The Darkness Spreads Over Credit Union Land: $50B Unaccounted For

There has been no public accounting for the Temporary Corporate Credit Union Stabilization Fund for nearly two years. Where are the voices calling for light?


December 21, 2011 is the winter solstice — the longest, darkest night of the year. Going forward, we know the seasons will change and more light will shine with each day. But when will the regulatory darkness disappear? At the end of this month, it will be two years since the last audited financial statements for the Temporary Corporate Credit Union Stabilization Fund, managed by NCUA, were made available.

This single audit, released in July 2010, showed the contingent liability for the TCCUSF as of December 2009 for all corporate exposure was $6.6 billion.

Twenty-four months have passed from the date of these statements. Since that time three more corporates have been nationalized and, along with WesCorp Credit Union and US Central, stripped of their most valuable assets. NCUA has issued more than $28 billion in guaranteed notes to fund new collateralized securities which were sold to Wall Street. At that time, and still today, credit unions have record amounts of liquidity and demonstrated the ability to fund these assets.

Even after the seizures of these corporates, credit unions remain liable for all losses from these events even though they no longer receive the benefit of the yields now going to the new owners of the securities.

The seizure of three more corporates, the issuance of the guaranteed notes, the direct sale of more than $10 billion in assets held by WesCorp and US Central — activities totaling more than $50 billion — have been done completely in the dark. No income statements, balance sheets, cash flows, or any accounting for the tens of millions in operating expenses have been issued.

For example, NCUA paid $10 million just to broker assets transferred from corporates. NCUA has converted the corporate workout into a regulatory financial black hole — with no facts, data, or independent accounting available to anyone.


If this unreported activity had been engaged in by any firm, governmental agency, not-for-profit, or credit union, the board would have been removed and outside audits started immediately.

Not only has this financial darkness spread over credit union land, but one year ago the shadow was extended over Congress. NCUA, in a last-minute, pre-adjournment quick strike, got Congress to pass S4036, which was explained as merely housekeeping for the TCCUSF, so it did not meet any consultation, public discussion, or explanation.

And so it passed, all in the dark. Barely eight months later this legislation was cited as the authority for NCUA’s $2.0 billion dollar premium assessment as TCCUSF future expenses with no accounting for present or past expenses.

Congress, credit unions, and the public continue to be subject to arbitrary NCUA actions supported by neither fact nor logic.

Is this because the financial information, previously routinely provided monthly by corporates, is not available? Does NCUA not have the systems or capability of managing the assets taken? Or is it that the data doesn’t support the conservatorship estimates? Were losses presented as future facts three years ago found to be inaccurate, imprecise, or overreaction?

If the losses were overestimated, are these misjudgments being covered up? What is the current value of the five investment portfolios that were seized?

Who Is Responsible For Acting?

Some of the players in this darkening drama include:

PWC: Where is this firm two years after its audit was used to assess the contingent liability for the TCUGLP? Has it left the playing field? Is it accountable for this estimate today?

Congress: Where are the committees (Senate Banking and House Financial Services) that passed legislation without discussion in December 2010 now that $50 billion of credit union assets have been seized and disposed with no accounting?

GAO: Where is the government’s watchdog when the problem is occurring now?

OIG: Who does the inspector general represent — the NCUA board? The Congress? Credit unions? The administration? The taxpaying member? How can NCUA’s supervisory committee be missing in action when the greatest transaction of all is happening on its watch — but unwatched, unreported, and un-reviewed?

NCUA Board: How can board members who preach financial literacy, director accountability, and strict compliance be so blind to the consequences of not tracking, reporting, or even overseeing this massive transfer of assets? Is there no backtesting required of decisions? Where does the buck stop? Or does it?

NCUA Staff: How can professionals schooled, trained, and responsible for the financial integrity, reporting, and oversight of credit unions lose their own standards of conduct when managing credit union resources?

Credit unions and their voices: Members’ funds have been taken without any accounting — more funds are predicted to be assessed in the future. Is this acceptable oversight of the collective funds each credit union provides?

A New System Or New Leadership?

The choices going forward are clear. If the system allows public conduct to go unchecked and unaccounted for, then system redesign with new checks and balances are needed. If the system’s architecture is sound, then new leadership to correct the operational deficiencies are required. This is what NCUA board appointments should be about, but is the administration even tracking these issues?

If no one is watching after $50 billion is seized, what will be the next catastrophe that goes unexplained and unaccounted for?

The only way to overcome NCUA’s financial darkness is to shed light. As Senator Everett Dirkson once remarked on civil rights legislation, “When I feel the heat, I see the light.” Who will be a source of light in 2012?




Dec. 21, 2011


  • Where is the accountability and transparency, while we have negative income and struggling?
  • Mr. Filson, thank you for your valuable insights. I would add another party to your list of those that is responsible for action. Ou state and national trade associations. Where is their voice in pressing NCUA to respond to the legitimate questions you raise?
    Brian Fogg, Credit Union of Vermont
  • We need accountability!!

    Where is the money going?
  • Where is the transparency?
  • Chip-you continue to raise thoughtful questions that deserve a response. These issues, combined with questionable expertise at the examination level, raise serious questions about NCUA leadership. If these issues were identified by NCUA at one of their supervised CU's, the outcome would be much different. Big voids exist in Governance and Accountibility.
    Michael Sacher, CPA
  • NCUA lacks transparency because it is hiding something. People don’t conceal good news. Therefore, NCUA is hiding bad news. The investment losses are likely greater than estimated – not less as suggested in the article. Otherwise, NCUA would be boasting about its magical turnaround powers. Credit unions should brace themselves for bigger assessments than credit union apologists are estimating. The old $50 billion is likely closer in value to $30 billion or less. Furthermore, the retail credit union exposure is also understated. The industry is reliving the S&L crises – only worse. Bankrupt retail credit unions are chasing yield just like the Corporate CUs did. When rates start to increase, in an 11th hour deal with Congress, NCUSIF will be conserved by FDIC. It will not be able to survive the Dollar administration’s unleashing of Corporate CU competition and NCUA cheerleading for business lending and loan particpations. Get ready. Do not kid yourselves with the industry’s and NCUA’s self-serving sugar coating.
  • Thank you for opening this discussion. We all need to turn up the heat and get some answers. NCUA has judgements against Deutsche Bank, Citi and at least one other----where is that money? NCUA claims their increased budget is due to adding more staff, so why can't they have their own audit completed after 2 years?
  • Thanks, Chip. Let's start turning the heat up on the NCUA to be transparent and revelatory as they demand we all be. We all know they've been turning it up on us, and continue to do so, since the economy nose-dived. We can only hope our Boards of Directors hear the clarion calls as well, and that the NCUA wises up to their business, if not ethical, obligations to our industry.
    Mark Herter
  • Chip, your comments are right on point. If any credit union was managed the way this has been the NCUA would have forced a change in both the management and board of directors, or would have closed the credit union.

    Keep up the good fight.
    Stu Weiner
  • Same old government as usual!
    Cindy Garvin
  • Unfortunately, you, Chip, seem to be the only one raising these issues. The duplicity is astounding in what the regulators expect from us but can't complete for their own organization. I am wondering what my league dues are doing since I haven't heard anything from them to defend credit unions from this unchecked agency.
    Todd Sheffield
  • We are fortunate to have a former NCUA insider independent enough to address conditions that should not exist in such an important agency. NCUA is important to America's middle class and the institutions that serve it best. Thanks for not only being there, but for a desire to make things right.
    Dan Clark
  • Thanks Chip for saying out loud what so many of our movement's leaders are unwilling say. Where is Chairwoman Matz and her commitment to transparrency now? Has the NCUA, and in particular the NCUA Board, finally realized that they are not good at actually running a creidt union that they so easily are critical of? I would also like a better accounting of how the NCUA believes they have saved millions of dollars for creidt unions by making such large increasses in thier exam force? They had pleanty of corporate examiners in the past and they were unable to adequately regulate/supervise them. Again Chip, thanks for speaking out as you always do ... let's hope that 2012 and beyond will bring about a better regulator in NCUA than in it has been in the past 8 years.
    Doug Wolf
  • WOW, would any other agency get away with something like this. Makes one certainly wonder, exactly who does NCUA report to. It appears, NOBODY is the answer!
    Dan Babcock
  • This article again shows that government entities, federal, state or local have agenda unto themselves. It requires vigilance from all interested parties to keep the system on the high road.
    David Watson
  • Excellent article that exposes the NCUA and its governments blatant lack of transparency. I bet that it goes higher up to the WH administration since it ties in to the mega stimulus packages that also have little accountability and transparency.

    Chip thank you for sticking your neck out to wake the Credit unions everywhere including the trade associations in particular who have been silent as well.
    Eric Marshall
  • Do not wait for CUNA or NAFCU to go down this road or “keep up the pressure” for transparency. Their interests are aligned with NCUA. Any effort would be cosmetic. Your hopes and money are wasted on waiting for CUNA, NAFCU, or any trade to act.
  • I know Credit Union CFO’s throughout the country have certainly noticed and complained about the lack of transparency for at least the last two years. Perhaps the complaining has only been amongst us CFO’s and CEO’s. As a collective voice, I would like to see CUNA continue to keep the pressure on NCUA for full and open disclosure. I realize they have lots of irons in the fire, but certainly the protection of Credit Union assets (Corporate or NPCU’s) should always remain at the top of the list. Thanks for keeping this issue on the table.
    Russ Dalke, Red Rocks Credit Union
  • These posts by Chip are full of half truths and are misleading. He is right that there should be timely financial reporting but the rest is off base.

    The corporates that were closed needed to be closed. They couldn't limp along any longer as they were essentially bankrupt and as such couldn't garner the additional capital needed to be viable entities. Chip looks to the operating earnings and neglects the facts that the liabilities far outweighed the assets.

    The line about credit unions willing to fund these assets is ridiculous. No CU was willing to assume the huge credit risk associated with the toxic mortgage-backed securities nor are FCUs allowed to as many were not rated highly enough to be an allowable investment.

    "Benefits of the yields going to the new owners" is another falsehood. The higher yields go to the TCCUSF. The bond holders get the stated yields which are lower due to NCUA guarantee. I join Chip in looking for the increased financial information, timely release of annual audited statements and quarterly updates but the paranoia exhibited in the rest of the column dilutes this message.
    unnamed CU CFO
  • Maybe it is time for Atlas to shrug. Credit Unions need to band together and refuse to pay anymore money to NCUA until they come clean. Why continue to enable such a corrupt organization?
  • Nice article. Scary situation. If the NCUA is not held accountable, they will run roughshod over the industry - especally in 2013 if the elections swing one way.
    John-Ashley Paul
  • How is this any different than community banks special assessments (read bailouts) of the BIF and SAIF Funds crises of Savings and Loans in the 1980's and 1990s?

    Community Banks paying for S &L's errors?

    At least credit union's don't have to pay the assessment and corporte and state taxes too and maintain an ROA < 1.0!

    What happened after that? Some went to jail. Some lost their jobs and the industry got stuck with FIRREA and the RTC (now defunct).

    At least this assessment is all credit union industry related. Pull up your adult britches and deal with the here and now and stop whining.

    A little history ..... (The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of about 747 out of the 3,234 savings and loan associations in the United States. A savings and loan or "thrift" is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members. "As of December 31, 1995, RTC estimated that the total cost for resolving the 747 failed institutions was $87.9 billion."
  • The points raised by Mr. Filson are both sobering and cause for concern. I hope NCUA responds to this article with some real facts.
    Mark Bohdanyk, CCUE
  • It is my position that NCUA and OFR believe themselves to be victims. They feel they are innocent in every situation. They will not hold themselves accountable and everyone else is at fault. These folks get stuck in the injured party role, e.g.: “ my pay is too low; you don’t respect us, there is nothing I can do about that, or all I can do is wait and see what Atlanta or Tallahassee says”. They live in a world of denial, their credibility is gone, and they do not know there is a problem, and it is them.
  • NCUA ...scary stuff! They sue an appraiser for a faulty appraisal yet cannot circle the invisible couple hundred square feet that is allegedly hanging off of a second of a square house that apparently only they and Navy Federal Credit Union can see? There is absolutely no accountability. It took nearly 4 years to even get a response from NCUA for appraisal fraud as well as mortgage fraud in which they did absolutely nothing. They continue to do nothing. Well, they did "investigate" which they admit was nothing more than a phone call to NFCU which brought even more questions as to why NFCU's contract (which they refuse to relinquish) and mine are, according to NCUA, 2 different contracts, as in altered after it was signed? I have spoken with every other regulatory agency and aside from the fact that they cannot help they certainly sound as they know what they are doing,they seem quite competent, familiar with laws, forms, regulations, etc. My advice is to keep your money out of any federal credit union, they can't all be bad but if you have a problem and need to report a federal credit union,you certainly want expect/want competent, responsible people that will do what the taxpayers are paying them to do. NCUA is part of the problem, not the solution. It's part of why the country is in the shape it's in. Veteran's are left homeless due to fraud they refuse to investigate, I'm sure they're paid well with a roof over their heads, they don't have to care, no one holds them accountable.
  • It feels as if Nero was not the only one fiddling while Rome burned. CUNA and NAFCU have been silent on the single greatest issue facing credit unions. Nothing can be more important than holding NCUA accountable for their management of over $50 billion in credit union assets and the takeover of the largest corporate credit unions.

    Imagine if NCUA was subject to examination. I can offer the following examiner findings all of which qualify for a letter of understanding or at least a record of action;

    1. Failure to obtain audited financial statements on a timely basis.

    2. Failure to provide timely financial statements.

    3. Failure to document vendor management (audit firm and brokers).

    4. Failure to control expenses (broker's fees, fees to consultants and audit fees).

    5. Lack of Board oversight.

    That looks like a CAMEL 5 for management. Let us hope we see a serious CUNA inquiry and either a full accounting from NCUA or public hearings by Congress.

    Henry Wirz