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“Democracy Dies In Darkness”

As I listened to NCUA’s streaming Board meeting Thursday, June 25, I was reminded of this phrase on the Washington Post’s masthead : Democracy Dies in Darkness. The paper’s first slogan was aired in a 2017 super bowl ad. [1]

The words convey a basic truth of democratic governance. They point to the powerful role of public information in discussion, analysis and decision-making, especially in regulation.

Listeners heard, as described below, that the agenda had changed with no explanation. Without transparency, actions become suspect. Trust is forfeited. Confidence lost.

An Email of Public Interest in the Meeting

A friend forwarded a copy of a credit union CEO’s email  to the NCUA Board prior to the meeting:

NCUA Board and Staff,

In 1867, Samuel Fay invented the paper clip. Originally Mr. Fay was trying to find a tool to easily attach tickets to fabrics. It worked and evolved its uses with the same foundational design to the tune of 11 billion purchased annually. 

 In 1899, Johan Vaaler tried to reinvent it. A different design to accomplish, in essence, the same goal. He went so far as to claim it better, campaign and erect sculptures in its honor, but the failure of this design was its impracticality. Many paper clip versions can be seen today but Fay’s original design, with the greatest history and track record of performance, leads the industry. Vaaler’s patent expired quietly.

The FDIC, FED and OCC have unanimously ended RBC requirements and all the work related to its calculation. . .From their September 2019 press release: “The leverage framework will greatly simplify regulatory determinations regarding capital adequacy and eliminate the need for qualifying community banking organizations to calculate and report quarterly risk-based capital ratios in their Call Reports.”

This (new leverage framework) capital adequacy standard is the same calculation that the credit union industry has been using for over 100 years and banking regulators have concluded there is no benefit and high cost burden to move to RBC.

I ask you to consider Vaaler’s paper clip and let RBC discussions and concept expire – for good. We have a proven model, like Samuel Fay. Moving away from the RBC discussion will allow NCUA to proceed with a refocused effort toward doing the work of helping credit unions find ways to help our members – especially in these unprecedented and trying times.

Withdrawing RBC from the Agenda

Opening the meeting Chairman Hood announced the RBC topic had been withdrawn. No reason given.

Was it because he did not have a second vote to discuss the issue? Was it concern the topic was insufficiently addressed? Of all the topics on the agenda, none had more immediate or long-lasting impact on the industry.

Credit unions are “in the dark” about Hood’s decision. At the prior monthly board meeting, the directors failed to second to move a topic forward, but then explained why they refused to do so. This time no discussion. Board members avoid presenting their points of view. There is darkness on both process and substance.

Credit unions are left to wonder what their politically appointed leaders are up to. Board members are subject to public confirmation so their expertise and view of their responsibility can be assessed by the Senate. Appointees embody the public interest in credit union oversight.

Board members’ role is to be publicly accountable for agency performance. Their collective silence prevents any assessment of NCUA’s latest thinking on this vital topic. It sidelines industry input and experience.

Most critically it fails to enlist credit union support for their action. Regulations become edicts imposed, not rules cooperatively and democratically generated.

How Freedom Is Lost

NCUA’s abrupt withdrawal of the RBC topic, deals a double blow to democratic governance. The board shirks its public accountability. Credit unions are denied information to make their voice heard. RBC, the most far reaching regulation ever proposed, lies in limbo.

As the industry speculates on this event, the incident shows the fragility of the public process meant to direct and control the administration of regulation. The board works in darkness; the industry has no light, and another democratic check and balance is minimized.

And that is how freedom is lost, one small step at a time.

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