ALEXANDRIA, Va. — Talk about having little time to adjust.

NCUA Chairman Michael E. Fryzel was sworn in at the end of Julyand almost immediately began leading his agency's reaction to whatmany have said is the most serious economic dislocation since theGreat Depression.

Fryzel, who was previously the top financial services regulatorin Illinois and a lawyer in private practice in Chicago, reflectedon his two-month whirlwind and how he sees the future of the NCUAand the credit union industry. This is his first interview sincetaking office.

CU Times: What have been the highlights of your tenure? What hassurprised you?

Fryzel: Coming here, I couldn't have anticipated the events thathave occurred. My original plan was to meet with certain staff,find out how things run and implement changes to make thingsbetter. But that was put on hold when we saw what happened.

First we went to the Hill and got more money for the centralliquidity facility [Congress approved eliminating the artificialcap of $1.5 billion, and now the facility can lend money to creditunions based on the formula established in the Federal Credit UnionAct, which is estimated to be $41.5 billion.] so we could helpcredit unions who might need it. Then, when we found out thatCongress was going to do things for banks–allow them to sell badassets to the government and increase their deposit insurance–wewanted to be included.

The original language of the bill just said financialinstitutions. So we went to the Hill, worked with the tradeassociations and got it changed. When they first changed it, creditunions were written in by hand on a draft.

CU Times: What's been the impact?

Fryzel: We've gotten tremendous feedback. It's a tremendousconfidence booster. We did the print campaign; we sent out theposters, including one with Uncle Sam. Obviously we need to watchthe economy, which changes on a daily basis, and see what else wemight have to do. We want to be sure that everything stabilizes aswe work through this crisis.

CU Times: How long will this last? When will credit startbecoming more available?

Fryzel: No one has all the answers to these questions. If I did,you'd be talking to me, not [Federal Reserve Chairman Ben]Bernanke. I've been telling credit union leaders, get out frombehind your desk and go to your lobbies and see what they need. Aperson-to-person approach is necessary.

CU Times: What do see you coming out of Congress affectingcredit unions?

Fryzel: We've gotten all from Congress that we're going to get.Nothing more this year and nothing till at least early next year,after the elections. We are ready to provide them with anyinformation they need. But we only go to the well when we have to.We're going to step back and see what the mood is after theelections.

CU Times: How would you describe the health of credit unions?Are you concerned about the flurry of mergers in recent years andthe fact that fewer new charters have been granted this yearcompared to last?

Fryzel: They'll be fine after they weather the storm. Mergerswill always happen. They are sometimes needed because of the poorperformance of one of the credit unions. We also encourage peopleto come up with ideas for new credit unions, especially if theyhave a field of membership that needs to be served.

CU Times: What changes to do you anticipate making within theagency?

Fryzel: NCUA is a big agency with lots of sections. But we needto look at things like whether field of membership decisions shouldbe centralized in Alexandria or stay in the regions. We also wantto look at whether we are examining the right things during exams.We also need to look at the structure of corporate creditunions.

We want to take a fresh look at everything and see if we can doit better.

The current focus is on the economic crisis is on the economiccrisis and seeing to it that credit unions are prepared to weatherit.

CU Times: Do the current regulations strike the right balancebetween ensuring safety and soundness and not stiflinginnovation?

Fryzel: Any agency can do a better job at what it does.Sometimes a new person can look at the situation and rules with anew set of eyes. I was reading an interview in Credit Union Timeswith Visions Federal Credit Union President Frank Berrish who saidhe was afraid that with some of the changes he'll be overregulatedand he complained about having a 90-question worksheet to fill outbefore his examination. When I read that, about an hour ago, Ie-mailed the appropriate office and asked for a copy. I have anopen mind, I'll take a look. Maybe all 90 questions are necessary,maybe some aren't.

We review one-third of all regulations each year. I have lookedat some regulations and said to staff 'I don't understand it,please rewrite this in English.' You shouldn't have to have a Ph.D.to understand it. We want to be sure it isn't intrusive orexcessive.

CU Times: Will there be an increase in premiums for the NationalCredit Union Share Insurance Find?

Fryzel: As of today, we're fine. We're not going to shut thedoor on anything, and that could change because some credit unionsare struggling. The credit unions have never cost the taxpayers apenny and we won't.

CU Times: Speaking of hurting credit unions, are you increasingyour efforts to find merger partners for credit unions?

Fryzel: Merger is always better than liquidation. If there is apotential partner we are happy about that. If a credit union isinterested in a merger we have the tools in place.

CU Times: What has surprised you the most?

Fryzel: The size of the bureaucracy and all the hoops you haveto jump through to get things done. Congress has been responsive toour needs, but there is a lot of give and take, it's the nature ofthe institution.

CU Times: Compare it to Illinois, which is known for havingpolitics practiced by people with sharp elbows?

Fryzel: In Illinois, Chicago politics has been controlled by theDaleys for many years, and they have run it very well. If they wanta program implemented, chances are it will be. In Washington,Congress has lots of people who want to be mayor. So there's a lotmore give and take.

CU Times: You met with the company that provides privateinsurance for some credit unions. Why did you do that and are youanticipating having that expanded or contracted?

Fryzel: I've known the top executives there since my days as anIllinois regulator. And nine states allow private insurance. Idon't regulate the private insurers, but they are part of thepicture. Nine states want that option. Only states or Congress canchange that, and I don't anticipate lobbying Congress either way onit.

CU Times: Congress will likely make some changes in the wayfinancial services are regulated. What are your thoughts on whatchanges should be made and on the Blueprint unveiled earlier thisyear by Treasury Secretary Paulson?

Fryzel: It's food for thought like everything else. My concernis that Congress might decide to have one giant agency to regulateeverybody. Credit unions should be kept separate because theirregulator knows and understands them. Any changes to regulationsshould incorporate my view that they be as little as possible, asmuch as necessary.

It will come down to what parts of the system they think need tobe better regulated. Nobody wants a repeat of what has happened,but the question is how you hit as chord that strikes abalance.

CU Times: What does the new environment–with the banks beingbigger and more consolidated–mean for the competitive situation forcredit unions?

Fryzel: Credit unions know their members and know theircompetition. I tell them “do what you do best, serve your members”and everything will work out.

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