An Example of Regulatory Leadership in the 1977 MCU Conservatorship

In a recent blog reviewing the latest events in the May 2019 NCUA conservatorship of MCU, I suggested that the real problem was the failure of regulators, especially NCUA, to publicly explain their actions and intentions. The lack of transparency means that no one is taking responsibility for decisions made. Contrast this approach with the 1977 New York Times report on this earlier Municipal conservatorship.

Although insured by NCUA, Muriel Siebert, the banking regulator publicly stepped up and took charge of the situation.

In the excerpt from the New York Time’s article below, note her directness and actions with the credit union including:

  • Her transparency discussing the situation, including citing delinquency and board “struggles”
  • Her statement of full cooperation from the NCUA, including funding, if necessary
  • Her assurance of continuity of operations including paying a 6.5% share dividend
  • Her on site visit to the credit union’s main office and statement that the Department did not intend to retain possession
  • Her assurance there would be no wholesale layoffs of staff
  • The statement by New York’s mayor Beame extending his appreciation to the Regulator for protecting members interests

This is what leadership looks like: collaborative, goal specific and backed by personal commitment. The turnaround succeeded!

New York State Is Taking Over Municipal Credit Union in the City

(November 3, 1977)

Superintendent Siebert asserted that the credit union “is not insolvent and it has sufficient liquidity for us to be able to run it.”

She said that the union would be open for business as usual at 9 A.M. today and that “we will accept deposits, permit withdrawals and make loans to members as in the past.”

The Banking Superintendent said that the National Credit Union has assured her of full cooperation and that the national group would provide additional funds to run the Municipal Credit Union “should ;hat become necessary.”

She said also that the deposit insurance of up to $40,000 per account would continue “in full force and effect.”

The 60‐year‐old Municipal Credit Union has deposits of more than $120 million and has been paying its members quarterly dividends of 6½ percent. Miss Siebert said it was her intention “to correct the institution’s operating problems” and to continue to pay the usual dividend for the quarter ending Dec. 31.

In explaining the events that led to the takeover, Superintendent Siebert said that Ian examination of the credit union by her department early this year “disclosed an increased rate of loan delinquencies” and that “little was being done by the M.C.U. to collect these delinquent loans.”

Fights for Control Cited

Miss Siebert said the credit unions operations were also jeopardized because a struggle had been waged since 1972 for control of its board of directors. She pointed out that lawsuits had been brought by dissident members of the board and that all this had created problems involving the “effectiveness of management, personnel and various financial controls.”

Late yesterday, she visited the credit union in the Municipal Building at 156 William Street and told the staff there that her department “does not intend to retain possession of this credit union indefinitely.”

“We do not plan any wholesale layoffs of employes,” she said, although we do plan to make some reductions in staff which have already been recommended by our auditors.”

Mayor Beame issued a statement last night, which in part said: “I wish to extend my appreciation to the State Bank ing Department for moving promptly in this matter to protect the interests of the city employees who are members of the credit union.”

The Municipal Credit Union was chartered by the state in 1916 with 19 members.

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