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Conference 7.286::dcu

Title:	DCU
Notice:	1996 BoD Election results in 1004
Moderator:	CPEEDY::BRADLEY

Created:	Sat Feb 07 1987
Last Modified:	Fri Jun 06 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1041
Total number of notes:	18759

521.0. "Boston Globe CU et al." by AOSG::AOSG::JMARTIN (Joseph A. Martin, Alpha VM) Wed Apr 08 1992 12:40

	   The Boston Globe, Monday, April 6, 1992, page 16
	     Credit unions get extension for US insurance
	     State tells Globe's, and others, to improve
			 -------------------
			 By Mitchell Zuckoff
			     Globe Staff
			 -------------------

Regulators have extended until December an order that all
Massachusetts credit unions obtain federal deposit insurance, but
already more than two dozen have been told they also must improve
their finances and business pratices or risk closure.

Among them is the Boston Globe Employees Credit Union, which has
attracted the particular interest of state and federal regulators as
they push financially troubled credit unions toward federal insurance.

Of 167 state-chartered credit unions, 77 have yet to receive insurance
from the National Credit Union Administration, a federal agency that
insures deposits up to $100,000.

Nearly two-thirds of the 77 have not applied or not received word on
their applications.  But 29, including the Globe credit union, have
been told by federal regulators they will not receive federal
insurance unless they improve their finances and business practices.

For now, deposits in those credit unions remain fully insured by a
private, industry-sponsored insurer, the Massachusetts Share Insurance
Corp.

But state banking commissioner Michael Hanson last year mandated that
all Bay State credit unions obtain federal insurance or risk closure.
Hanson originally planned to take action this spring, but last week
said he has extended the deadline until December.

Hanson's drive to require federal insurance for Massachusetts credit
unions was prompted by the December 1990 collapse of an
industry-sponsored deposit insurer in Rhode Island.  The result was
the sudden closure of 45 institutions, most of them credit unions,
affecting 500,000 Rhode Island depositors with $1.5 billion in
deposits.  A statewide financial crisis lingers today.

In general, Massachusetts credit unions are financially stronger than
their Rhode Island neighbors, and the Massachusetts insurance fund is
healthier than its Rhode Island counterpart, with a $50 million
balance.  "But there isn't a state fund anywhere that could handle a
system-wide collapse," Hanson said.

Hanson refused to comment about the Globe credit union or any other
institution, but he said that no exceptions will be made to his
policy.  He already has removed and replaced the entire 11-member
board and president of the Bridgewater Credit Union, whom regulators
said were opposing the move to federal insurance.

"We are not asking them to do this, we're telling them," Hanson said.
"What happened next door [in Rhode Island] isn't going to happen
here."

The Globe credit union, a mid-sized institution with $11.6 million in
assets, has been trying to meet Hanson's demand since last fall, when
its application for federal insurance was "deferred."  By deferring
the Globe credit union, federal regulators refused to grant the
insurance but agreed to reconsider the application if the credit union
improves its finances and practices.  Although the credit union is
located in the newspaper company's building, it is owned by Globe
employees.

The most immediate problem for the Globe credit union is too little
surplus capital--the cushion of money that allows credit unions to
withstand losses from bad loans.  Manager Gene Farrell Jr. said there
is surplus capital of $234,000, or about half the amount needed to
satisfy federal regulators.

The credit union might be able to obtain the additional money as a
long-term, no-interest loan from its present insurer, the
Massachusetts Share Insurance Corp.  However, that money won't be made
available until regulators resolve concerns about the Globe credit
union's board of directors.

State and federal regulators say that even if a credit union takes the
proper steps to qualify for the additional capital, it could be denied
federal insurance, closed or merged out of business on the grounds
that the way it is being run does not meet broad "safety and
soundness" rules.

The Globe credit union attracted regulators' interest after a January
election of the board of directors, at which several members were
elected whom regulators consider hostile to efforts designed to
improve the credit union's finances.

The capital-enhancement effort, put into place by Farrell with the
support of federal and state regulators, includes a tight rein on
loans, higher fees and a lower interest rate on deposits--it fell
Wednesday from 4.25 percent to 4.1 percent.

In contrast, several members of the credit union's board have been
outspoken in support of higher interest rates on deposits, low fees
and lower interest rates on loans.  Several directors also have made
no secret of their disdain for Farrell and his regulator-backed
program.

"I'm not really happy with the present management, but we're held
captive to it until we get the federal insurance," said board member
James O'Sullivan, a pressman elected to the board last year.  "When
your hand is in the dog's mouth, you talk nice to the dog."

Federal and state regulators say they are withholding a decision on
the Globe credit union until they are convinced that the board is not
simply playing along with the current program until federal insurance
is granted.

T.R	Title	User	Personal Name	Date	Lines
521.1	"Nice doggie, nice doggie."	AOSG::AOSG::JMARTIN	Joseph A. Martin, Alpha VM	`Wed Apr 08 1992 12:41`	33
	>>Massachusetts Share Insurance Corp. However, that money won't be made >>available until regulators resolve concerns about the Globe credit >>union's board of directors. >> >>State and federal regulators say that even if a credit union takes the >>proper steps to qualify for the additional capital, it could be denied >>federal insurance, closed or merged out of business on the grounds >>that the way it is being run does not meet broad "safety and >>soundness" rules. To me the biggest revelation in the article is that regulators who would never think of intruding into the PROCESS of CU elections have no qualms about voiding the OUTCOME of CU elections. I realize that these are state-chartered institutions (unlike DCU), but DCU lives in the same "regulatory climate" and, in fact, deals with the same NCUA which is "deferring" insurance to some of these CUs. Maybe it's too soon to forget Marx and Engels sneering at "bourgeois liberty". A surplus capital of $234,000 divided by assets of $11,600,000 is a 2% ratio. The Globe CU manager says they're shooting for twice that, 4%. Why is Mr. Cockburn going for 8%? Correct me if I'm wrong, but DCU presently has a capital/assets ratio around 3%, down from a pre-pillage 5%. Why the 8% goal? It's an important question, since that goal is going to drive almost every substantive decision that the financial professionals make and propose. 8% means bank-like spread between deposit and loan rates, as well as endless invention in fees. Even if the ties didn't influence me, it's a good thing that most of the Real Choices candidates wore them for their pictures. They can show the pictures to the NCUA as a demonstration of their rehabilitation to banker-like respectability. ;-) \Joe
521.2	could reduce expenses	SLOAN::HOM		`Wed Apr 08 1992 14:22`	38
	Another way, albeit a minor one, to improve the surplus is to reduce expenses. In the latest DCU newsletter, Chuck Cockburn indicated that he has hired 1) a new General Counsel ("experienced with credit unions"), 2) a new accounting firm. Both firms are located on the West Coast. O'Rourke & Clark's address is 200 Valley Drive Brisbane, CA. (The local address for ballots was probably picked to shorten mail delivery time.) In defense of Chuck, I can understand his desires to use firms that he is familar with (I assume from his Rockwell days). Perhaps he will consider using local firms in the future. I and other Real Choices candidates certainly would push for use of local firms. Given this statement, I question whether the statement by Michael J. Sacher of O'Rourke is really accurate or not: "Michael J. Sacher, CPA Vice-President O'Rourke & Clark Accountancy Corporation [ text removed... see note 502.63 for full text] As you are aware, O'Rourke & Clark Accountancy Corporation has been appointed Tellers of Election. We are an independent CPA firm with no interest in the outcome of the election." Gim
521.3	Local to who?	BSS::C_BOUTCHER		`Wed Apr 08 1992 14:53`	6
	re:2 What do you mean by "local firms"? Local to who? DCU is a credit union that covers a wide geography. Thanks
521.4	Local to DCU HQ	RGB::SEILER	Larry Seiler	`Wed Apr 08 1992 15:10`	11
	DCU HQ is where most of the records are kept and where most of the people the auditors need to see are located. New England is also where most (though not all) of the Board meetings are held, and it is likely that it will always be where a majority of the Board members live and work. DCU does indeed cover a wide geography, and its operations should become more geographically inclusive. However, DCU headquarters seems to me to cover a pretty small territory, and it probably always will. Enjoy, Larry
521.5		AOSG::GILLETT	Petition candidate for DCU BoD	`Wed Apr 08 1992 15:25`	11
	re: .4, By the same argument, it would make little sense to use a firm in Boston if the headquarters were located in Los Angeles. The only real issue I see here is finding the right firm in the area. If that can be done, then having a firm in California doesn't make much sense to me. ./chris
521.6		INDUCE::SHERMAN	ECADSR::Sherman DTN 223-3326	`Wed Apr 08 1992 16:00`	4
	It could also be that Chuck chose these firms because he knew and trusted them. If the cost of doing business with them is not significantly different, trust could be the overriding factor versus geographical location.
521.7		CSC32::S_MAUFE	society needs a cat proof keyboard.	`Wed Apr 08 1992 16:53`	10
	let me check I understand, the same firm that is tallying the election has just been appointed auditors to the CU, and will be picking up fees? Sure hope those chinese walls are strong, Simon
521.8		PATE::MACNEAL	ruck `n' roll	`Wed Apr 08 1992 16:57`	6
	� let me check I understand, the same firm that is tallying the election � has just been appointed auditors to the CU, and will be picking up � fees? I believe that they were selected prior to the election and that tallying votes in an election is part of their duties.
521.9		GUFFAW::GRANSEWICZ	REAL CHOICES for a real CU!	`Wed Apr 08 1992 17:31`	7
	RE: .7 My understanding is that they do not perform the actual tally. They audit the process, ie. ensure its integrity and accuracy. I believe there is another company involved in processing the ballots, hence the "and their representatives will have access to the ballot."
521.10		SLOAN::HOM		`Wed Apr 08 1992 17:36`	26
	-.2 may be incorrect. The bylaws (as of January, 1992) state that tellers are appointed by the president after nominations are closed. The need not be the same firm as auditing firm. What's interesting is that the President appoints the Tellers and the Tellers in term hire another firm to to do the vote tabulation. BYLAWS Federal Credit Union, Charter No- 23521 (A corporation chartered under the la,, of the United States) Article Vi. Elections Section 2. ... and when nominations have been closed, tellers shall be appointed by the president, ballots shall be distributed, the vote shall be taken and tallied by the tellers, and the results announced.
521.11		AOSG::GILLETT	Petition candidate for DCU BoD	`Wed Apr 08 1992 17:37`	17
	Process as I understand it: DCU: Hires accounting firm Hires tally/source firm (?) Sources ballot material Tally Firm: Receives ballot, handles count Accounting Firm: Oversees processing, audits the results, submits results to DCU. All pretty standard stuff. ./chris