NCUA Town Hall Statement Summary

On behalf of Jay Johnson, Executive Vice President

Callahan & Associates, Inc
NCUA Town Hall Meeting
Washington DC
September 30, 2009

Madame Chair: the following is a summation of recommendations from a longer statement that we have prepared for this Town Hall Meeting dialogue.

My goal is to put the Corporate Credit Union issue in a broader context. One year ago financial markets were in a total meltdown. However during the entire period of this crisis, the credit union system has achieved record results, especially meeting the critical need of members for credit. The cooperative charter has proven its powerful countercyclical purpose at a time when national policy is seeking innovative solutions.

During this same time NCUA has taken control of over $180 billion of credit union resources. Because of the scope and impact of this on credit unions, it is important to re-evaluate this extraordinary expansion of power.

My full statement has the following recommendations:

• NCUA should immediately begin a top-to-bottom policy review to align its actions and policies with credit unions’ Congressional purpose and the Administration’s top national priorities.
• This review would result in the collective credit union resources managed by the Agency being put back into the system, not drawn from it. Two immediate actions needed are:
• Capital notes, similar to the concept used in US Central, available to all credit unions with less than 7% net worth;
• Bringing credit union oversight and involvement, beginning with the two corporates you now manage, to all funds managed by the Agency, but owned by credit unions. If members continue to be disenfranchised in daily operations, they are unlikely to support a redesigned corporate network imposed on them, no matter how well thought out.
• Support for the corporate system has waned since NCUA’s takeover. Some credit unions doubt the need for corporates; some want to see a very limited role; others are lukewarm. Since the failures of Fannie/Freddie and the problems in the FHLB system, the future role of the corporate network is more critical than ever. Part of the corporate network’s future design should be done jointly with the CLF to create a new capability for system access to secondary markets.

These recommendations are based on the belief that the credit union system creates the most powerful charter in America today. But the charter’s power relies on the system’s interdependence especially the use of collective resources for individual credit union assistance. Cooperatives’ greatest strength is their collaborative capability—but only if these collaborative resources are used effectively.

Beyond the immediate challenges from this economic downturn, the credit union system is uniquely positioned to assist society in other areas of critical need. If cooperatives are how Congress elects to strengthen America’s health care delivery system, we can be part of this solution. The credit union system has over $260 billion in investments. Cooperatives for health care are currently estimated to require $6.0 billion in funding. Working together, credit unions not only can continue to show America a way through the greatest financial crisis in a generation, they can also help create new approaches to some of our society’s most urgent needs.