The son of a banker, Bill Cheney is now a leading voice on credit unions as head of the joint California and Nevada Credit Union Leagues. Though the baby-faced 48-year-old Rancho Palos Verdes resident looks like a newcomer, Cheney has decades of industry experience, including a stint as chief executive of El Segundo’s Xerox Federal Credit Union, now known as Xceed Financial. He recently talked to the Business Journal about the state of the credit union industry.
Question: How did supposedly supersafe credit unions ever get themselves in this kind of trouble?
Answer: Credit unions are being impacted as collateral damage. There were (lenders) making these one-half percent, 1 percent loans, no income documentation, no appraisal, no real underwriting that affected the housing market, which has now affected credit unions.
Q: Credit unions are very active in mortgage lending, so shouldn’t they share in some of the blame?
A: They never engaged in that sort of irresponsible lending. Credit unions make loans to people that they have every expectation will be able to repay the loan.
Q: They were never irresponsible? Haven’t a bunch suffered losses?
A: Most credit unions didn’t make subprime loans.
Q: How does unemployment factor into this?
A: People who lose their job have a hard time paying their mortgage or paying other loans, so that’s having an impact on credit unions.
Q: How do you think credit unions will fare as the recession drags on?
A: The good news for credit unions is we were well-capitalized coming into this crisis and we are going to get through it. It’s not going to be easy, but we are going to get through it and come out of it stronger.
Q: What makes you so confident?
A: For so long, the Los Angeles area was such a prominent aerospace economy. Some of our largest credit unions are affiliated with the aerospace industry. Those credit unions really thrived during the boom years of aerospace in Southern California. When the aerospace economy (declined) in the late ’80s and early ’90s in Southern California, I think they proved their resilience and capability from a management perspective because those credit unions didn’t falter even though a lot of financial institutions in California did. They, in fact, not only survived in that period, but thrived coming out of it. I think we’ll see that coming out of this crisis, too.
Q: A perennial issue has been the assertion by banks that credit unions have an unfair tax advantage. Has the banking crisis changed anything?
A: The bankers’ rhetoric has stayed the same: Credit unions operate like banks so they should be taxed like banks. But credit unions don’t operate like banks and if a bank felt like a tax exemption was enough of a competitive advantage, they could convert to a credit union but then they’d lose their stock options and the board members would lose their compensation. There’s not been a bank that’s converted to a credit union; if we’ve got such an unfair advantage, then why is that?
Q: You seem very passionate about credit union issues, having gone all the way to Capitol Hill to testify before Congress.
A: I’ve always been passionate about credit unions. I would say that when I was a CEO of the credit union, I was pretty outspoken. I loved every minute I had as CEO of a credit union and wouldn’t change a thing about it.
Q: Then why did you leave Xerox in 2006 and assume the chief executive role at this organization?
A: Sometimes I ask myself the same question. I enjoyed the part of my job at the credit union that included being an advocate not only for my credit union but for other credit unions. This (job) gave me an opportunity to represent not only my credit union, but also to represent all of the credit unions in California and Nevada.
Q: How do you get along with bankers on a personal level?
A: I don’t have any ax to grind with bankers at all. In fact, we have an open line of communication between myself and the person who’s the head of the California Bankers Association. My father is a retired banker we have a good relationship. (Laughs.)
