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
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
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
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.
Home | Menu | Links | Info | Chairman's Page