CUNA Governmental Affairs Conference February 26, 2001

Thank you for that warm welcome. I would like to thank Dan Mica and his staff for their hospitality during this Government Affairs Conference. In addition I would
also like to thank each and every credit union that has taken the time to call or write. As a former CUNA staffer, I have often been on that side of the podium. I hope that this is the first of many speeches that I will have a chance to deliver to you from this side of the podium.

The CUNA Governmental Affairs Conference is a time when credit union volunteers and staff come to our nation's capital to make their voices heard. It is also a
time for you to assess what is on the mind of your government officials and create an environment where ideas are exchanged.

As the newest member of the NCUA Board, I stand before you with a sense of humility and of purpose. I have spent much of my adult life dedicated to serving the
credit union movement in one capacity or another. From my early days of running the private deposit insurance trade association, NASIC to my time at CUNA to the formation of the National Association of State Chartered Credit Unions, I do know credit unions. It's also a bit of a family business as my father, Ted, worked at NCUA in the early 80's. It gives me a great sense of pride knowing that he created the "NCUA" logo that adorns our stationery and is etched on the door that I walk through every morning on my way to my office.

My experience has afforded me a deeper understanding of the movement's heritage, its history and most important, the cooperative values set forth by Filene and
Bergengren. These values are still carried forth in credit unions across this country and need to be preserved in the future.

Since taking office, I have often been asked to expound upon my vision of the National Credit Union Administration where it has been and where I see it going. My
Executive Assistant Mike McKenna and I often discuss this very thing. I think that the new buzzword is "vision". And like most buzzwords, vision is overused and misunderstood. Vision is useless unless those that you work with share and understand your vision. With that in mind, I hope that you will share my vision because without support, a vision cannot become reality.

In short, my vision is for NCUA to become better at providing quality regulatory service to credit unions. Our primary objective should be to maintain a high level of
member confidence in this industry. I want to make this agency a better provider of valued service to you and, in turn, to your members.I realize that you want to know my views on the issues affecting credit unions. Critical issues that your credit unions will face as we head into the 21st century,

With that in mind, I would like to address three topics:

I also want to share my vision of what the agency can do to be all that it can be.

Incidental Powers

Our Incidental Powers regulation has the ability to help credit unions sustain and enhance a higher level of service to your members. It also requires credit unions to
weigh new business opportunities with potential inherent risks. That's right, risks. For with every new opportunity, there are risks. All too often when we are in
the mode of pursuing new ventures we fail to be prudent in weighing those risks. And after the newness has worn off, we are left with a project that becomes more
threatening. It is our position to give credit unions the flexibility to provide services that benefit your members.

Now, it is important to recognize that most of the powers advanced in the regulation have already been approved through legal opinions from our General Counsel's office. Some of the areas that will benefit credit unions include: electronic financial services, excess capacity, financial counseling services and finder activities.

Let me share with you a quote that I read the other day regarding incidental powers. The story appeared in the American Banker newspaper which quoted someone as saying ... the new rule "is going to completely benefit consumers because it provides greater choice and more competition. Any time you have greater choice and
more competition it usually means lower prices and better services."

Sounds like it came from a credit union representative or a member of the NCUA staff doesn't it?

Interestingly though, the quote came from a spokesperson of a large banking trade association. It was in response to the banks calling for increased incidental powers from the Federal Reserve. But the quote really can be applied to our regulation as well. Increased choice usually does result in lower prices and a better deal for the consumer, or in your case, the member. I am convinced our Incidental Powers regulation will help credit unions help their members. I anticipate the Board will issue a final incidental powers rule this summer and the rule will be effective 30 days after that.

International Branching

My second issue is that of International Branching. As technology continues to reduce barriers between states and nations, credit unions have expressed an interest in
establishing branches in foreign countries. Twenty years ago, international branching meant the physical presence of a brick and mortar facility, Today, brick and mortar is not needed to establish a branch in another country.

The initial concern was (and still is) from a standpoint of safety and soundness. What happens in a worst case scenario if the credit union experiences financial trouble? What impact could this have on the share insurance fund? As someone who doesn't like to reinvent the wheel, I looked at some of the guidelines used by our fellow financial regulators. The banks have successfully used the Federal Reserve's Regulation K.

I would support the ability of state chartered credit unions to branch internationally if approved by their state regulator. I would also support this same authority for federal credit unions.

NCUA/Credit Union Advisory Council

My last issue is one that is near to my heart.

As one who considers himself a good listener, I am interested in hearing what you; the credit union movement has to say on topics of importance. I've often told our staff that I want to hear what they think, not what they think I want to hear. Good listening is truly an art.

The ability to communicate has always been a valuable tool. When explorers first set out on a mission, they would take the time to chart their course, noting any dangers. This allowed subsequent travelers to avoid these dangers. And, in turn, mankind benefited from good communication.

In an effort to find out what is on your mind, today, I unveil for the first time my proposal to establish a NCUA/Credit Union Advisory Council.This informal panel would meet to address the current issues of concern and the positions of both the regulator and the regulated. The Advisory Council would be comprised of credit unions of all sizes and geographic locations.

To accomplish this, I plan to propose a 12 -person group, which breaks down as follows:

The group could meet in open and closed sessions. The members would serve without compensation. However, to encourage the participation of small and large
credit unions, the agency would reimburse for reasonable travel costs when necessary. The agenda would be up to the discretion of the advisory group-- no topic should be off-limits.

It is my hope that this group would give the NCUA a better insight on issues important to the credit unions they represent. Using my previous example of explorers, this will allow credit unions to better map out their future.

The input of the Advisory Council could be invaluable in terms of understanding the impact of proposed regulations. It could also serve to shorten the comment time
needed before implementing a final rule.

A VIEW OF THE AGENCY'S RESPONSIBILITIES

In addition to these three issues, I also want to convey my sense of what is needed for NCUA to best fulfill our mission to the credit union movement. I call it the P - R - 0 theory, PRO, an acronym which stands for Professionalism, Responsiveness and Observance. After all, where would the credit union system be today without another acronym to learn?

Professionalism includes respecting those being regulated. Respect should be practiced at every level -- between board members, between board members and staff, between staff and credit unions and between examiners and credit unions. As I learned from my parents early on, "respect and good manners don't cost anything" -- in fact they are priceless.

Responsiveness recognizes that technology is our best weapon. Computers and the Internet have allowed us to scratch the surface on being a more responsive agency. But we must do more. And we can't reach our potential by standing still -- we must continue to move forward by embracing new and available technology. This could include more off-site exams and better risk analysis.

And lastly, Observance. This is where our safety and soundness concerns come into play. As stewards of the public trust, the agency needs to remain vigilant in our
protection of credit union deposits while also remembering that with every new product delivered to a credit union member, there may come some risk. We need to remain observant while not being risk-averse. In doing so, the agency needs to be willing to "think outside the box."

With that in mind, I consider the statement, "that's the way that we've always done it," as the 8 most dreaded words in the agency's vocabulary. These are exciting times for both the agency and the credit union movement. It is our challenge to use these events as a springboard for new initiatives and bold action.

As the newest member of the NCUA Board, I look forward to meeting these new challenges. But most of all, I look forward to working with the credit union movement in a way that creates prosperity for your members while preserving trust in our system and service to your members.

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