Wendell "Bucky'' Sebastian has always been a bit of a maverick within the sedate universe of credit unions.
Before he took charge at the GTE Federal Credit Union in Tampa, he helped trigger the biggest overhaul of America's credit union system since the Great Depression. As general counsel of the National Credit Union Administration in the 1980s, he wrote the legal opinion (which eventually became law) that allowed credit unions to vastly expand and merge with other unrelated unions.
Now, at the age of 64, Sebastian is at it again.
He's floating a proposal that could dramatically reshape and expand the mission of credit unions. Sebastian thinks he has a window to make his pitch, given that reform of the financial services industry is a front-burner issue in Washington, D.C., as the Obama administration takes over.
"I'm absolutely confident we can get this done,'' he said, adding with a laugh: "It'll either be impossible or not that hard. ... My friends call me a maniac on a mission.''
His wants to create a new type of charter for credit unions. In fact, organizations that opt in wouldn't even be called federal credit unions any more, but "federal financial service cooperatives.''
Like credit unions, the co-ops would be not-for-profits that pay dividends to members, choose their own membership fields or markets and be run by a volunteer board elected by the members/owners.
Unlike credit unions, the new co-ops would have unlimited authority for business lending, mortgage lending and commercial lending. And they would have access to capital markets to raise money for lending.
Had such a charter been in place, credit unions would have access to the multibillion dollar federal rescue plan now priming the pump at banks across the country. The federal bailout funds are intended in part to ease the credit crunch and help financial institutions make more loans.
"We don't have access to any of that money,'' Sebastian said. "We could be lending more. We could be following the needs some of the people have right now. ... But we're less capable to solve this situation because of that inhibition.''
In late October, Sebastian shared his plan in a Washington, D.C., meeting with 40 CEOs of the 100 biggest credit unions in the country.
Though not as hard-hit as some regional banks, the country's 8,000 credit unions haven't been immune to the downturn, particularly those in Florida that are heavily reliant on real estate loans. The GTE credit union last month reported a $2.7-million loss in its third quarter, contributing to a $21.9-million loss for the past nine months. And Suncoast Schools Federal Credit Union in Tampa, the largest credit union in Florida, notched a quarterly loss of $25.7-million as it set aside nearly $24-million in reserves to cover bad mortgage loans.
Tom Dorety, president and CEO of the $6-billion Suncoast Schools credit union, welcomed Sebastian's initiative as a way to broaden services and funnel more loans to hard-pressed members.
"Conceptually, I think it's a great idea,'' he said. "We're at a disadvantage that we can't even raise capital (to lend). We're not getting any infusion of capital from the government.''
Despite the economic downturn, Suncoast is not closing any branches. Its membership is still growing at a 7 percent clip. "But some type of capital reform would allow us to do an even better job,'' Dorety said.
John J. McKechnie, director of public and Congressional affairs for the National Credit Union Administration, the governmental agency that oversees the industry, is aware of Sebastian's plan. But whether it will be part of the group's legislative agenda hasn't been determined.
"The chairman and the board are still assessing various proposals'' of credit union members, McKechnie said. "No decisions have been made.''
When Sebastian arrived in the spring of 1989, GTE Federal Credit Union was a $160-million operation with nine branches and 40,000 members — all with ties to the old General Telephone (now part of Verizon).
Today, it's a $2-billion institution with 205,000 members. Thanks to the upgraded charter rules that Sebastian helped push when at the National Credit Union Administration, GTE's footprint stretches from Port Charlotte to the Georgia state line. It even has branches in Louisiana.
From his perch inside the credit union's 13-acre headquarters on the outskirts of downtown Tampa, Sebastian last week lamented how the fiscal crisis has widened to affect all lenders and why he believes "our system of a cooperative is the answer.''
What he calls "the gospel according to Bucky'' is that credit unions have different DNA than banks. Without the pressures that publicly traded banks feel, he says, credit unions don't have to manage quarter to quarter to keep profits up. As he sees it, banks try to get as much money out of customers through fees to raise their bottom line. For credit unions, because the customer is the owner, their interest is making money for their customers, not for the not-for-profit institution itself.
Historically, banks have objected to any widening of credit union mandates. They've cried foul that credit unions aren't on the same playing field because they're exempt from being taxed. As a concession, Sebastian's plan calls for taxing the converted financial services cooperatives at a corporate rate, but only after the co-op covers all operating expenses, pays dividends to members and sets aside reserves of 6 percent to 12 percent.
To blunt another common criticism of credit unions, he also suggests the cooperatives be subject to disclosing their lending patterns to minorities as banks do under the Community Reinvestment Act provisions.
But whether or not the bankers get on board — or his fellow credit unions, for that matter — Sebastian is undaunted about pushing his cause. "I'm not asking for anyone's permission. I'm not immune to suggestions to improve it ... but I'm not soliciting support,'' he said. "I just know we could be solving some of the needs of our people right now.''
Jeff Harrington can be reached at 727-893-8242 or firstname.lastname@example.org