ARLINGTON, Va. – When it comes to the independent study recently released by Prof. Lawrence White and sponsored by Boeing Employees' Credit Union, "Caught in a Regulatory Vise: The Peculiar Problem Faced by Federally Insured State Chartered Credit Unions," NASCUS and NAFCU agree the study was a successful tool to trigger public debate on NCUA's overhead transfer rate. Beyond that point, the associations' positions on the study's findings diverge. While NASCUS applauded the study's key finding – that the regulatory structure of the NCUA and the NCUSIF places the agency in a position of a conflict of interest and forces federally-insured, state-chartered credit unions to cross-subsidize federal credit unions (CU Times, July 11)- NAFCU asserts the findings are inaccurate. There are two ways to evaluate the results of Dr. White's study, says Dr. Tun Wai, director of research and analysis for NAFCU, and depending on which approach the evaluation takes will provide a different perspective on the study's findings. "Theoretically, if the determination of where the NCUA's expenses should be allocated is done by the agency, there could be a potential for a conflict of interest because the person who determines where the money should be allocated is the same person who controls the NCUSIF," Wai said. "In actuality, however, the NCUA in determining insurance fund expenses is in an excellent position to make that determination. If not NCUA, who else would do it?" Wai asked. "That's the way Congress set the NCUSIF up. They didn't set it up so that there would be an independent insurance agency and an independent federal regulator like there is on the banking side." Wai offered that Dr. White's study also doesn't take into account training-related benefits NCUA provides state credit union examiners in regards to the share insurance fund such as laptops and travel expenses. "These benefits carry value. I don't know of any other federal agency that gives these types of benefits as a blank check," said Wai. "There is a service being provided and costs involved in the NCUA helping to make the safety and soundness of the entire credit union movement remains strong," he said. As for White's claim that state-chartered credit unions are being overcharged about $31 million annually, Wai said state-chartered credit unions are actually receiving a net discount for their coverage of $3.1 million, based on data from 1990 to 2000. Dr. Wai also took issue with White's contention that "the NCUA's actions do not represent a beneficial form of regulatory competition." Wai argued that, "Just because a different fee is charged federal vs. state credit unions, isn't prima facie evidence that there's a lack of competition." Last year, NCUA raised the overhead transfer rate to 66.72% from 50%, but the agency lowered operating fees to federal credit unions 20.38%. Instead, Wai said, a more valid indicator that there is competition is the availability of the choices of charters credit unions can select and whether that choice is being exercised. "There is no requirement in federal law that state-chartered credit unions have to be federally-insured and obtain share insurance from the NCUSIF," said Wai. Wai acknowledged that not all states allow state-chartered credit unions to be privately insured and that these SCCUs therefore rely on the NCSIF. "That is an imposition made by state legislators, not federal law," he said. "If state-chartered credit unions have a problem with that, they should address it with their state legislators." "The assumption that the overhead transfer rate is incorrect and that the charge is helping federal credit unions is assuming it was in equilibrium to start with. That is not the case. The NCUA is trying to play catch-up. According to the agency, the overhead transfer rate should have been higher a long time ago," said Wai. Like NASCUS, NAFCU too has been concerned about the methodology Deloitte & Touche is using in its study. In particular, the association is interested in the various weights Deloitte & Touche is using, and their decision on what are insurance and non-insurance related activities. `This is a difficult decision to make," said Wai. "That's why the instructions on the Deloitte & Touche survey are so critical." He reiterated NAFCU's support for the Deloitte & Touche study. "It's very clear that NCUA is giving free rein to Deloitte & Touche to ask outside parties their views on the study," said Wai. Despite reaching different conclusions from Dr. White's study than NASCUS, Wai supports the publication of the study. "Just because someone doesn't have the full information on an issue doesn't mean they can't have an opinion. Public debate on an issue is always a good thing." -

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