An Era of “Regulatory Backlash”

America’s credit union museum has begun an oral history series of recordings about critical events in the 110 years of the movement.

Episode 16, my contribution, is in two parts.   Part 1 tells the story of deregulation.   I described this approach as a pragmatic response to the disruptive economic and political forces changing many areas of American enterprise in the late 1970’s:

“Deregulation was not a political ideology, strategic blueprint or onetime response to a changing economy.

In credit unions it was nothing less than building a better system of “cooperative credit in the United States.” It turned upside down the practice of government making everyday business decisions for credit unions.

Rather that responsibility was now in the hands of those closest to the members-management and boards.”

Callahan’s Calling Card

In part 2, I recall the reasons Ed Callahan gave when asked why he was leaving the NCUA Chair with over two years remaining on his term. One was to help credit unions take advantage of the opportunities provided by deregulation.

In founding Callahans, the firm’s first effort was to establish a database of all US credit unions.  In 1986 this became the source for the first and only annual Credit Union Directory. Volume 36 was released this past quarter.

This data resource became the multifaceted Peer-to-Peer database and software that is the go-to, most advanced analytical tool for understanding the industry today.

The Ending of an ERA

Part 2 discusses the ending of this fourth chapter of credit union history–deregulation–in 2009 as the Great Recession financial crisis occurs.  Each of these four ERA’s is approximately a generation long.

While the following 25 years have yet to be fully lived, I suggest the initial decade’s dominate activity could be described as a time of “regulatory backlash.”  The mutual regulatory-industry approach to change and response to disruptions was ended.  NCUA emphasized its “independence” from the credit unions and undertook a series of unilateral regulatory initiatives to re-regulate and impose greater restrictions on multiple areas of activity.

When an NCUA Chair today testifies before Congress that his oversight North Star is FIRE, the cooperative system has been put on notice.  The Chair is just one board vote shy from throwing credit  unions into the pit of regulatory damnation.

The presentation is 22 minutes.   I refer to both recent history and current topics such as mergers, the idolization of size, and the ever-present temptation to become “bank-lite.”

Whatever name sticks when the current 25-year chapter is closed, I trust reviewing these initial years of NCUA activity in the light of prior ERA’s experiences will be educational.


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