Nussle: Emergency mergers protect members, insurance fund

January 9, 2019

Emergency credit union mergers helps protect members and the National Credit Union Share Insurance Fund, CUNA President/CEO Jim Nussle wrote Wednesday in American Banker. Nussle’s op-ed shows why such mergers are beneficial to the credit unions involved, their members, and the entire credit union system.

“The indisputable fact is that by approving these mergers the National Credit Union Administration has fulfilled its mission to promote credit unions and protect the share insurance fund,” Nussle wrote. “Members of troubled credit unions will continue to receive highly valued credit union services and the broader credit union industry will not see a degradation of the share insurance fund as a result of lending concentration in a disrupted industry. This is a good outcome for all involved.”

He went on to highlight several recent examples of New York-based credit unions who ran into trouble due to taxi medallion loans being affected by ridesharing services. Those credit unions were absorbed through NCUA-approved emergency mergers, ensuring members continue to have access to financial services without affecting the National Credit Union Share Insurance Fund. 

Nussle added that it’s the cooperative nature of the credit union system that paves the way for the mergers that benefit both credit unions, as well as their members.

“What the credit union system did when these credit unions got in trouble sets us apart from the banking industry. Instead of closing the credit unions and shutting off access to credit union services, other credit unions stood up and worked with the regulators on emergency mergers,” Nussle wrote. “Emergency mergers are rare and always done with extreme care, making sure that merging credit unions makes sense for all impacted members and helps protect the National Credit Union Share Insurance Fund. Had these mergers not been approved, all credit unions — and their members — would have borne the cost of the eventual failure of the medallion credit unions.”

Nussle also pushed back against a recent bank attack that claimed the latest of these mergers, Pentagon FCU with Progressive FCU, will lead to PenFed changing its mission and reach, despite PenFed’s statements to the contrary.

“[Bankers] are going to try to convince Congress that this move should jeopardize the credit union tax status. But nothing could be further from the truth…PenFed already has a presence in all 50 states as a multiple-bond credit union. And PenFed leaders have said publicly that the credit union has no plans to change its membership focus,” Nussle wrote. “Frankly, it is hard to take bankers seriously when they make any claim regarding credit unions’ tax status — after all, banks just received a $26 billion tax break. But in this case, there is simply no connection…The concept of field of membership and common bond was originally a tool to determine creditworthiness, developed at a time when credit scores and other more sophisticated creditworthiness tools did not exist.”