All things must change To something new, to something strange. – Longfellow As a state regulator, I have experienced the painful transition that comes with having to adapt to a changing economic environment. In North Carolina, our Division is entirely fee supported and by law, our fees are to be collected and expended solely for the purposes of the regulation of credit unions. Because the state had such a huge deficit this year, the cash reserve we accumulated by careful cost cutting was taken away and put into the general fund. Nationally, all State Regulatory Agencies face similar budget pressures. Our economy is in a recession. We are at war and still reeling from the shock of terrorist attacks. We face a totally different economic environment today. Coping with the impact of what all this means to credit unions, the state agencies that regulate them and the federal regulator that oversees federal CUs and insures most of the deposits of the credit union system are at a critical juncture. As Chairwoman-elect of NASCUS, I have the wealth of experience of my fellow regulators from which to draw. Our collective knowledge, open system approach and willingness to experiment have led to numerous innovations, some of which have been adopted successfully by other states, and, in the highest form of flattery, have been imitated by the federal regulator. One of the many innovations I'd like to see migrate from the state to the federal system in the coming year is the idea that credit unions should have options which management can use to raise capital. This has taken hold in the Tar Heel State where we have already approved a program, and several other states, particularly California, are also seeking ways to accommodate the need. If low income designated credit unions and corporate credit unions can use alternative capital then why can't all credit unions benefit from using this capital building mechanism? How many more credit unions must switch charters to mutual banks (20 and counting) before NCUA fashions such a remedy? And speaking of the migration of concepts from the state to the federal system, the stance taken by many states against predatory lending provides another example of how credit unions and state credit union regulators working together leads to workable solutions. This issue emerged in my home state with people like Jim Blaine and Martin Eakes (who has been recognized with a prestigious award for his work) taking a leadership role. And in the coming year, let's prompt all financial regulators to look for more ways to use technology to reduce the cost of exams. Today we can make in-person examiner visits more cost effective by collecting, and then actually analyzing, electronically submitted reports. NASCUS Chairman Jim Forney's state of Iowa has already made great progress in adapting technology to free human hands to do work that only people can do, rather than bogging them down in paperwork. If we can do a lot of diagnostic work before the visit the credit union, we can save a lot of time and expense for all involved. Just as regulators expect credit unions to adapt in order to remain competitive and relevant to their members by being responsive to their changing financial needs, credit union members have every right to expect that regulators – state and federal- will adapt the regulatory environment to those needed changes. We must be a resource for change rather than an impediment. NASCUS has always served as a catalyst for innovation, and this past year has shown that our focus efforts lead to progress. During the year, NASCUS fostered a cooperative relationship between the federal insurer and state regulators. We nurtured board to board interaction on topics such as PCA; the corporate CU program; the state member business loan rules; the future examination process; the rollout of expanded educational opportunities and the certification program for state examiners. We also fostered a cooperative relationship between state agencies as demonstrated by the increase in the number of state agencies and state credit union assets that are under the supervision of accredited state credit union regulatory agencies. NASCUS members listen to each other and to our regulated industry in order to make a safer, sounder and more responsive state credit union system. But we are only part of the picture and can only do so much. While the credit union system is safer and sounder than ever before, we must not be smug. What once were record surpluses in the American economy may soon be projected deficits, and states are already feeling the squeeze. We must take care to guard the invaluable confidence and trust members have in their credit unions. A solvent insurance fund, and properly managed state agencies lies at the heart of that confidence. Chip Filson, president of Callahan and Associates said at the NCUA's November 1 Budget Forum that the "financial model for the Fund has been turned upside down. Administrative expenses, not insurance losses, are eating up all of the Fund's revenues. It is more urgent than ever to change the NCUA's approach to using the Fund's revenue – or risk jeopardizing the very purpose for which the fund was capitalized: promoting confidence in the credit union system." As I said in my testimony at the NCUA's Budget Forum "Let's put our heads together and discuss ways to make this whole process more efficient." That is a pledge I willingly make with the full support of my fellow state regulators and the full backing of NASCUS management. Let's apply that spirit of cooperation and innovation to all the problems we face. Urgent work awaits us.