While credit unions focus on the threat of federal taxation, there is another event that could end the independent cooperative system. To understand how governmental agencies are reorganized, it is useful to review what happened to the separate S&L industry after a decade long series of industry and regulatory failings.
From an Inspector General Report dated March 2012: Title III of the Dodd-Frank Act sets forth provisions to address problems and concerns in the multiple agency financial regulatory system by abolishing OTS and transferring its powers and authorities to the FRB, FDIC, and OCC as of July 21, 2011 .
All OTS functions relating to federal savings associations, all OTS rulemaking authority for federal and state savings associations, and the majority of OTS employees transferred to OCC; OTS’s supervisory responsibility for state-chartered savings associations and OTS employees to support these responsibilities transferred to FDIC; and OTS’s authority for consolidated supervision of savings and loan holding companies and their non-depository subsidiaries transferred to FRB.
Prior to this 2011 transfer of supervision, chartering and examination, the separate FSLIC insurance fund had been merged into the FDIC in two steps. The FSLIC was abolished in August 1989 and replaced by the Resolution Trust Corporation (RTC). On December 31, 1995, the RTC was merged into the FDIC which became the sole deposit insurer for all thrift institutions.
Current numbers under OCC responsibility are approximately 1.500 national banks and federal savings associations and 50 federal branches and agencies of foreign banks.
As of mid-2024 there were 556 surviving savings institutions. There was no single regulator however. Supervisory oversight of their $1.2 trillion total assets was divided among the OCC-242, the FDIC- 278 and the Federal Reserve-36.
An independent consolidated thrift industry does not exist today. Depending on each institution’s charter history and scope of operations, regulatory oversight is divided among the three federal banking agencies.
The Relevance of History
A goal of the Trump administration is greater governmental efficiency. Combining regulatory agencies is not a new idea. Merging the cooperatively designed NCUSIF into the FDIC, closing the unused CLF and transferring chartering and supervision to a new Treasury bureau would seem a reasonable proposal-for some.
A New North Star: Faster Alone, Farther Together
How might a single OCC administrator view this possibility? The following is from an exit interview with the acting OCC head during the Biden administration:
Michael Hsu, a longtime bank supervisor and former top Fed staffer, threw himself into what he describes as a dream job: running an agency full of examiners. The OCC chief was at the table as officials managed through a regional banking crisis and a crypto crash.
MH: I made safeguarding trust the North Star for all that we were doing…I feel good about what we’ve done.
I’m most interested in long-term, durable wins. I’ve been in government for 20 years, over 20 years doing this stuff. There’s nothing more frustrating than this kind of fleeting, pendulum-swing of announcements. . .
There’s a saying: Faster alone, farther together. I say it to my staff all the time, which is frustrating, because sometimes we have to slow down…But if you just do it alone, you can get the quick win, but then the next guy is just going to undo the quick win.
Responding to a Reorganization Review
To counter the inevitable suggestions for more coordinated financial regulation, the so-called level playing field, requires rethinking what is being communicated at every level about credit unions today.
Some areas for messaging might include:
- An NCUA led by informed and articulate leaders presenting the contributions and role of credit unions and cooperative design to the pubic and Congress;
- An industry performing with stable and successful financials capable of responding to ever-changing markets;
- Meeting public and individual interest in and demand for cooperative charters to lift up local groups and communities;
- Daily examples of member-owner benefit that rises above traditional service and product options from for-profit providers;
- Leadership at all levels communicating the advantages of cooperative design. A former NCUA executive director once summarized credit union’s purpose with the phrase: “it’s the member, stupid.”
Much of today’s credit union commentary reads and sounds like all the other lobbying and jockeying with a new administration. Protect the status quo. Align one’s vision and “asks” with the incoming administration’s priorities.
That apprach may be smart politics. But credit unions did not succeed by preserving the status quo. What will their role be in responding to the numerous areas of unmet member needs and expectations? That response will position NCUA and credit unions as leaders for greater contribtions or, if not, as a part of governmental policy that needs rethinking.