Union contract of the day, NCUA edition

By Felix Salmon
December 25, 2010
Robin Sidel reports on the NCUA's new budget:

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Robin Sidel reports on the NCUA’s new budget:

The 2011 budget for the National Credit Union Administration, which insures about 7,400 credit unions, will rise 12% from the prior year, fueled partly by contractual pay raises for unionized employees…

The agency’s employee pay and benefits are set to climb 12% to $163.2 million in the current fiscal year. Most of the jump is unavoidable because of contractual obligations to unionized employees, who represent about 80% of the NCUA’s work force.

I would love to see more detail on this. Yes, the NCUA is hiring more examiners. And yes, I’m sure that the cost of benefits is rising fast. But 12%?

The NCUA explains, in a press release, that 37% of the increase in pay and benefits is due to a “6.1% pay increase mandated by the Three Year Collective Bargaining Agreement entered into in 2008″.

It’s worth bearing three things in mind, here. Firstly, the NCUA failed miserably in its job over the past three years, overseeing as it did the complete collapse of the corporate credit unions which underpinned pretty much the entire credit-union system. Secondly, we were already in a highly disinflationary world in 2008, when the NCUA happily signed off on a 6.1% annual pay increase in 2011. And thirdly, credit unions in general, and their trade associations in particular, have all been critical of these pay hikes.

It’s important that financial regulators can pay well to attract talented staff. But collective bargaining agreements with across-the-board 6.1% pay rises are not a smart way of doing that. And, frankly, there’s not much evidence that the NCUA’s staff is particularly talented: if you were a talented financial regulator, would you want to work for the NCUA?

It’s ridiculous that the NCUA can simply vote itself as much of a budget increase as it likes, showering money on its headquarters and its employees, sticking the cost onto the credit unions, with no real checks or balances at all. At most institutions, there’s some incentive somewhere to keep the budget in check. At the NCUA, there seems to be none.

But more to the point, it’s ridiculous that the NCUA exists at all: it should by rights have been abolished, along with the OCC, in Dodd-Frank. One thing pretty much everybody agrees on is that we have too many regulators; the FDIC should simply absorb the NCUA, along with its examiners and its insurance fund. The examiners would be part of a larger, higher-profile regulator with real teeth; occasional failures would be less prone to cause an unfair burden on credit unions; and credit unions in general would be brought closer into the financial mainstream. But sadly, if this never happened in Dodd-Frank, it’s not going to happen at all.


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Agree on the NCUA abusive self-indulgence, but disagree on the solution. Why would CUs want their reasonably stable insurance fund commingled with FDIC-insured banks’? The latter has a rather large hole in it, and I see no reason CU members should bail out publicly traded (or privately held) banks.

Posted by Lilguy | Report as abusive

Mr. Salmon, I am baffled by this post. You refer to a “6.1% annual pay increase”, but the press release gives no indication that this is an “annual” increase, nor that the increase is “across-the-board”. You ask why a talented financial regulator would want to work for the NCUA. Why not? Is the pay too low? How does NCUA pay compare to other regulators? Or, for that matter, with credit union pay? Why am I to believe that the NCUA is “showering money” on its headquarters and employees? Because the credit unions’ trade association is complaining?
If you want me to consider credit union regulators’ salaries as an example of the outrageous compensation packages in the financial services industry, you’ll have to make a better case than this.

Posted by SBayer | Report as abusive

Felix, I sense your outrage but you’ve done a very poor job of communicating its source. Are you unhappy with the job that the regulators did leading up to this crisis? Do you feel they are underpaid? Overpaid? Understaffed? Overstaffed? Do you simply hate unions in general?

As SBayer, noted, you didn’t even begin to do your homework on this one. You might at the very least point your loyal readers to this budget release from last year:
http://www.ncua.gov/news/press_releases/ 2009/FINAL11-19MatzStatementon2010NCUABu dget(3).pdf

A few thoughts:
(1) Staffing (and the budget) *DECREASED* from 2000-2008. Did their responsibilities decrease? Or were they handling more work with fewer examiners? Perhaps you ought to have expressed outrage during this period, in time to head off the collapse you spoke of?

(2) Depending on the natural turnover, an organization with stagnant/declining employment often does little or no new hiring. Moreover, budgetary pressures tend to squeeze management positions at least as severely as those at the bottom. You end up with less “fresh blood” coming in and less opportunity for advancement within the organization. Ambitious and talented individuals *will* flee such an organization. Especially when wages stagnate and they are being asked to do more with less. Seems to me they’ve set up the ideal recipe for mediocrity (and you can see this same dynamic at work in our public schools over certain decades).

(3) The 2000-2010 budget increase averaged 4% annually. The 2008-2011 increase may be sharp, but not outrageously so ESPECIALLY given the rise in health care costs over that time.

Felix, you might investigate this one more closely? And then elaborate on your objections? Include some vision for this organization rather than simple outrage over a one-year increase.

Posted by TFF | Report as abusive

“Secondly, we were already in a highly disinflationary world in 2008, when the NCUA happily signed off on a 6.1% annual pay increase in 2011.”

Errr… not if this contract was entered into during the summer of ’08. Remember when the ECB was raising rates, oil was heading toward $140, and people were criticizing the Fed for its overly easy monetary policy? The world changed in September of ’08.

Posted by MitchW | Report as abusive

Seems that the NCUA was playing “catch up” with this contract. As a credit union member, I am concerned with anything that will increase my costs, this being one. At the same time as a union member, I am all for my bretheren getting a fair deal, which you really don’t address if they did or not.

Posted by neeros | Report as abusive