, such as the just-passed credit card bill, the threat of a resurrected mortgage cramdown, and the impact of the new Consumer Protection Agency pitched by the Obama Administration. Such a new oversight agency will lead to a loss of preemption, regulatory conflicts, and questions of how to pay for it, he said.

Noting "NCUA already does some of this through its Office of Small Credit Unions," Becker said he is pleased NCUA Chairman Michael Fryzel supported NAFCU's call for such oversight to remain within NCUA, which has proposed its own such office.

As for NAFCU itself, while CUNA has been posting losses and recently announced new layoffs, Becker said his group's "very conservative financial policies and our capital" has allowed it to remain in the black. He acknowledged conference attendance has declined, but the group has no plans to eliminate or combine any meetings. For those CUs whose travel budget is now a comfortable pair of walking shoes, NAFCU recently unveiled a webcast studio and 14 modules of educational content.

When it meets this week it will do with a new tagline: "NAFCU: Your direct connection to education, advocacy & advancement."

"We will continue to stay focused on being member driven," said Becker.

Frank J. Diekmann can be reached at

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