|
JoAnn Johnson Board
Member Speech to the National Association of Federal Credit Unions 35th Annual Conference July 18, 2002 Thank you Fred for that kind introduction and for the invitation to address your 35th Annual Conference. As I go out and visit with the credit union community I am again reminded just how fortunate I am to have been given the opportunity by President Bush, to work with the national credit union movement as a Board member of the National Credit Union Administration. The sense of commitment and conviction of those involved within the movement, whether they are credit union tellers or credit union CEOs, never ceases to amaze me. Credit unions are an excellent reflection of the American way of life; of democracy, and self-determination. I want each of you to know that since my recess appointment in January, the staff and leadership of NAFCU expeditiously briefed me on issues important to your membership and have provided me excellent support as I learn my new responsibilities. As a matter of fact, I got to know your association's executive committee very early in my tenure, when they attended the Senate Banking Committee’s hearing during my confirmation. I appreciate that support and applaud your civic-mindedness. I also had the opportunity to tour Three Rivers Federal Credit Union in Fort Wayne, Indiana, where Jim Mills, your NAFCU chairman serves as CEO. Three Rivers Federal Credit Union is doing a great job of partnering with local community groups to ensure broader credit union access within their community. You should consider your association well represented. I look forward to working with your organization during my tenure. Obviously, I won’t suggest to you that we will always agree on every issue, but I can commit to you that I will always listen to your perspective, respect your opinions, and provide you fair and honest consideration. Hopefully we will find that we can agree more often than we disagree. Today, I'd like to tell you a bit about my background, let you know of my commitment to doing my level best to ensure the safety and soundness of credit unions, and let you know what I have been working on since my appointment. First, let me share my story about how I came to know credit unions. I first ran for the Iowa Senate in 1994 – it was an open seat. Early in my campaign, credit union members contacted me to set up a meeting to discuss credit unions. While my experience with credit unions was limited, I welcomed the opportunity to meet and learn more about issues important to the industry. During this meeting, all they asked of me was to listen to their perspective and provide them a fair hearing – this didn’t seem to be an unreasonable request. My opponent in that race happened to be a banker who was serving on the board of the Iowa Bankers Association. While the jury was still out on me, the banker’s agenda was pretty clear. Iowa credit unions stepped in and supported my campaign. In what I now know to be characteristic credit union fashion that made all the difference – with credit union volunteers knocking on doors with me on warm evenings, an effective grassroots networks and a commitment to credit union principles – I began my public service career. During my eight years in the Iowa Senate I had the privilege of chairing two committees, the Ways and Means Committee with jurisdiction over taxes, and the Commerce Committee with jurisdiction over many competing economic interests. I learned the skills of a legislator, and the need to hear all sides of an issue and chart a course to an equitable solution. I will be continuing that policy at NCUA and encourage you to continue doing what you do best – let policymakers know what you are thinking and why. In accepting the President’s recess appointment on January 22nd, I traded in my legislator duties for regulator responsibilities – and having been a legislator, I appreciate and respect the distinction between the two. I want each and every one of you to know that I am committed to listening carefully, working hard, and doing my level best in fulfilling my role as a National Credit Union Administration Board Member. I firmly believe that it is the responsibility of the regulator to regulate and it is the job of the Credit Union Board and management to manage each institution. Since my recess appointment in January, I have been spending the majority of my time studying up on the issues important to credit unions. I have been doing this through meetings with NCUA office directors, studying NCUA programs, meeting with credit union representatives, and attending credit union meetings, like this one. As a regulator, my top priority is to ensure the safety and soundness of credit unions. I believe it is my responsibility to provide credit unions sound, viable options that provide the maximum opportunities available to extend financial services to their members within the limits of applicable statutes and safety and soundness. When considering whether a state or federal charter would be best for the credit union and its members, it must be within the limits of applicable statutes of safety and soundness. It is a goal of mine to make sure that the federal charter continues to be viable and attractive so that federal credit unions have the ability to compete in a changing marketplace. I suspect that state regulators are doing the same in regard to their respective state chartered credit unions. I support the dual chartering system. As a regulator of federal credit unions, I think it is a responsibility of mine to evaluate what changes should be considered to keep the federal charter safe and sound. With the recent passage of such innovative proposals as RegFlex and the revised incidental powers rules, the NCUA Board has demonstrated its confidence in the federal charter and recognizes that the long-term viability of the federal charter will hinge on a federal credit union’s ability to compete in the future. Certainly more can be done and you can be assured that I will continue efforts to enhance the federal charter where appropriate and allowable within the Federal Credit Union Act. However in many instances our efforts to provide needed flexibility are limited by statutory constraints imposed by Congress. I continue to meet and listen with representatives from the credit union community so that I can hear the concerns of credit unions nationwide. I am also requesting credit unions to identify regulatory requirements that are restricting them from providing products and services to their membership. It is a goal of mine to review regulations to determine if any additional flexibility can be granted while still ensuring that credit unions remain safe and sound. I want to ensure that the regulations we have in place are necessary and effective. During the April board meeting, I voted in favor of a final rule repealing the community action plan (CAP) requirements. CAP was the rule that would have required existing federally chartered community credit unions to document in writing how it plans on serving the entire community. In December, the previous NCUA board adopted an interim final rule repealing this regulation. As I stated at April’s board meeting, I believe this was the right thing to do procedurally and in substance. And we did the right thing by repealing CAP permanently. Both the 428 comment letters on the interim final rule and the facts about federal credit unions’ service to their members supported a repeal. I want to share with you my thoughts on this issue. First, it is my philosophy that a fundamental tenet of responsible government is that agencies such as the NCUA should not impose regulatory burdens unless there is a demonstrated need or benefit outweighing the burden of the regulation. With respect to the question of the need for a rule such as CAP, a useful starting point is to look at the history of the banking industry and CRA. Those who support CRA for banks can point to the fact that at the time of its passage Congress found evidence of commercial banks taking deposit funds out of the communities they served in order to extend more lucrative loans in other markets. In response, Congress enacted CRA to establish that banks have an “affirmative obligation to help meet the credit needs of the local communities in which they are chartered.” In contrast, Congress has in fact considered and declined to adopt the concept of a CRA for credit unions. There are important and valid reasons for this. Credit unions, by their very nature, serve only the communities in which they are chartered. As we all know, credit unions serve a specified community or field of membership and make loans to members only within that field of membership. As a matter of fact, when a credit union solicits NCUA to expand their field of membership, one issue closely scrutinized is whether the credit union has the ability and commitment to appropriately serve the newly defined membership. In fact, when the NCUA Board first imposed the CAP regulation in October of 2000, the board noted that there was no tangible evidence that credit unions were not planning on serving their entire communities. There is evidence available now, and what it shows is that without government intervention, credit unions are going beyond serving their existing membership and affirmatively reaching out to serve underserved communities. In the year 2001, Federal credit unions added 281 communities designated by the U.S. Treasury Department as underserved areas into their fields of membership, adding over 16 million potential new members. Through June of this year, credit unions have added 196 underserved areas resulting in service to an additional 9.1 million potential new members. What this clearly shows is that without NCUA or any other governmental entity requiring it, credit unions are doing the right thing. Credit unions are expanding into areas that are lacking in traditional financial services. Credit unions are taking steps to meet their mission of serving people of modest means, providing an alternative to pawn shops, check cashers and rent-to-own stores. Credit unions are moving into communities that other traditional financial institutions have often abandoned, and are providing much needed services at affordable prices. They are doing it with NCUA’s cooperation and encouragement through programs such as Access Across America and through rule changes that make it easier to serve these communities. Federal credit unions are doing the right thing by helping the members of these communities realize the American Dream, and I believe the NCUA Board did the right thing by repealing the CAP rule. As some of you may know, our Office of General Counsel has an on-going regulatory review project to update, clarify and simplify existing regulations and eliminate redundant and unnecessary provisions. General counsel staff reviews one-third of our regulations each year. I believe this is an effective program and also another way in which we can further enhance the federal charter. One of the rules that staff has identified in this year’s review is the member business loan rule. Under this rule, the NCUA board may exempt federally insured state chartered credit unions from NCUA’s rule if the state supervisory authority has submitted an individual state rule for NCUA approval. In order to approve the rule, NCUA must determine that the state rule minimizes the risk and accomplishes the overall objectives of the federal member business loan rule. Since January, the Board has approved three state member business loan rules and there are currently 7 states that have their own rule. Our staff has developed an analysis of the state rules and has identified three areas where exemptions have been granted with rules less restrictive than the federal member business loan rule. Since the federal rule has not been reviewed since these state rules have been adopted, we owe it to ourselves and to credit unions to review the rule. This assessment will help determine whether the member business loan rule can be revised to be less restrictive without impacting safety and soundness. While General Counsel staff is currently reviewing the member business loan rule, it is important to recognize the statutory restrictions Congress placed on credit unions. Current statute limits the total of all credit union member business loans to the lesser of 12.25% of assets or 1.75 times their actual net worth. We all need to be mindful that regulatory flexibility is limited by statutory constraints. With that said, I will continue to provide flexibility where I consider appropriate and permissible within the Federal Credit Union Act. Ensuring credit union access to as many Americans as possible is a top priority of mine. Credit unions continue to do a great job in serving their communities and continue to reach out to more underserved communities. As Chairman Dollar mentioned, the Chartering and Field of Membership Task Force is currently working on recommendations to provide additional flexibility in the area of field of membership while not overstepping statutory authority. I continue to get briefed by staff on field of membership issues and look forward to the opportunity to deliberate further enhancements in this area. We hope to issue a proposed rule for comments before the end of the year and I would encourage each of you to review our proposal and submit your comments back to us. In closing, I want each and every one of you to know that I am committed to listening carefully, working hard, and doing my level best in fulfilling my role as a National Credit Union Administration Board member. I will listen to your perspective on issues and hope I can serve as a facilitator of solutions within NCUA and the movement. With so many people continuing to join credit unions around the country and committing more of their hard-earned money in your care, more Americans are depending on you and me every day to make sure that credit unions remain safe, sound and accessible. Thank you for what you do every day and keep up the good work. |