Article Exposes Cozy Relationship Between CU Regulator and Industry

An investigative report by Daniel Wagner, senior reporter for The Center for Public Integrity, exposes the cozy relationship between the National Credit Union Administration (NCUA) and the credit union industry.

The article begins with the newest NCUA Board member, Rick Metsger, attending a luncheon in his honor at Credit Union House, a $4 million party and meeting space on Capitol Hill funded by the industry, shortly after being sworn into office. The event was attended by credit union regulators, leaders, and advocates toasting "one of their own, a fellow-true believer in credit unions who would now police the industry full-time."

The article highlighted the clubby world of the credit union movement where the regulators are ideologically in sync with the companies they regulate. This results in NCUA often acting as a cheerleader and enabler for the credit union industry.

For example, it was NCUA policies at the behest of the credit union lobby that led to the failure of five corporate credit unions requiring a $19.2 billion bailout of the industry.

This coziness between the regulator and the regulated in part arises from the revolving door between NCUA and credit union movement, as all three current NCUA Board members worked in or represented the industry. Wagner wrote: "There are no meaningful safeguards to prevent the NCUA from being completely filled with the industry veterans and allies."

In addition, Wagner points out that credit unions have erected a sprawling advocacy machine to protect their tax exemption, which is funded at the expense of credit union members to the tune of more than $100 million per year.

Read the article.

Update on Hawaii State FCU

On February 3 of this year, I wrote about the controversy surrounding the excessive perks the board members of Hawaii State FCU had awarded to themselves and possible conflicts of interest.

This is a follow up on that earlier post.

Members of the credit union appear to have been fed up with the credit union board of directors and voted to oust the board chair Beverly Ing Lee, whose travel agency arranged official board trips frequently at ticket prices higher than what the airlines offered.

Read the story about the election.

Follow Up: Hawaii State FCU Directors Agree to Cut Their Benefits

In the wake of member criticism, the directors for the Hawaii State Federal Credit Union, the state's second largest, agreed to cut the benefits they give themselves. Read the article in the Honolulu Star Advertiser.

On February 3, I wrote about an investigative article appearing in Honolulu Star Advertiser about excessive perks the board members of Hawaii State FCU had awarded to themselves and possible conflicts of interest.

Article Exposes Concerns About Excessive Benefits and Conflicts of Interest at Hawaii State FCU

An article appearing in the January 30, 2011 Honolulu Star Advertiser reports on potential conflicts of interest and excessive benefits to the board members of Hawaii State Federal Credit Union, the second largest credit union in the state.

The article cites as examples of excessive benefits that the credit union pays for up to seven off-island trips annually for each board member with up to four trips to the mainland, covers travel expenses for spouses, and reimburses board members for health insurance costs.

Frank Diekmann, editor and publisher of Credit Union Journal, is quoted as saying that these benefits are pretty much in excess of what credit union boards receive regardless of the size of the credit union.

Additionally, according to documents obtained by the newspaper, regulators raised red flags with respect to "the use of a travel agency owned by the board chairwoman to book official trips, frequently at higher prices than what the airlines offered directly, and accepting free rooms at a Waikiki hotel where the annual membership meetings were held."

To read the article, click here.

Read editorial Uphold credit union trust