By Frank J. Diekmann
I’ll just go ahead and say it upfront: this was pretty disappointing. Where was the calls for a credit union militia? How can you go a whole two hours and not claim the whole thing is “rigged?” Where was the guy in a t-shirt reading, “I’ll send you my operating fee when you pull it from my cold, dead CFO”?
In an era of “Somebody needs to go to Washington and hold them accountable!,” more than just one somebody did. It could have been another day that sounded a lot like talk radio with rants about the federal government, but in this case the ranters were credit unions (who clearly have no future in politics given the little ranting they did and the civility shown), while the target of their complaints had actually invited them there (NCUA Chairman Rick Metsger and Board Member Mark McWatters).
Really, this is no way to run a revolution—how will CUs ever get YouTube views this way? Now we will just have to wait and see what happens.
As CUToday.info reported at length here, NCUA last week hosted a budget briefing to allow for “stakeholder input” into its budgeting process in general and its 2017-18 budget in particular. If you’re surprised that credit unions and their trade groups want to see the agency’s budget shrinking, then perhaps this would also be a good time for you to Google “Chicago Cubs.” The general theme of remarks was no surprise: if the overall health of the shrinking number of credit unions is good, why does the regulator’s budget for 2017 seem more in line with 2008?
During the 2:15 meeting, both NCUA board members and two senior executives provided some details on why the budget keeps growing (salaries and benefits make up the bulk of the budget), and investments in training and technology have increased. If NCUA held out any sort of carrot it was the suggestion that CUs should see ROI on the technology dollars in the form of fewer on-site exams that will also need to be conducted less frequently. Credit unions should hold the agency’s feet to the fire on that one in the same way examiners do when following up with a CU on a DOR.
In that vein, Bill Raker, CEO of Firefly Credit Union in Minnesota, had one of the best lines while speaking during the briefing when he said, “It seems my credit union spends more time justifying proposed expenditures than does the agency.”
Faux Outrage?
There’s a lot of faux outrage in the country, much of it ginned up to attract clicks and eyeballs and to sell advertising—or in the case of trade associations, to keep the dues coming. But the issues and concerns being raised about a federal agency that just keeps growing even though one of the institutions it regulates disappears on a near daily basis are legitimate. The $300-million NCUA budget should be headed the other way, but as Oscar Wilde so famously observed, ““The bureaucracy is expanding to meet the needs of the expanding bureaucracy.”
Mr. Metsger and Mr. McWatters deserve credit for holding the budget briefing; how many other federal agencies do so? They, along with former Chairman Debbie Matz, have made available substantial amounts of budget information on www.ncua.gov. Yet as Metsger has said to me previously, and as McWatters observed during the briefing, “It’s been a difficult process over the last two years, and we have put a TON of data on our website. Surprisingly, there have been precious few clicks on that information. People have asked for transparency, it’s a good thing, but perhaps people don’t really want it.”
In other words, credit unions demanded the windows be cleaned, and then no one ever looked in.
As McWatters also said, this process isn’t about “pencils and paperclips,” and during the briefing at which seven people from credit unions shared their views, there weren’t a lot of specific suggestions for budget cuts. In fact, one of the specific changes called for, in this case by NASCUS which wants to expand the NCUA board to five members from three, would add about $2 million in agency expenses (NAFCU is on the opposite side of that issue, so good luck).
Although it wasn’t mentioned during the briefing, NCUA is picking up some savings in the second half of this year because the third board seat remains vacant. Thanks, Congress.
To Regulate, Or Not To Regulate
Sean Gaven, SVP/CFO with American Airlines FCU in Fort Worth, Texas, suggested his research indicates NCUA’s flexibility initiative seems to show it could mean a need for roughly one-third fewer examiners, which will reduce costs for both NCUA and credit unions themselves, in future years.
On the other side of the argument that times are good now and it’s time to cut staffing, Metsger observed, “Isn’t it the job of a regulator to have staffing adequate to prevent future troubled credit unions rather than to clean up after institutions that have gotten into trouble?”
To regulate, or not to regulate, there’s the rub, Hamlet might have observed had King Claudius succeeded in driving him from Denmark’s royal family and into a career in financial services regulation. That is the balance that will need to be struck, and we’ll have to see if the budget scale tilts back the other way in 2018-19.
In the meantime, I’ll look for you at an upcoming Make NCUA Great Again rally, where I suspect everyone will be polite.
Frank J. Diekmann can be reached at Frank@CUToday.info or @FrankCUToday.