The credit union movement is at a major crossroad in its storied history. Current economic conditions, combined with market liquidity frozen as a result of the mortgage crisis, has caused pain among all financial industries, especially within the banking industry and the credit union movement. Despite the fact that the "best financial minds in the world" got caught up in this crisis with unheard of losses, it appears that many within the credit union movement would prefer to scrap the whole corporate credit union network because they obviously have no appreciation for the contributions the network has made to the whole movement, or the corporate credit unions' role in the success of the movement over the decades. No doubt, without the corporate credit union movement there would be a lot fewer credit unions, large and small.
Efficiencies in payment systems, simple cash management, low-cost correspondent services, intermediary for the Federal Reserve Bank, and low-risk investment options are only a few of the benefits that would not exist without the corporate credit union network. In addition, where would credit unions go for lines of credit as large as they are outside the corporate credit union network without having to buy marketable securities in excess of the approved line of credit limit just to pledge against the approved line? How many credit unions, especially medium to small credit unions, could actually efficiently manage Federal Reserve Bank accounts and afford to keep sterile reserves there under Reg D? Not being able to do so would mean going to competitor banks for services - does that sound like a better option? Yes, the corporate credit union network does bring real value to the table and is worth saving.
It is very disappointing that some of the leaders of the largest credit unions cannot see beyond their own bottom lines (and bonuses) to realize the benefits that would be lost if the corporate credit union network would be lost. These are the same "leaders" that demanded returns and services from their corporate credit unions that forced more risks to be taken and gladly took the benefits - thanks for jumping ship when the seas get rough! Leaders are supposed to rationally analyze situations in a calm manner and guide others through solutions, too bad we don't have more vocal, real leaders.
These same "leaders" have called for corporates to only exist for payment systems; how convenient to wish for the most efficient of services to survive without a supporting balance sheet. I would like to know how they would manage their organization if they were only allowed to offer checking accounts with no CD, loan, or investment options to pay for it. Not so easy, is it?
The NCUA Corporate Stabilization Program may not be the ideal solution, and it certainly will be costly to natural-person credit unions in the short run, but, it will cost more in the long run if knee-jerk reactions done in frustration and anger, are allowed to be the determining factor in any solution. Step back and think, yes the solution will be costly, but haven't the credit unions over the last 30 years realized much more in higher earnings and lower fees than any cost they are being asked to pay for now? I think so!
There are problems within the Corporate Credit Union Network no doubt, but, let's step back and really look at what caused it, how it can be mitigated in the future, and come out on the other side with a better system. There are examples (a vast majority of the corporate credit unions) whose operating model is substantially the same as it has been for the last few decades that have proven to be able to survive this unprecedented financial crisis, and the credit union movement should take notice and realize that once we get by the immediate issues, there is value in saving the network and there are already examples of how it might look.
Douglas Wolf, CEO,
Midwest Corporate FCU, Bismarck, N.D.
LETTERS TO THE EDITOR
Letters to the Editor can be sent to Managing Editor Lisa Freeman at lfreeman@ cujournal.com.