by: Stephen Nelson, VP of Credit Union Support, Utah Credit Union Association
What follows is an actual re-creation of many conversations that small credit union presidents and executives have recounted to me.
CU President: What the hell? Why are you being so ridiculous?
Examiner: I’m just here to find things that are wrong with your credit union, point them out, and threaten you until you agree with me that you should fix them.
CU President: But I have 30% capital! At my current losses, I could last 100 years before falling into PCA. And if it weren’t for the corporate stabilization payments, I would be profitable!
Examiner: You’re a blight on the land. A threat to the insurance fund. You must be neutralized.
CU President: Why do you have to be such an idiot about it?
Examiner: You mistake my tough love for disdain. Fool!
CU President: It feels like you’re trying to kill me.
Examiner: Not you. You’ll make it, but others won’t.
CU President: I knew it! NCUA is trying to kill small credit unions!
Examiner: Yes. Yes, we are. But only credit unions of $XX million and under.
Coincidentally–or maybe not coincidentally–the asset size given by the examiner is always just below the asset size of the credit union I am talking with. The range has varied from $60 million down to about $25 million.
I rather doubt that NCUA is intentionally killing smaller credit unions. I just don’t know what NCUA has to gain from having no smaller credit unions. But there is also no denying that all credit unions–not just small ones–feel like NCUA is trying to push them out of business.
In fact, even before NCUA started tightening the thumbscrews over the last few years, small credit unions were already merging right and left. This is nothing new. What is relatively new is that larger credit unions are feeling pressure. I suspect the reason is that the market is becoming more competitive, and the added regulatory burden on top of that just increases the heat in that crucible.
And I don’t think that the real problem is the tightening of regulations and rules. Objectively examined, a lot of what NCUA (or other government agencies) require, is probably pretty good business practice, and is probably consumer friendly (I’m going to exclude things like government price fixing in that statement). The problem is how NCUA–and not just NCUA, but every government agency–approaches the issue. They have no consistency, and they act like tyrants.
I have a good friend whose family owns a mining business. He tells of how he had the equivalent of an exam, and had absolutely no problems. Then, an employee had a heart attack and died while at work. Of course the government came in to take a look at the place, and suddenly found all kinds of things wrong with the company. Absolutely nothing had changed between the first exam and the second–except that an employee had a heart attack. My friend feels like the government is trying to put them out of business.
The problem isn’t just NCUA or FDIC. It’s government regulators in general. They need to be consistent, and they need to develop some tact. Then maybe it won’t feel like they’re purposefully trying to kill industries.
Stephen Nelson is the VP of Credit Union Support at the Association. He’s worked in the credit union movement for ten years in various capacities. www.utahscreditunions.org