NCUA: Spending Money and the Lack of Oversight

The authority for tapping the NCUSIF for NCUA operating expenses has always been clouded and is even less clear now when we try to discover its origins through the fog of time. Twenty years ago when the insurance fund was building but still relatively small, the agency began tapping the fund for monies needed for insurance related work. Over the years, as more and more credit unions had to join and contribute to the NCUSIF, the fund grew to a tremendous pot of gold ever more tempting as a source of funds to run NCUA . . . and the transfer rate has only gone in one direction: higher and higher.

 
 

From last week…

The authority for tapping the NCUSIF for NCUA operating expenses has always been clouded and is even less clear now when we try to discover its origins through the fog of time. Twenty years ago when the insurance fund was building but still relatively small, the agency began tapping the fund for monies needed for insurance related work. Over the years, as more and more credit unions had to join and contribute to the NCUSIF, the fund grew to a tremendous pot of gold ever more tempting as a source of funds to run NCUA . . . and the transfer rate has only gone in one direction: higher and higher.

Not surprisingly, the success of the fund has led to regulator arrogance, which manifests itself in several ways. Despite spending ever-increasing amounts of money, the NCUA has not bothered to disclose spending and operating data. With good times, both the regulated and the regulator tend to get lazy: 'What's another $10 million here or there?' Oversight on both sides falls off.

Another manifestation of arrogance: considering raising the insurance fund cap from 1.3 to 1.5 percent. NCUA now has the authority to do this but has not acted upon it. It needs not the first nor to do the second. The NCUSIF is huge. The credit union movement is not in the least in danger.

And last, NCUA has spent a quarter of a billion dollars of insurance fund reserve over the last 5 years, but in a climate of no claims and no payouts. Is this kind of spending justified? What has been the cost to each credit union and each credit union member of this quarter of a billion dollars?

No Oversight and No Accountability
All this leads to an even larger issue, the lack of scrutiny over what the NCUA does with credit union money. As presently practiced, there is an astonishing lack of oversight or accountability. The NCUA can set the transfer rate arbitrarily and determine its budget in executive session behind closed doors. It does not have to appear before a Congressional committee. It operates out there by itself and no one is the wiser. Only the CLF's borrowing authority is reviewed by Congress.

When the NCUSIF was capitalized in the early 1980s, credit unions complained that they couldn't be sure their money was going to be managed properly. The NCUA then countered by saying it would report its work to Congress, that when the 1.3-percent cap was reached it would be required to pay a premium back to the credit unions, and that the trade associations would oversee the budget process.

These things were done then, but since that time points one and three have shriveled to ineffectiveness. The NCUA really operates behind closed doors. We simply do not have the facts about their expenses, don't know how much they spend on computers or even on pencils. This is wrong. The money NCUA has is money from the members of credit unions, and those people have the right to know the facts about how their money is being spent.

 

 

 

March 5, 2001


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