March 23, 2009


Comments

 
 
 
  • Thank you.
    Heken V. Edwards
     
     
     
  • I hope someone will clear up the reason why the PIMCO study is kept under wraps. Certainly someone at a higher level than NCUA will demand to see it.
    Johnson
     
     
     
  • Great article! I think that NCUA should look at all the data and test for reasonableness and not just depend on one source. Especially with so much at risk. Unrealized losses really shouldn't equate to real dollar losses for the entire industry based on one source.
    Dennis Barta
     
     
     
  • Arrest Bill Gross.
    Anonymous
     
     
     
  • Why the rush to make a decision? It seems like everyone is running around with their hair on fire and that we MUST make a decision immediately or the world will end. How about a transparent open discussion on the methodology and calculations used, and some common sense in creating a solution we can live with? We are big boys and girls, and you can tell us the truth... we do not need to be spared the facts.
    David P. Dally
     
     
     
  • Well written, except I DO object to "paying the bill." Many credit unions are unable to bear the financial burden.
    Anonymous
     
     
     
  • What an intelligent, rational approach. Surely NCUA considered average default rates and loss severity in their calculations? If not, they should have done so.
    Lois Weathers
     
     
     
  • Feet to the fire - GO CHIP!
    Chris Owen - Meriwest
     
     
     
  • Is it time for the movement to reconsider where its political support goes? If push comes to shove, we can pay tax and compete with the banks - as long as we are delivering in line with the mission. But how can we compete with a bureaucracy that has all the authority and none of the industry knowledge/savvy? And worse, will not listen to those who do? Perhaps some sympathy for the energy companies is in order. When we go to the ballot box we must be careful what we wish for - we just might get it.
    political thought
     
     
     
  • Chip and I got off to a rocky start in January as his view and my view of the corporate bail out differed significantly, but I must say Chip’s stock has risen in late March. However I still have one remaining significant difference with Chip. I do object to paying the bill. Pillaging the NCUSIF fund to cover non-cash accounting only losses related to OTTI is not what the fund was intended for; that is however, exactly what TARP was intended for. The NCUA Board and perhaps many reading this article somehow have convinced themselves that not taking TARP money (which is a taxpayer loan, not a handout) will some how allow the NCUA to remain independent. This is and in my view has always been fiction. However the NCUA Boards very actions, lack of foresight, lack of understanding financial markets and just plain stubbornness have in my view guaranteed the NCUA will be absorbed by a regulator that is directed by a more competent Board. Look to Citibank, their situation is very comparable to WesCorp and USC, yet Citi’s regulators actions have not jeopardized the entire banking sector.
    Rotchla
     
     
     
  • Chip, another great article! Thank you.
    Kevin Stang
     
     
     
  • Well written and thought out. This letter helps me understand the need to see the PIMCO and the NCUA assumptions, if not the report itself. This info would help us all look at this with open eyes and understanding. Not as commandments from on High.
    James Wileman
     
     
     
  • I don't think you are asking anything unreasonable and I appreciate your doing the review. Thanks, DDD
    Dennis D Degenhardt
     
     
     
  • Chip, you have fairly and accurately hit the nail on the head. The NCUA, not only should, but must publish the PIMCO analysis. This will serve two purposes, it will either support or show the NCUA to have made a bad decision, and it will give others the ablility to do their own similar analysis. Keep up the good work.
    Stuart Weiner
     
     
     
  • Thank you Chip, Your assessment taken in concert with President's Obama's recent predictions of a 2.6 to 2.9 percent growth in GDP in the short run puts the NCUA board actions at odds with common sense, the CU Movement and the new administration. Thank you for your leadership and brilliance.
    Sarah Bang
     
     
     
  • Assuming Pimco's numbers for AAA MBS is what every FI will have to record, will the FFIEC be using the same numbers for all FI's?
    Dan Paulson
     
     
     
  • We knew we were being lied to and your analysis shows how impossible it is that anyone with industry knowledge could have believed Wescorp and USC needed to be seized. We still need to know why NCUA used this crisis as an excuse to take over the corporates. What is their ultimate objective, the one they won't tell us about.
    Steve
     
     
     
  • I recall a presentation by WesCorp, perhaps from one of their Safety and Soundness presentations (surely somebody has this around), that tried to establish a breakeven for their mortgage types. In other words, what percentage of defaults and with what severity would need to occur in order for their portfolios to be impaired. I believe this analysis was in the last couple of years. A number that I recall was that for their subprime portfolio they would need to incur 30% default rates with over 50% severity. I bring this up for two reasons. First, WesCorp routinely applied this kind of analysis to their own portfolios so the work that PIMCO conducted, while stunningly expensive, will not yield much information. As Chip points out, IT IS ALL IN THE ASSUMPTIONS, which must be draconian for this level of losses to occur. WesCorp could have done this analysis on their own, as could the NCUA. This is why it is critical that the details of these portfolios be released. Second, any characterization or accusation that they (and, I suspect US Central) were providing untrue numbers flie in the face of the facts; WesCorp could not have provded this information in a presentation absent this analysis. If the NCUA was not aware of the potential losses in the types of severe default and impairment scenarios, it was only becasue they dodn't ask for it. In spite of what some have said, It is really just very basic math that is needed to anayze the profit/loss on these portfolios. Finally, an additional implication of Chip's analysis is that in order for these very high default/impairment assumptions to be met, it seems that prepayments would need to slow down dramatically (There are some details that go into this assumption that I won't go into). And while it is always possible that prepayments will go down, IN ONE OF THE LOWEST RATE ENVIRONMENTS ON RECORD, it seems unlikely. Higher prepayments means shorter average lives, and less chance of impairment. The answer lies in the assumptions. Second,
    Anonymous
     
     
     
  • Took our first look at premium bill and status lat last ights board meeting. We are confortable with what we decided but Chips letter makes a lot a very clear case forthe "fuzzieness" of this that I have unconfoorable when . Will be intersting to see how this all plays out. Hope it is not mini-happening that resembles that which is going on in DC. KRH
    Ken Hill
     
     
     
 
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