WASHINGTON -- House Banking Committee Chairman Henry Gonzalez is questioning the independence of corporate credit unions, especially U.S. Central Credit Union.
"My primary concern with this unique structure is the fact that the industry's largest trade association, through interlocking directorates, has an inordinate influence over the operations of U.S. Central and about one-half of the other 40 corporate credit unions," the Texas Democrat said at a heating last week.
Corporate credit unions are member-owned institutions that provide liquidity for the industry. They are backed up by U.S. Central.
Rep. Gonzalez and others are unhappy that the industry's largest trade group, the Credit Union National Association, has members on the boards of corporates, including U.S. Central.
Harold Black, who headed a committee commissioned by the industry's regulator, the National Credit Union Administration, to review risks of the corporate credit union network, said all corporate credit unions should be stand-alone institutions.
"The committee found no reasonable justification for integrated corporates," Mr. Black said.
However, CUNA president Ralph Swoboda vigorously defended the practice, saying that it is a credit union's right to pick its own directors.
"Nothing has happened to warrant the federal government stripping credit unions of the right to choose what, if any, working relationship they want between their trade associations and their corporates," he said.
Although the interlocking arrangements present the potential for conflicts of interest, Mr. Swoboda said that these risks are manageable without mandating action as suggested by the NCUA in September. The NCUA issued a proposed regulation that would require that a majority of a corporate credit union's directors not be officers, directors, agents, or employees of a credit union-related organization and would prohibit employees of the corporate credit union from having dual roles with a trade organization.
The CUNA and U.S. Central said last week that they had dissolved their overlapping management. Mr. Swoboda resigned as U.S. Central's chief executive, and James Bell, the credit union's president, withdrew as an executive vice president of CUNA.
However, CUNA still maintains interlocking directorates with U.S. Central.
Mr. Nielsen writes for Medill News Service.