I want to begin by thanking each and every one of you for your service. Without the dedication and commitment of all of you, our national system of cooperative credit would not exist. However, more than 110 million Americans are better off because of your work.
There are more credit union members in this country than ever before. Assets are higher than ever before. The financial soundness of credit unions coast to coast, in aggregate, is stronger than ever before. This, just 10 years after the financial crisis put the very survival of the credit union system into question. It has been quite a comeback.
We know from history that peaks and valleys are part of the economic cycle. We are currently experiencing the third longest economic expansion in history, which began in mid-2009, and are on the cusp of the longest expansion on record. We are hovering near the peak, but we know the valley looms ahead. When the next recession will come, no one knows for sure. After all, economists are famous for predicting nine of the last five recessions. But, when it comes credit unions are well positioned to be there to help your members weather the change in the economic climate.
During my nearly five years on the NCUA Board, we have advanced a regulatory framework that strikes a delicate balance between measures to ensure soundness of the Share Insurance Fund against the inevitable downturn, and expansion of opportunities to serve member needs with the capital outlays necessary to meet those needs. We have enhanced credit unions’ abilities to engage in member business lending to help grow their communities and passed an extensive field of membership rule to allow more consumers the opportunity to choose a not-for-profit financial partner.
We have also strived to take a visionary approach to the future of the NCUA itself to see what changes we need to make to appropriately supervise the credit union system of the future, and do so in a constructive and cost-efficient manner. During the past 18 months, we have taken decisive action to reorganize the agency. We are eliminating 40 percent of our regional offices and reducing our leased space by 80 percent. We are reducing the overall number of examiners while enhancing our capabilities by increasing the number of specialists in the field so we can have better peer–to-peer interaction with credit unions on specialized lending issues.
On a personal note, what I am most proud of during my tenure is that we have accomplished these changes and many more through bipartisan, or more accurately, non-partisan consensus — including all actions taken during my term as the agency’s Chairman and the current Chairman’s term. In a capital known best for discord and tribal allegiance, NCUA has been the agency that works and gets the job done. Chairman McWatters and I are committed to finding solutions to problems.
At our board meeting two weeks ago, the NCUA Board, once again, took a historic and unanimous action. We approved a $735.7 million distribution from the Share Insurance Fund, which will be made by the third quarter of this year. This is more than 15 times larger than the last distribution of $52 million in 2007. It is also more than the cumulative amount of all distributions to credit unions since the Share Insurance Fund was capitalized.
It is worth noting that while credit unions will be receiving a distribution this year, banks will be paying premiums to build up their deposit insurance fund, and, to the best of my knowledge, banks have never received a distribution from their fund.
They key driver behind all of this was our decision last fall to close the Corporate Stabilization Fund early and distribute its assets, as required by law into the Share Insurance Fund. This idea was initiated by Chairman McWatters over a year ago as a way to make distributions to credit unions earlier than the original 2021 timeline, and also to help insulate credit unions from possible dark clouds on the horizon that could actually end up forcing credit unions to pay significant premiums to shore up the fund.
Our decision to move forward on this approach has proven a wise one. Without such action, the Share Insurance Fund would have fallen to 1.18 percent at year’s end, below the statutory minimum to be considered adequately capitalized as required by law. Had we followed that path, credit unions would be facing premium assessments of $1.3 billion just to return the fund’s equity ratio back to the original 1.30 percent normal operating level. Instead, the checks will be flowing the other way.
So let’s have a little audience participation. Do you want to pay assessments or receive a distribution this year?
Everyone in the audience who prefers paying NCUA $1.3 billion in additional assessments this year please raise your hand?
Now, everyone who prefers receiving $735 million in distributions to your credit union raise your hand. I am absolutely shocked and amazed. You came to the same conclusion Mr. McWatters and I came to. And the same conclusion your president, Jim Nussle, and the CUNA Board came to last year when they supported closing the Stabilization Fund and begin returning cash to credit unions. In this case, it is much less rewarding to give than to receive.
I thank the CUNA Board for its support, because amazingly, not every national trade association supported closing the Stabilization Fund. One vigorously opposed it. If we had followed their advice, you would be paying well over a billion dollars in assessments in the months ahead.
I want to thank you all for your input and suggestions over the years. And since this will likely be my last GAC, I want to thank President Obama for asking me to come out East and join the NCUA Board and later to designate me as agency Chairman. I also want to thank President Trump for allowing me to continue working with Chairman McWatters to make the credit union system stronger for working Americans. But you, my friends, are the true guardians of the gate to the financial hopes and aspirations of tens of millions of Americans. Till your fields carefully and sustainably. God bless you, and may you and your credit union live long and prosper.