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A special message from Mary Martha Fortney, President and CEO,
April 7, 2008
 The U.S. Treasury stunned the financial services industry on March 31 when it introduced a proposal to reorganize the United States financial regulatory structure. Among the changes suggested are combining the NCUA with other federal agencies, eliminating the federal credit union charter and requiring federal supervision of state-chartered banks.
The credit union system strongly opposes Treasury’s proposal, and NASCUS is seriously concerned about the proposal as well. There are good reasons for the opposition. The plan would eliminate credit union dual chartering – and state bank dual chartering for that matter – institute a uniform federal charter for financial institutions and eliminate a separate credit union regulator.
The U.S. Treasury must understand that while the current regulatory system was probably not deliberately engineered, it has provided important competition, diversity and innovation for the nation’s regulators and financial institutions. The credit union dual chartering system has worked effectively for nearly 100 years. Dual chartering has remained viable in the financial marketplace because of the distinct benefits provided by each charter.
The dual chartering concept is based on the important foundation of competition and choice between state and federal charters. Disruption of the current structure would have various negative impacts. It would diminish state and federal regulator cooperation, tip the balance of power between states and the federal government and minimize the economic benefit and enhanced consumer protections available to states through state-chartered institutions.
NASCUS is also concerned about the proposal’s preemption of state authority over state-chartered institutions. It is the proper role of state governments and state regulators to determine what is appropriate for their state-chartered institutions. A push to federal uniformity threatens the entire dual chartering system and dangerously preempts the balance of state and federal government. NASCUS and others in the credit union system would oppose any efforts to eliminate the state credit union charter.
Clearly, these changes would affect the way credit union members are served and credit unions are organized. There is concern that the federal income tax-exemption would be in danger and that the unique, democratic nature of credit unions would be altered.
At this point, Treasury’s plan creates far more questions than answers for the state credit union system. A lot of discussion and action will occur in the future to ensure the current regulatory system is maintained and enhanced, rather than jeopardized by federal uniformity.
NASCUS will continue to review the proposal and work with Treasury and others to ensure that that state authority is maintained over state-chartered institutions. Treasury must recognize the value and importance of the current credit union regulatory system and the importance of dual chartering.
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