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Jan. 5, 2012
Thanks again Chip! I appreciate your dissection of the audit report and your ability to help all of us better understand the many continued concerns. Your action recommendations should be heeded by all of us!
Russ Dalke VP/CFO Red Rocks CU
Credit unions need this challenge to review this report with their Boards. It is our members money.
I am grateful for this analysis, it reveals the mismangement of much of the actions of the recent past and is troubling to see the attitude of the regulators who are implementers of the laws Congress pass as representitives of the people.
Iwill reveiw with my Board the report and take action.
Thank you, thank you, thank you for continuing to ask the questions that need to be asked, and unfortunately, most of us are not equiped to ask, or are fearful of the NCUA's retaliation if we did ask (I'm not putting my name on this post because I know the NCUA reads you stuff with distain. I would, however, make three more points. First, how can the auditors sign off on "estimates" of losses when the OIG can't find any detail? Why is the detail so MIA and can't be shared with everyone - especially all those who have to pay the bills. My corporate gives me regular updates on their portfolio performance and the work of their multiple vendor's estimates of future guesses about losses (all of which have been overstated so far). Where is the NCUAs estimates and do they use any credible outside resources like they require my corporate to use because they don't trust anyone anymore?. Second, TRANSPARENCY? OMG! Four color graphs of unsubstantiated guesses about future losses is not transparancy. Where are the facts, like what are the actual cash losses on these securities? Have the cash losses reached the amount of capital that the NCUA took from CUs yet? We need the actual losses by security and by corporate to make that decision. Tell me they don't have that and why the actual results cannot be shared with those who not only paying the bill, but are paying those salarys on Duke Street. How does the actual losses stand against the charges (capital stolen) from CUs? Third, where are our trade associations? They are becoming branches and extentions of the NCUA's PR campaigns. We need associations that look out for us as well as you are doing, not spin and endless self promotion. Where are the leaders and why are we mindlessling letting the NCUA get away with this?
afraid to come out of the dark
Excellent article, which I shared with our Directors and Officers.
Chip, we all know that this is going to cost the industry far more than "current" loss estimates. While there are presentation dynamics being used to help people avoid being blamed, the current estimate are also wrong because no one can know the ulimatel cost.
There are 4 million mortgages in some form of serious delinquency and/or foreclosure right now. These losses have not yet occurred yet. And once these foreclosure move through the system real estate prices will continue to fall and that will cause more losses because thereby creating a feedback loop that will spiral for a while. Taking view of the entire housing problem today in the U.S., there are 300 thousand homes per month being foreclosured while there are only 100 thousand homes being liquidated per month. This means that the REO stock will grow for the next couple of years and prices will continue to adjust to clear the market.
NCUA's conserved credit union's investment hold this type of collateral and so the current estimates very likely do not capture this dynamic, non-linear future described above.
So like most people with their pants on fire, they will do everything the can to make it look like the fire is under control and that the loss estimates are correct. But they can't know until it arrives and the losses that they are estimating have not arrived yet.
Thanks for calling this to our attention. I expect you will have ample opportunity to report on this for the next several years as NCUA comes to realize that the problem they inherited by a bubble in the housing sector is much larger than they could have ever imagined.
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