Yesterday, Chip Filson published a piece concerning the NCUA’s actions in dealing with NYC credit unions that dealt in taxi medallion loans. In attempting to cram in an expensive and short-term solution, the NCUA and its board have given up on cooperative solutions despite many interested parties seeking to do just that.

As Chip mentions: “Members of Congress, the New York City Council, the union representing the taxi drivers, CUNA and three credit union leagues have all written or spoken up asking NCUA to do what is in the borrowers’ best interests. They have all sought a collaborative solution with the borrowers, not an outright sale of the portfolio.”

Here’s how I see it:

The NCUA is in a corner

Over the last few years the marketplace has come to expect them to be self-serving and quick to wash their hands of their responsibility to our members, our industry, and our economy by simply shipping the work-outs of challenged members to anyone but the credit union industry. Their propensity to allow third parties to bank big profits on these situations and take a hero’s bow for their quick actions is now becoming an act we have all seen too many times. Their lack of good faith as fosters of credit union members — as to the returns from members’ hard work — has led to a loss of goodwill between our system and the member who act as consumer-owners for the future. Yes the NCUA is in a corner, but do they care?

The NCUA board is silent and sulking in the shadows of that corner

Not sure of their role or their ability to lead the board once again pushes bureaucrats in front of the microphones to relay the NCUA’s position and approach to the problem. “Go ahead, deliver the news, but make it clear that the board is leading the charge. By the way, what is our position and why?” After years and years of workout tactics that follow the liquidate and transfer approach, the board has lost its will to debate new approaches on their watch. Short terms, political efficiencies, and no desire to be anything more than a “bureaucrat’s” friend has left the board in the shadows when these moments arrive.

The NCUA is putting us all in a corner

We are cooperatives and cooperatives live with members, not simply manage them as an investor would. Investors speed to liquidate, speed forward to the next best thing, and minimize losses like there is no consequence to the people who are washed away and robbed of a chance to work it out.  And as the NCUA prepares to wash it all away again with the help of the investors’ “math and mystique”, we all lose. Not on paper, but in spirit. We lose the respect we have built by standing by those who want the chance to work it out, live it out. The NCUA is putting us all in a corner, sucking us into their vision of “burn to earn”, and in the end washing away generations of hope and respect over and over, one crisis at a time. And the view from the corner for the true of heart cooperatives sucks.

Is that how you see it? Tell Me Why I’m Wrong!

Yesterday, I shared a letter to the NCUA from the Ohio Credit Union League and my translation of the formal language to more blunt terms. Today, Vic Pantea shared his comments on the budget:

Dear Sir:

I watched with great interest as the new 3-person board and staff reviewed the 2020-2021 version of the NCUA budget last week.  New faces both at and behind the board table and as seems to be tradition, a lot of empty seats to the front.  The scene, the presentation documentation and the speech took me back to the past.

“My budget comments are basically linked to prior statements that a budget driven by a strategic plan that includes few measurable milestones, that fails to identify who is accountable for the accomplishment or failure of those strategic objectives in specific timeframes and that fails to provide us all with the economic and financial benefits achieved by the dollars spent, is fundamentally flawed from its very beginning.” CU*Answers, Budget Comments, November 7, 2016

I must admit that the current budget and staff comments do a good job of recognizing the fact that the budget, by necessity, is linked to the strategic plan.  That fact is mentioned often.  That the budget is linked to a plan that lacks imagination, innovative thought and excitement for goals that will drive the recognition that NCUA has no peers is a shame.  A plan that differentiates itself and drives it to a level of excellence that highlights not only its own uniqueness as a regulatory agency but the very uniqueness and nature of the network of cooperative organizations it regulates.  Instead, those of us who have paid attention, we get a document that is surely cut and pasted from the recent past, same old ………. same old.

I guess that the reason that credit unions don’t flood you with comments and overflow the Duke Street board room for your open meeting is that in those years that you have taken the opportunity to publicly share the budget you have also failed to make any significant changes based on our comments before you vote on the budget only a few weeks later.  You have never reported why projects and changes to examination protocols and tools are not delivered on a timely basis or how much project delays or failures have cost our members.  We certainly agree with the recent witness testimony from NAFCU that the budget process lacks any mechanism for reporting back the ROI on multi-million-dollar projects to the credit unions who are paying for them.  The ESS project was first introduced in the 2016 budget at a projected cost of $20+ M, the 2019 budget was $22.0 M and the 2020 budget has another $15.8 million.  Can anyone tell us what the impact that investment will be on personnel and examination costs in 2021 and beyond?  What will be the impact on losses to the fund because of the millions of dollars of new analytics and virtual examination strategies?  Will we finally see a real reduction in examination man-hours as the new tools eliminate or reduce field exams?

Can state chartered/federally insured CUs see a serious reduction the OTR?  Will new real-time predictive modeling reduce the NOL?  How much and who’s responsible?  When will it happen?  Surely the common sense comments from NASCUS, that it seems impossible that examining one $1.5 B credit union costs more than 3 examinations at three unique $500 M CUs rings true with you?  That this ridiculous excuse that the complexity of larger credit unions justifies the ever increasing spend and is not being addressed by millions of dollars of investment in new expert systems and productivity gains is a false premise.

It is the height of embarrassment that the agency responsibility for the public health of all credit unions makes no mention in strategic plan or budget of the need for new charters.  We work closely with de novo credit unions and there is no excuse for the undermanned and seemingly unappreciated effort for those Americans who wish to continue the collaborative goal of sharing a not-for-profit financial services alternative with friends and family of a common bond.  The extra time and money spent to encourage and promote new charters is certainly in the budget, it’s just earmarked for some other, less worthy expense. Being volunteer organizations is hard enough but when bureaucratic barriers delay and befuddle their efforts it is easy to see the discouragement.  The risk to the fund created by new credit unions is de minimus.  Our history is that failed startups are usually merged with existing CUs and that the small asset CUs hardly pose any real financial threat to our $16B + share insurance fund.  Instead of barriers, the agency needs to guarantee a de novo program that it will take no longer than 90 days to gain approval and that their agency and insurer will concentrate on supervision strategies that encourage success and growth rather than decline, failure or eventual merger.

Another failure in the budget process, and much like the above-mentioned “complexity” measurement, is the continued use of a ratio of insured credit union deposit to the agency budget.  The use of this ratio as justification for budget increases is unfounded and unproven to support the future safety and soundness of credit unions.  The fact that it continues to be the singular measurement of support for years of escalating costs is the very proof that the strategic plan and the leadership of the agency, both political and professional staff, lacks any differentiating vision from the past and is not continuously looking for new ways to evaluate agency performance.  Unless the new Chairman gives us reason to think otherwise, this alone is reason for credit unions to lack confidence in leadership and looking forward to significant changes in that same leadership. 

The challenges of the current century cannot be overcome by the same tired regulatory practices of the past.  The time has come for this agency to be held accountable for not only the stewardship of OUR $16.7 B share insurance fund, but the evolution of regulatory practices that recognize that credit unions are not banks.

Regards,

Victor J. Pantea

Manager of Marketplace Alliances

A new type of voice is needed to reach the NCUA regarding its budgeting practices

The Ohio Credit Union League certainly knows how to write a letter where the good stuff is buried in the BS… no wonder no one really reads these kinds of comments! Think they should have just sent some HEADLINES or QUOTES they are planning for their local papers, and been done with it. Here it is translated:

• The CUs and their employees are pissed that the NCUA has no self-control, or awareness of how they justify stealing income from the mouths of the citizens of Ohio that employee so many in serving even more.
• Please excuse the false praise included in the third paragraph of our comment – it is just the BS that you expect to read, before you, the NCUA, blow us off.
• You are killing us with a death of a thousand cuts, endless annual increases doled out like you do not think we can do the math for the last 10 years. 57% increase in an era of CU consolidation and an NCUA response that puts more and more on CU third party commentators so the NCUA can just validate the work of others instead of being a real vendor to the industry.
• While you promise the innovation that you claim will be the effective solution to lower overhead, you all know this is double speak for just increasing your budget for painful mismanaged change that only a government agency could abide.
• Please disregard any hope that the NCUA remains a separate entity from the other agencies, for almost anything would better than having to survive your incompetence in the financial management of our industry. While we long for independence, it might be better to suffer new government approaches.
• We end with BS that could only be typed, because we could not verbalize these words aloud without choking.

In short, WE do not accept your budget, your thinking, or your taxing of our system without representation or a process that better allows us a voice in the selection of our representation.