PayThink

The following article, part of CU Journal's July 13 Bonus Content, is an extended version of the way it appeared in print.

I'm beginning to think all this talk of a national brand campaign for credit unions has it backward. If it happens, it isn't going to come from the top-down, it's going to come from the bottom up. And a lot of folks won't be happy.

Over the past week or two a new regulatory proposal laid out in the op-ed pages of The Guardian has gathered steam, and we thought it was time to share it with BankThink´s readers. The idea is to make bank mismanagement a criminal offense, something similar to negligent homicide. If a bank founders, its upper management can be investigated for recklessness.

Reports are coming in about a new campaign bank lobbyists are considering to fight the establishment of an independent consumer protection agency: One idea that´s on the table, according to the Washington Post, is for a series of TV ads modeled after the "Harry and Louise" spots that aired during Clinton administration´s health care reform effort. Harry and Louise were everymen, a middle class couple lamenting the loss of their good private healthcare plans for coverage "designed by government bureaucrats." The thrust of this new campaign would be that a consumer protection regulator would stifle innovation and generally deprive consumers of more choices.

A Forbes.com article published today looks at the circumstances under which struggling mortgage borrowers are deciding to voluntarily stop making their monthly payments in order to secure loan modifications banks are otherwise not willing to perform. Experts in the article say it´s a "last-resort" sort of move and that only the desperate should try it, but that those who do have gotten good results. A bank analyst, meanwhile explains that banks don´t want to grant loan mods to people unless they are "mortally wounded;" otherwise the whole thing would just get "too expensive." So borrowers are essentially choosing to ruin their credit and lock in a loan mod rather than waiting to default out of necessity. Is this a twisted form of market efficiency at work?

This week, Congress is back in session and the financial regulatory committees will be hard at work on a system overhaul. Thrown into the mix is a new set of rules governing private equity investments in failed banks, put out to comment by the Federal Deposit Insurance Corp.

One of the reasons that credit unions have traditionally won only a small slice of the real estate lending market is the typical homebuying process. What usually happens is that consumers see a real estate agent long before they sit down with a lender. That's a backward way of doing things, because how can you know what price range to look for before you've been pre-qualified? But people think "new house!" before they think "new loan!" and so the Realtor is often the starting point.

I wonder how many were struck by the irony when Dan Mica thanks President Obama for keeping the NCUA independent when just a short time ago he was asking for TARP funds just in case of an emergency. I fought against the use of TARP funds and my side won. If Dan Mica's side had won, credit unions would have been no doubt very included in the administration plans for financial institution reform.

Stumbling through the dark, like a drunk looking for a lamppost, does have its rewards. You get to do and say anything that comes to the muddled mind without remorse or blame, so that when you do finally find the light and begin to sober up, your new-found position can be anything you'd like to make of it and totally disconnected from how you got there.

Credit unions got some pretty good advice recently from a guy they likely once would have turned down for a loan.