Credit Union Times - Centennial Edition - (Page I23) Celebrating 100 Years , speCial Centennial edition Corporates’ aCCU born of CapCorp’s dark days By HEATHER ANDERSON CU Times Correspondent-at-Large WASHINGTON — One of the most unpleasant events in corporate history may have better prepared financial institutions to face today’s challenges. Few want to talk about the events surrounding the February 1995 conservatorship of Capitol Corporate Federal Credit Union. Like Lord Voldemort of the Harry Potter series, CapCorp and former NCUA Chairman Norm D’Amours are among those “who must not be named.” Corporates and regulators won’t even go on record to say whether they’re appreciative of the regulations that came out of the CapCorp failure, given today’s tough market. Certainly, an industry that won’t even speak of an event does not want to repeat it. However, corporates will discuss one silver lining from those dark days: the creation of the Association of Corporate Credit Unions, an advocacy association that provides corporates with the legislative voice they could have used back in the mid1990s. “Protecting and preserving the vision and purpose of corporate credit unions is key to the continued success of islative bodies, trade associations, and tance of cooperation among the other financial services organizations, corporates as well as open dialogue Miller said. The group also provides with the NCUA. educational and informational “Since those days, which led to exchange opportunities within the the development of the Association corporate network, as well as research of Corporate Credit Unions, we and development initiatives that furhave been served well by our assother advance the credit union sysciation,” Lee said. “Over the years, tem’s capacities. the ACCU has served to coordinate Public relations principal Margaus as a group and has made sure ret Blankers, who headed Western Corporate’s public our positions as corporates are understood by the variaffairs department at the time, recalled that the politi- ous constituencies that are fundamental to our industry, cal environment created a “perfect storm” for the Cap- including the trade associations and the NCUA.” Corp failure. Blankers added: “In retrospect, we should have While many in the industry blame former NCUA always had a voice and should have been able to battle Chairman Norm D’Amours for the failure, Blankers the perception because perception creates reality.” said it’s important to recall Miller said the ACCU the political environment in operates on a philosophy Washington at the time– that corporates, as an induswhen the failures of savings try within the credit union and loans were still fresh system, need to collaborate, memories, and when Newt innovate, speak and act Gingrich and a newly electfrom a unified standpoint ed Republican majority in when it comes to broad regCongress had pledged an ulatory and legislative agenaggressive “Contract with das. America.” “The regulatory climate, “Corporates weren’t yet as well as the economic, known outside of the credit legislative and political union industry, and up until landscape, continually that point that was fine changes,” the association because we filled a backdirector said. “As a result, Francis Lee Brad Miller office role,” Blankers said. the ACCU leverages its colNot that corporates hadn’t been immune from finan- lective resources throughout the corporate network to cial problems before 1995. But when one corporate further the growth, development and interests of corfound itself in trouble, the others rallied to support it porate credit unions in serving their credit union memand regulator intervention had never before been neces- bers.” sary. Miller added that today’s economic and financial “Nobody had ever lost a dime at a corporate credit challenges make a collective corporate voice more union,” Blankers said. important than ever. However, in the case of CapCorp, politics and percep“The relationship between corporates and credit tion played as big a role as the financials, catching cor- unions is a trusted partnership, and through that partporate public affairs shops off guard. nership, corporates are uniquely positioned to use our “Most of the corporates were still under the umbrella collective voice to help the credit union movement meet of the leagues, with U.S. Central under CUNA,” Blank- the challenges and augment the opportunities to better ers recalled, “and there was no appetite to have a voice serve credit unions’ own members and attract new exclusive for the corporates. The feeling was corporates members,” he said. were wholesale institutions, and they were too hard to —handerson@cutimes.com describe and understand.” Francis Lee, currently the credit union movement, and this represents the pri- president/CEO at U.S. mary focus of the Association of Corporate Credit Unions,” Central Credit Union, served as CapCorp’s consaid Brad Miller, the group’s executive director. The ACCU represents the interests of corporate servatorship CEO. He credit unions to a wide range of constituencies, includ- recalled that the event NEW YORK, Jan. 10, 1909 — The president of the Chase National Bank today ing credit unions and leagues, regulatory agencies, leg- demonstrated the imporroundly denounced bank deposit insurance as “socialistic in the extreme.” In a bylined article published in The New York Times, A. Barton Hepburn, Chase’s president, said, “Depositors in banks do not need guardians any more than manufacturers of goods or the vendors of merchandise. The proposition is socialistic in the extreme and is paternalism run riot.” He added that enactment of deposit insurance “portends disaster” and “threatens the welfare of the entire community.” BOSTON, April 15, 1909 — The Massachusetts Credit Union Act has become Last year the state of Oklahoma became the first state to enact a deposit guaranlaw. tee plan, and several states, including New Jersey and Kansas, were considering The new law defines a credit union as “a cooperative association formed for the similar proposals. In addition, Democrats in the U.S. Congress have said that they purpose of promoting thrift among its members.” It is required that a group of at least intend to introduce federal deposit insurance legislation during the current session. seven persons apply for a charter to organize a credit union. “If one class of bank creditors is to be insured against the usual mischance of busiOnce a charter is granted, a credit union can receive the savings from members ness, why not all classes? And where is the justice of levying a depositor’s loss, for and return purchased shares, and can make loans. Further, the law requires that which he is not responsible, except in the exercise of bad judgment in the selection of credit unions be governed democratically, with each member entitled to only one vote his bank, upon other banks, which also are not responsible for his loss,” Hepburn regardless of the number of shares owned. wrote. Members are required to elect a board of directors, which in turn names a presiHepburn warned that deposit insurance would not alleviate panic withdrawals, dent and other officers. Member also must elect a credit committee and supervisory but would exacerbate them because depositors in “safe” banks would fear that their committee. The credit committee must approve all loans. Neither the directors nor funds could be used to payout depositors in failed banks. “No law could be spread members of the committees can receive compensation for their work. upon the statute books more fraught with mischief than a law for enforced guarantee (With the signing of this bill, Massachusetts became the first state in the nation of bank deposits,” he said. to pass a general statute for the establishment of credit unions. But this is not the Hepburn called proposed deposit insurance fees a tax that would force legitimate nation’s credit union law nor did it lead to the first credit union. On April 6, New business to bear the risks of speculators. “It compels the conservative banker to place Hampshire legislature passed a special act that allowed the incorporation of St. his character, standing in the community, and financial strength at the command of Mary’s Cooperative Credit Association in Manchester.) the incompetent, venturesome or dishonest rivals,” the New York bank chief wrote. In retrospect, we should have always had a voice and should have been able to battle the perception because perception creates reality. — Margaret Blankers Chase Chief assails birth of deposit insurance Massachusetts Credit Union bill becomes law www.cutimes.com Credit Union Times, December 2008 http://www.cutimes.com
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