In recent months, NCUA chairman Debbie Matz has taken a lot of heat for comparing home-based credit unions to buggy whip manufacturers. That’s a bum rap. Matz makes a terrific analogy.
More than a century ago, when there were tens of millions of horse-drawn conveyances in this country, there were thousands of whip manufacturers to meet market demands. Today, the market is much smaller. There are many fewer carts and buggies, so there are far fewer companies making whips for them, but those purveyors that have survived are highly specialized small businesses providing high-quality products to meet the distinct needs of a demanding clientele.
Exactly the same things can be said about modern home-based credit unions. Where once there were thousands, there are now fewer than one hundred, but the survivors deliver targeted arrays of high-quality financial services that meet the needs and expectations of their members. If this were not the case, the institutions would no longer exist.
Both home-based credit unions and whip makers are self-governing organizations that survive and thrive in a free economy by meeting the needs of those they serve. Vibrant cultural artifacts, just like buggy whip makers, home-based credit unions are the living history of our movement. They are also up-to-the-minute realizations the visions that serve their owner-members best.
This is where Matz’s comparison fails. No one in their right mind would try to put a solvent buggy whip manufacturer out of business by regulatory fiat, not even if they had the power to do so. Yet Matz has chosen to do just that, creating authority out of whole cloth and justifying it through feigned concern about the safety and well-being of NCUA examiners. Too harsh? No. Reasonable as Matz makes her worries sound, neither she nor anyone else has been able to produce a single real-life example of the risks she imagines.
What this absurd situation does is suggest a different metaphor for home-based credit unions: canaries in a coal mine. Credit unions have a special regulatory structure because they are cooperative institutions. The NCUA is not just responsible for safety and soundness supervision and management of the insurance fund, it is charged with protecting the movement’s history, culture, and ethos. Instead of hewing to these legal obligations, Matz appears to be mocking them. She gets away with this because there is no controlling authority to which she is responsible.
The NCUA is not accountable to the President because it’s an independent agency. Unlike most other independent agencies, it’s not accountable to Congress either because credit unions pay for it directly with their members’ money. The NCUA is accountable only to credit unions. This unusual situation should be one of the strengths of the credit union movement, but Matz has transformed it into a worrisome weakness.
If the chairman can shut down home-based credit unions in a capricious fit of regulatory pique, what else could she do? Could she outlaw volunteer boards of directors if she decides that sophisticated financial institutions need professional governance? Could she institute a mandatory membership test if she decides not everyone should be entitled to belong to a financial cooperative?
If the Federal Trade Commission or some other agency tried to outlaw buggy whip manufacturing on some similarly concocted proposition, the outrage would run the gamut from cultural anthropologists to free-market libertarians. Even in this divided day and age, a bipartisan coalition in Congress would be screaming for the head of the audacious apparatchikwho overstepped their bounds. But for home-based credit unions, where is the outrage?