STATEMENT OF DENNIS DOLLAR NCUA BOARD MEMBER MARCH
26, 1998 Good morning,
Mr. Chairman and Ladies and Gentlemen of the Committee. As a member
of the Board of the National Credit Union Administration, I very much
appreciate the opportunity to appear today with my Board colleagues
in support of legislation that will help NCUA and America's credit
unions deal with the impact of the recent Supreme Court ruling in
what has become known as the ATT Case. Without a
doubt, the aftermath of this decision has left many unanswered questions
as to the future of federally-chartered credit unions if they find
themselves unable to grow, prosper and, therefore, compete in today's
financial marketplace. Knowing the
commitment of this committee to a safe, sound and viable credit union
system for the over 70 million Americans who are presently members
of credit unions, as well as the millions of other Americans who may
in the future desire to have the choice of joining a not-for-profit
financial cooperative, we commend you for your request of this hearing
and for what we hope will be prompt action on this important issue. Having served
as the President and CEO of a small-to-moderate size credit union
until I came to the NCUA Board just this past October, I would like
to address this issue today in perhaps a different light from what
you may hear from other formal testimony. I would like
to give a first-hand account from my experience at the Gulfport VA
Federal Credit Union to help point out to you what I believe to be
the wisdom and propriety of the NCUA's multiple group policy in 1982
and the need to have it reinstated in some statutory form. While what
I share with you today is a personal perspective from the credit union
trenches, I feel that it is also a representative story of many credit
unions deeply rooted in the public policy issues of safety and soundness
and the extension of credit to those who are often overlooked by the
traditional financial institutions. The Gulfport
VA Medical Center in Gulfport, Mississippi, was the original sponsor
group of my credit union in 1935, one of the 200 oldest federal credit
union charters in the nation. Twenty years ago, there were about 2,000
employees who worked full or part time at the VA Hospital in Gulfport.
As a result
of downsizing, consolidations, and outsourcing, there are today less
than 200 employees. Were it not
for the NCUA's policy of allowing select employer groups to affiliate
with an existing credit union, my former credit union would likely
have been truly a "former credit union." It certainly would
have been of safety and soundness concern to NCUA as a regulator and
to the National Credit Union Share Insurance Fund as the insurer. Instead,
the Gulfport VA Federal Credit Union is, in 1998, a well-capitalized,
thriving $32 million credit union, serving 12,000 members from 150
employer groups throughout the Mississippi Gulf Coast area. Not only
has the NCUA's diversification policy taken a credit union which would
have likely been a merger or shutdown candidate without it and turned
it into a viable, growing institution well serving its members, but
it has also provided credit union services to 149 other small businesses
who could never have been able to sustain a credit union of their
own. To me, this
is one of the most overlooked aspects of the field of membership issue.
Small businesses make up over 90% of this nation's workforce. These employees
of limited means, often the employee of a small business without the
necessary base to form their own credit union, are the very reason
the Federal Credit Union Act was enacted to begin with in 1934. I know that
there are serious differences of opinion over what Congress meant
in the 1934 Federal Credit Union Act when it talks about "group"
or "groups" as having a common bond and whether this depression-era
standard should be applied strictly to credit unions trying to prosper
in the competitive marketplace of the new millennium. But there
is no lack of clarity about the Act's intent to "extend the availability
of credit," nor is there any doubt about its overriding emphasis
on safe and sound credit unions. Neither are these concepts outdated.
It seems
to me that NCUA in 1982 found a way to meet both emphases: ---to make
credit unions available to the employees of small businesses who have
a difficult time providing such fringe benefits as 401k plans, but
can provide a payroll savings plan though their credit union and who
cannot set up a "holdover 'til payday" loan but can refer
their employee to their credit union for a small personal loan of
a couple hundred dollars that most banks would not make. ---while
at the same time, using the diversification of multiple employer groups
to ensure the safety, soundness and longterm viability of credit unions
whose original sponsor group may face downsizing, shutdowns, or mergers
- events totally outside the control of what would otherwise be a
safe, sound credit union. The NCUA
multiple group policy is good public policy. It has resulted in credit
unions having the strongest capital position in their history, extending
credit to more members than ever before and the Share Insurance Fund
being in its strongest financial position ever. Not one taxpayer dollar
has been called upon to bail out or supplement the credit union Share
Insurance Fund. At my former
credit union, this policy protected our ability to serve our members
as well as providing assurance that our institution's viability and
growth potential would result in our being able to extend credit in
accordance with the letter and spirit of the Federal Credit Union
Act for many years to come without fear of the Insurance Fund or taxpayer's
dollars being required to bail us out. Mr. Chairman,
ladies and gentlemen of the committee, that ability to grow and remain
viable to serve the financial needs of its members is what credit
unions must have restored by this Congress. Being hit by a truck or
a long-term battle with a cancer often results with the same prognosis
for the patient in the long run. For many of America's credit unions,
the inability to grow with new members and new employer groups will
result in a malignancy that could ultimately have an effect as devastating
in the months and years ahead as an immediate divestiture order from
the court would have today. Neither is in the best interest of American
consumers, nor the Share Insurance Fund. The Federal
Credit Union Act is more than a single definition of "common
bond." It is a structure for extending cooperative credit through
not-for-profit credit unions that is as viable today as it was in
1934 when the law was passed. We must not
allow this option for American consumers to be restricted by the inability
of credit unions to remain safe, sound and growing. I join my
colleagues in urging your support of legislation that would codify
the NCUA's multiple group policy as expeditiously as possible. Thank you.
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