by. Henry Meier
Is NCUA and, by extension, the credit union industry important enough to have a seat at the table when it comes to deciding issues that impact the financial structure of the Country? Now, even if I didn’t get paid by the industry, I would still say the answer is yes. Credit unions represent more than 90 million account holders and influence the banking industry as a whole by providing needed competition to the for-profit banking model.
Nevertheless, yesterday, the Washington-based Bipartisan Policy Center released a report detailing recommended changes to the financial industry. The report, the outgrowth of a Task Force co-chaired by former New York State Banking Superintendent Richard Neiman, contains some ideas that should be seriously considered. It argues correctly that Dodd-Frank represents a missed opportunity for needed financial reform in this Country. It also argues that the Country should consolidate financial regulations and examiner training. The really good news is that this Task Force, unlike so many others, recognizes that credit unions are unique financial institutions and that NCUA should continue to exist to oversee their regulation.
Now for the part of the report that irks me. In lieu of calling for the creation of a single regulator, Dodd-Frank created a Financial Stability Oversight Council (FSOC). The purpose of the council is to create a framework for financial regulators to identify risk posed not only by large banks but by non-banks as well (think AIG before the meltdown). NCUA was given a seat on the council as a voting member. The Task Force recommends that this power be taken away from NCUA. It explains that “credit unions are an important part of the U.S. financial system, but they generally are small and do not figure into macro-prudential discussions. To the extent they do a credit union voice will still be represented on the FSOC, though without a vote.” This is bureaucratese for patting credit unions on the head and sending them to the corner with crayons while the adults do all the important work.
Since the Bipartisan Policy Center is dedicated to getting knowledgeable people together to come up with serious recommendations about serious problems facing the nation, its ideas have absolutely no chance of getting anywhere in today’s Washington. Nevertheless, this recommendation is irksome for several reasons. First, credit unions may not be as big as the behemoth banks that have the ability to bring the Country to its knees, but they certainly are impacted by the conduct of these institutions. Making credit unions comply with almost all of the Dodd-Frank inspired regulations but not giving them any ability to influence the conduct of the institutions responsible for Dodd-Frank in the first place is a lot like telling a teenager to get a driver’s license but then not letting him drive. More importantly, the proposal reflects the continued arrogance of the banking elite. Even after the masters of the universe engaged in policies and practices that have caused millions of people to lose their jobs and homes, we are still told that only a relative handful of self-proclaimed geniuses truly have the skills and knowledge necessary to oversee the Country’s financial system. What hubris.continue reading »