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June 8, 2009
I have had a problem with NCUA since they caused Cap Corp to go under in the '90s. They have imaginary friends proposing imaginary worst case scenarios based on a less than 5 percent chance of occurring and use that to justify their postions of power liek every other bureaucrat. If the jerks at FASB hadn't brought back "Mark to Market" after almost 70 years of safety without it, the credit market wouldn't have dried up hleping to worsen the economic crisis. If NCUA hadn't used a company in the business of buying and trading risky investments to help rate the Corporates, perhaps we wouldn't have had to encumber an inordiante amount of regulatroy capital. It seems that almost all of the triggers can be traced back to some Government bureaucracy or program.
Brian Clark wrote: Credit unions did not "elect to recognize the NCUSIF expenses and move on". Recognizing the expense was required by the NCUA.
Absolutely correct, Brian.
The question is, when will the NCUA be audited to find out who/what/why this was allowed to happen?
Why should Credit Unions continue to accept the NCUA's accounting measures? OH, I guess we are REQUIRED TO and have NO CHOICE but to let the money-changers continue to defile the temple.
While I admire Chip's enthusiasm his grasp of accounting is poor at best and his presentation of the facts is sloppy. Credit unions did not "elect to recognize the NCUSIF expenses and move on". Recognizing the expense was required by the NCUA and I, among many, am waiting for the NCUA webcast so I can reverse the expense and defer over years. Deferring the expense will relieve the much of the net worth dilemma that the rest of the article addresses. Redefining net worth to include the allowance for loan losses is a nice sleight of hand but given the economy and the loan losses credit unions are looking at I think those reserves will be needed. Stating that the allowance is fully funded at credit unions may be the biggest leap he makes it the column. Who knows what fully funded is? It takes years for real estate losses to be finalized. There is great uncertainty in the loan loss reserves. To say that the loss of the $1 billion US Central note has been recognized by natural person credit unions and therefore we can simply move the dollars to another cause is simplistic. If the losses are less than originally anticipated the NCUA will invoice credit unions less than originally anticipated. Good news. The expense was taken from us and can be given back. Lastly, the NCUSIF is an insurance fund. If not needed it should be returned to the credit unions that overpaid into the fund.
Chip - Maybe you can prevail upon former WesCorp CEO Bob Siravo to return some of that SERP he took down in 12-2008. If you recall the NCUA fired Bob on 3-20-2009 after taking WesCorp into conservatorship. We in fact need a revised regulatory scheme - the NCUA has failed us. NCUA has been on sight at USC & WesCorp full time for over 10 years - & look at the results. Besides firing Bob and Francis - did the NCUA fire anyone at the NCUA? I din't think so. Did they get promoted? I thought so.
I think that NCUA will have to increase the NCUSIF reserves for natural person credit unions. The share insurance fund only has about $15 million in reserves for natural person credit union losses. The Eastern Finanical Credit Union merger with Space Coast proabably won't work without substantial NCUA assistance. I expect that there will be a long list of natural person credit unions that require assistance. I believe any over accrual for corporate credit union losses will likely end up being applied to natural person credit unions. We should also expect to see other corporate credit union problems that wil require NCUA assistance beyond just US Central and Wescorp. I think it is likley that credit unions will be assessed signficant additional share insurance premiums and special assessments before we are through this recession.
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