Bankers Ask for Congressional Probe of PenFed-Progressive Merger
“Does the merger benefit PenFed members or only PenFed executive officers who are likely to see significant salary and benefit increases?”
Accusing the NCUA of “flouting” its emergency merger authority, community bankers are asking for a congressional investigation into the agency’s approval of the merger between PenFed and Progressive Credit Union.
“If you ask me, the only thing ‘emergency’ about this acquisition is the giant alarm it should set off about the latest credit union power grab,” Rebeca Romero Rainey CEO/president of the Independent Community Bankers of America said in a blog post explaining the trade group’s opposition to the merger.
Rainey pointed out that Progressive was grandfathered when the common bond requirement was established in 1934. As a result, the credit union had no restriction on who it could serve.
She said that PenFed assumed Progressive’s charter, meaning that the nation’s second-largest credit union may now serve anyone it chooses. She added that PenFed officials have been “unabashed” about their desire for rapid growth, adding that the open charter will help facilitate that effort.
Rainey said the open charter PenFed now has “could remake the competitive landscape of American financial services, endanger the revenue base of federal, state, and local governments, and harm thousands of community banks.”
She has sent letters to the House Financial Services, Senate Banking, House Ways and Means and Senate Finance committees requesting hearings into the merger. The latter two panels have oversight authority over tax issues, including the credit union tax exemption.
The NCUA approved the emergency merger, which became effective Jan. 1. With $382 million in assets as of Sept. 30, Progressive had a large number of loans backed by taxi medallions whose values have plunged in recent years.
NAFCU President/CEO B. Dan Berger defended the NCUA’s merger decision. In a letter to House Financial Services Chairman Maxine Waters (D-Calif.) and ranking Republican Patrick McHenry of North Carolina, Berger said the NCUA was following past practices in approving the merger.
“The NCUA has used similar emergency authority in the past,” he said. “So, this action was nothing new and it helped prevent a charge to the [Share Insurance Fund] and a loss of financial services to Progressive Credit Union’s members.”
In her letter, Rainey posed several questions that could be explored during a congressional hearing.
For instance, she asked, “Does the merger benefit PenFed members or only PenFed executive officers who are likely to see significant salary and benefit increases?”
And she asked whether Progressive’s capital levels were allowed to dwindle to dangerously low levels to warrant the use of emergency authority.