Wednesday, December 23, 2015

The FDIC and Miracle on 34th Street


Well, I finally heard back from the FDIC!  The official letter of response was a tour-de-force of precision and clarity.  No room was left for doubt nor argument.  The logic was crisp and well-reasoned; the legal opinion definitive; even the letterhead oozed with quiet, self-assured authority.   Without question the gig was up, fini, chapter closed.  Mr. Robert C. Fick, legal counsel of the FDIC, had written the final scene in the Credit Union remake of Miracle on 34th Street.  And, as the cameras panned toward the heavens, the screen faded into the credits…

Huh? What? Miracle on 34th Street??  Oh, you came in late; well, let me bring you up to speed.

Awhile back, several folks connected with the National Association of State Credit Union Supervisors (NASCUS) ventured over to the FDIC – the “other” federal deposit insurer – to talk about capital, risk measurement, insurance, state/federal cooperation, corporate governance and more!  We met with FDIC Board member at the time Tom Curry, who in a former life was a Massachusetts’ financial regulator.  Mr. Curry is a very bright man, well-tempered by hands-on-in-the-trenches practicality, and a broad-based, all-institutions experience.  Mr. Curry is also extremely well-seasoned in “real politick.”

The discussions were terrifically beneficial, the insight
enlightening.  These days so many of our regulatory “experts” are one issue, one trick ponies with a very thin range of understanding.  It’s always wonderful to stumble onto an impresario – someone who grasps the subtleties of the larger circus!  Mr. Curry is such a man in the financial regulatory world.  Time well spent!

On the issue of whether or not credit unions could qualify for FDIC coverage, Mr. Curry was certain and convincing in saying the answer was “no.”  Despite the fact that the FDIC insures all sorts of commercial, community, industrial, cooperative banks and several flavors of thrifts; all in the room who had done some prior legal research (including us!) agreed with his opinion.  Still, it was intriguing to hear that the actual question had never officially been asked.  Mr. Curry indicated that a letter of request sent directly to the FDIC Chairman would be the proper channel and protocol if we wanted "to press the issue".

Thought about it for a couple of weeks.  Maybe it was the time of year.  After all, it was Christmas, the season of hope, the season of joy and giving.  Maybe it was because I’d just finished watching the 1947 move classic Miracle on 34th Street.  Maybe it was one too many glasses of Albuquerque Gruet Champagne!  At any rate, wrote up a letter of request to the FDIC and, right before Christmas, dropped that sucker into the mail....

For those of you who aren’t old movie buffs, guess a synopsis of Miracle on 34th Street would help at this point.  Storyline is that Macy’s Department Store in New York City hires an elderly gentleman as an in-store Santa Claus.  The new employee proves to be a smash with the kids and creates a publicity sensation for Macy’s by sending parents to other stores (including Macy’s arch rival Gimbels!) when better bargains can be had.  All goes well until Macy’s personnel department checks up on Santa’s background.  He claims his real name is Kris Kringle, home address North Pole, and is adamant that he truly is Santa Claus!  You get the drift.  The evil Human Resources director decides to can Mr. Kringle by having Santa legally committed.

The final, dramatic scenes in the movie occur in a courtroom where the State of New York is trying to prove mental incompetence.  Santa proves to be the State’s best witness as he firmly, but politely, sticks with his story. The defense attorney rallies with testimony from Mr. Macy who supports Santa, fearing bad publicity; and with the State prosecutor’s six year old son, who testifies that “his Daddy” believes in Santa Claus.  “His Daddy” when asked in court directly by his son, of course has to agree that "there is a Santa Claus"!  The judge, however, demands testimony and support from a “fully competent, authoritative source.”  
That’s achieved at the eleventh hour when the U.S. Postal Service, an agency of the Federal Government, weighs in by personally delivering 150,000 letters addressed to "Santa Claus, North Pole" directly to Mr. Kringle at the courthouse.  Decision for the defense, Santa does exist, case closed!

At this point, if you’re thinking “I don’t get it!”; consider this. Here’s the most important sentence from Mr. Fick's - the FDIC legal counsel - letter: “Since a credit union is neither a bank nor a savings association, it is not a “depository institution” and, therefore, is not eligible for federal deposit insurance from the FDIC.”  Still in the dark?  Well, the bad news is that credit unions aren’t currently eligible for FDIC insurance; but the good news is that we’re not eligible according to the FDIC because we’re not a bank!

Our detractors and political opponents always claim that there is no difference between banks and credit unions (they probably tell their children and grandchildren there isn’t a Santa Claus either!).  Well, we now have the chief legal counsel of the FDIC, a federal agency and a “fully competent, authoritative source,” officially ruling that credit unions are different and are certainly not worthy under Federal law of being considered banks.  What a wonderful Christmas present!!  Copies of the FDIC opinion letter are, of course, available should you wish to send one to each member of your Congressional delegation.

Folks, there is a Santa Claus, “miracles” do happen, credit unions are in fact different - and we are definitely not banks!!

One final thought.  There was much breathless gossiping and hand wringing when news “leaked out” of our FDIC application request.  Quite a few pundits and several politicos jumped to an absurdly wrong delusion.  

So, just for the record, hope no one will miss the point when they hear about our pending application for membership in 
the American Bankers’ Association (ABA)…

(Ya reckon they're gonna let us join?!)

Get the picture?…It’s a Wonderful Life!!


Patrick Keefe said...

Jim: Nice holiday connection. Please send me a copy of the letter when you have a chance. Thanks, and happy holidays!

Pat Keefe

Greg said...

Absolutely brilliant!

Anonymous said...

Proof once again that Blaine is playing chess while many others in the credit union community are playing checkers.

Jason Dias said...

The chess and checkers line is mine!!!!

Karen Hart said...

I would love to receive a copy of that letter from the FDIC.