As Prepared for Delivery on June 17, 2021
Good afternoon! It’s my pleasure to be here today — all the more so because I welcome the opportunity for an in-person meeting after the last year of video meetings from my home office. Our modern technological tools are a great convenience, but I think most of us will agree they’re no replacement for the connection we get from gatherings like this.
That’s only one of the lessons we can take from this last year. I was reviewing the conference agenda and I saw that you all had a session just before lunch titled “Transitioning from Risk to Resilience.” That title stood out to me, because in five simple words it sums up the journey we’ve taken since March 2020, doesn’t it?
Think back to where we were this time just 12 months ago. In June of last year, the COVID-19 pandemic was raging, with case numbers, hospitalizations, and deaths rising rapidly all over the world. Uncertainty and anxiety were rampant, as medical professionals were still struggling to identify effective treatments, and it was believed that a vaccine was likely years away.
Meanwhile, the pandemic dealt a crippling blow to our economy, with a sudden and massive increase in unemployment — I’ll remind you the jobless rate was over 11 percent in June of last year — coupled with a drastic decline in GDP. Adding to the challenge, we were facing a serious moral reckoning in the weeks after the killing of George Floyd in Minneapolis, as people flooded the streets to demand change. In the most extreme cases, our cities faced civil unrest and even violence.
Our nation has faced many challenges in our lifetimes, but few compare to what was unfolding before our eyes this time last year.
The fact that, just 12 months later, I could be standing here with you, fully vaccinated, and we can talk about a gradual return to normal – well, if I had suggested this would be possible last June, you probably would had me locked away.
So, to talk about moving “from risk to resilience” is a timely lesson, because we’re living it today. And when you look at some of the trend lines for credit unions we’ve seen in the last few weeks, we see proof positive of what that resilience means in the real world.
For example, in the last quarter federally insured credit unions reported net income growth of $11.3 billion, an increase of 134.9 percent over the year ending in the first quarter of 2021. Insured shares and deposits rose $286 billion, or 22.4 percent, to $1.56 trillion over the same period. We’re also seeing steady loan growth and lower delinquency rates. These are strong performance numbers that we can agree reflect a recovery in progress.
Likewise, we’re seeing positive indicators in the broader economy, with a solid jobs report last month, strong consumer spending, a vastly improved GDP outlook, and other reassuring signs that the worst is past.
Obviously, we still have a long way to go, but we also have a lot to be optimistic about, and it’s absolutely appropriate that we should celebrate this progress — which, again I’ll remind you, was virtually unimaginable just 12 months ago.
But at the same time, we should not allow that progress, and our urgent desire to “return to normal,” to lull us into a sense of complacency. Because the reality is, we still have a lot of work to do to rebuild after the challenges of last year – because for too many people in our society, things are still a long way from normal.
For example: when the pandemic struck and that national emergency was declared in March 2020, one of the things we did at the NCUA under my chairmanship was to shift to an off-site work posture. This was challenging, but we made it work.
But as I try to remind people on a regular basis, so many other people did not have that option. A lot of them had to keep showing up at work, at a time when the virus was spreading widely and rapidly; many of them fell ill. A lot of people simply were out of work when their workplace was shut down, often by state or local government edict. Even among those who were fortunate enough to hold on to their jobs, many saw their hours and wages reduced.
While a lot of us were able to work from a remote posture and do our jobs effectively, with perhaps some inconvenience, a great many of our fellow Americans faced serious, serious challenges, through no fault of their own.
Let’s be blunt here: a lot of us were blessed in that we didn’t have to miss a paycheck, and we did not have to truly bear the full brunt of the economic contraction. But there are a great many people who are still not back to “normal” after what was lost last year, and we need to make it a priority to help them regain their footing in this recovery.
So, yes, our economy is recovering, but the job is nowhere near finished. And credit unions – with the industry’s long-standing mantra of “people helping people”—can and should play a key role in that recovery.
Of course, in many respects, I recognize that you all are well aware of this, because credit union leaders and employees were on the front lines as last year’s economic challenges unfolded. You saw that many of your members were struggling, and you took action to help. One of the great success stories of this last challenging year has been how credit unions stepped up to respond to ensure that your members had ongoing access to financial services, credit and other needs.
So, the question is, what can we do now to continue that record of success in the recovery? I have argued that we need to make financial inclusion a top priority for the financial services industry as a whole. You might have even heard me say that “financial inclusion is the civil rights challenge of our generation.” I say it all the time, and I’ll keep saying it, because it’s that important.
In fact, it was owing to that commitment that I led the charge to create NCUA’s ACCESS initiative, which stands for “Advancing Communities through Credit, Education, Stability & Support” last year. This is an agency initiative to develop policies and programs to enhance inclusion within the credit union system, by expanding access to financial services; financial capability training for underserved and diverse communities; and employment opportunities. I encourage you all to keep an eye on that program and the tools it makes available as you make financial inclusion part of your own business strategy.
Now that I’ve handed over the NCUA board chairmanship to my colleague Todd Harper, I’ve been asked how that changes my role on the board. And to be honest, the answer is: not that much, as far as I’m concerned. I still have the same priorities I had when I was serving as chairman.
So, in terms of what credit unions should expect going forward, regulatory reform will still be at the top of my list. Over the last year, we took numerous steps to provide relief to help your institutions weather the pandemic storm, and we will continue to look to other forms of relief that may be needed.
We’re also watching closely to determine what we may need to do to support smaller credit unions and minority depository institutions in the months to come. Last year’s events left many of these institutions more vulnerable, and so closures of financial institutions, with the attendant systemic risks, are always a possibility.
Should that occur, we want to be prepared to respond with prudence. My preference is always to save institutions rather than merging them but will respond in the most appropriate way to ensure the safety and soundness of the larger system — again, that’s a lesson in resilience.
I’ll also be looking at what we can do to streamline and simplify the chartering process for new credit unions. Last year, the NCUA had only one new charter, and only two are planned for this year. My board colleague Kyle Hauptman, who joined the agency this year as Vice Chairman, has said that one of the greatest threats to the system of cooperative credit is the lack of new entrants to the marketplace. I agree with that assessment, so we’re going to be looking at ways we can open up the pipeline, so to speak, and hopefully encourage more charters in the future.
I’m also going to looking at what we might do to address the affordable housing crisis, which is appropriate since June is National Homeownership Month. According to a recent analysis from Freddie Mac, the U.S. housing inventory is an estimated 3.8 million homes short of what we need to meet the current demand. That shortfall is most acute in the supply of “starter homes” – that is, the entry-level, single-family houses that are needed for younger and first-time buyers. As a result, many of these young buyers find themselves delaying their entry to the housing market. Chairman Harper recently appointed me to represent the NCUA on the board of NeighborWorks America (opens new window), a Congressionally chartered non-profit organization dedicated to increasing access to affordable housing in communities across the nation. So that’s an issue I’ll be focused on working with credit unions to see how we can address that deficit.
And finally, I’m looking very seriously at what more we can do to develop a constructive regulatory framework for financial technology. I’m very pleased to see that this year’s conference includes so many presentations on fintech products and services, because I believe these innovations are going to play a vital role in the industry’s future. Under my chairmanship the NCUA last year, we established a new Office for Financial Technology and Access to focus on the regulatory and supervisory issues related to fintech. We recognize these technologies are going to play a growing role in financial services, so we want to ensure they’re effectively integrated to best serve the needs of credit unions and your members.
I’ll be especially interested in seeing how we can deploy these tools to help the under-served, the marginalized, the unbanked, those without access to financial services. I want to encourage you all to explore the potential and possibilities of these tools, and as a regulator, I want you to have the flexibility to do so, and I don’t want our examiners penalizing you for putting these digital tools to work on behalf of your members.
I recognize this is an ambitious list. However, I know we can do all of these things and more, while continuing to ensure the safety and the soundness of the industry.
I began this talk speaking about the challenges of “risk and resilience,” and what helps us to navigate those challenges is “optimism.” During the height of pandemic, through all the uncertainty, I always sought to project a sense of careful optimism, because I understood how easy it can be to succumb to anxiety and negativity in difficult and uncertain times.
And now that we’re seeing the clouds part, I’m still optimistic – but, as I noted, I also want to take care that we don’t succumb to complacency or self-congratulation when there is still so much work to be done to restore what’s been lost over the last 18 months. We should be prudent and realistic about the challenges we face. As Bob Iger, the CEO of Disney, has said: “One of the most important qualities of a good leader is optimism, a pragmatic enthusiasm for what can be achieved.”
“Pragmatic enthusiasm.” That’s a reminder that we always want our optimism to be grounded in a sense of reality – especially now, because we still have work to do in terms of coping with the pandemic’s effects and restoring the economy, and there are always other risks we need to prepared for. But if we approach those risks with a true sense of resilience, we’ll find that we can emerge, as we have from the challenges of the last year, much stronger. Thank you very much, and I’ll be happy to take any questions you may have.