Conspiracies & Risks, Tough And Changing Times

Tea partiers and liberals may not agree on much when it comes to government, but surely both groups could come to a consensus that without government you just can't have a really good, quality conspiracy theory.

Not sure what the 2011 Summer Movie Season will hold, but I'm going to take a chance and assume the fourth installment in the "Jason Bourne" series will not be "The Bourne Regulator." And yet there are no shortages of otherwise level-headed leaders within credit unions who are quite sure NCUA's secret goal-sworn to in some sort of covert ceremony held in the parking garage beneath its Alexandria, Va., headquarters and involving the sacrifice of young examiners-is to put small and medium-size credit unions out of business.

Such was the case during the recent NAFCU meeting where an agency exec was speaking and one person posed an accusation in the form of a question and implied that NCUA is conspiring to give larger CUs more time to work out problems than it does smaller and midsize CUs.

But the story pitch for Dan Brown's new novel "The Da Vinci Code 4 & 5 CUs" wasn't even finished before the NCUA rep replied to the effect, "Yep, that's pretty much true."

"The size and the sophistication of the credit union is a factor," said John Kutchey, deputy director of NCUA's Office of Examination and Insurance. "We have about 800 exam staff, and we have a pipeline we use to manage that process. If it is in imminent danger we will take it over, as we did with WesCorp and U.S. Central. But the larger the financial institution, generally, the more sophisticated its management team and the more confidence we have in their ability to manage their way (back to profitability). Speaking frankly, size does come into play. Our charge is to minimize the loss to the insurance fund. But if we need to take it over, we take it."

Kutchey went on to add that it's not that difficult to find a merger partner for an ailing credit union that's in the $300 million in asset range or smaller. "But when it gets to the billion-dollar level, now you have about 140 credit unions that could take it over. In the $3 billion to $5 billion range, I can count on two hands the number that can take them."

• Observed at that same meeting by CUNA Mutual Economist Dave Colby when asked if there is any good news in the economy, "Well, the downside risks have declined, because we've run out of downside risks."

• Speaking of NCUA and the economy, with each downturn comes talk of cutting the size of government, and with that talk of consolidating agencies. Funny, because the same CUs that are usually complaining about NCUA are also always on the look out to defend their "independent regulator."

But about a dozen former credit unions will be getting some new oversight. Thanks to the financial reform bill, the Office of Thrift Supervision is being merged into the Office of the Comptroller of the Currency, even though the thrift charter will continue to exist. Like the spoils of war, territory is being divided up this way: the OCC will supervise federal savings associations, the Fed will oversee S&L holding companies and other non-depository subsidiaries, and the FDIC will supervise state savings associations. Approximately 10 former CUs that are now operating with a thrift charter will be affected.

Perhaps this will also chip away at the unfortunate scenario that has developed in Washington in which certain regulators have pitched themselves as "unregulators" when trying to get institutions to change charters. We've all seen the result.

During the NAFCU meeting NCUA Chairman Debbie Matz warmed up her audience by joking that she was about to provide an "assessment of the credit union community. But there's no need to pull out your checkbooks. This assessment won't cost you any money." That elicited some groans. Matz followed up by pointing out some stats that had many CEOs in the audience thinking about taking a long walk on a short Navy Pier in Chicago. Matz noted there are nearly 2,100 CUs identified as troubled, with CAMEL 3, 4, and 5-rated CUs holding 21% of all CU assets (including 30 with more than $1 billion each in assets).

But Matz, who said the agency will propose that within three months of being elected, every board member demonstrate the ability to read a balance sheet, won the audience back a bit later by revealing NCUA would allow the NCUSIF to operate slightly under the 1.2% equity ratio target, which should lower the assessments most CUs will have to pay moving forward.

• Sign of the Changing Times: The Combined Council of Automotive Credit Unions is now the Combined Council of America's Credit Unions. Ann Garmon, president of Horizon One CU in Indianapolis and liaison for the group, said the change was driven, as you'd expect, by what's occurred in the U.S. auto industry. The association has opened its annual meeting to all CUs.

• Best line I've heard in a while: During a WOCCU meeting, one man approaching a table that had a large CU crowd sitting around it, said, "If there were any more of you there you'd need a charter."

Frank J. Diekmann is publisher of Credit Union Journal and can be reached at fdiekmann@cujournal.com.