NCUA Audit Reports Show There’s Something Wrong

The NCUA board touts its payback to credit unions, but soaring reserves hide a different story.

 
 

The NCUA made history at its Feb. 15 board meeting, but not because it approved returning $735 million to the cooperative system.

That money is not a win; it's a consolation prize from the $2.6 billion surplus connected to the merger of the Temporary Corporate Credit Union Stability Fund into the National Credit Union Share Insurance Fund. The NCUA is running out the back door with attorneys dividing the loot from one of the biggest rip-offs in our cooperative insurance history.

 

 

Now, here’s the really shocking news. The regulator also issued the results of its Dec. 31, 2017, audits. The current board is now responsible for overseeing the first operating loss — $229 million — in the NCUSIF’s history since recapitalization in 1985.

The NCUSIF also posted in December its largest ever monthly loss provision expense: $657.8 million.

Further, the allowance for losses at year-end 2017 was $925.5 million, compared with $196.6 million at the end of 2016.  With the exception of 2010, when the recovery from the financial crisis was just beginning, that’s the highest allowance ever.

Keep in mind, actual share fund net cash losses were only $18.9 million for all of 2017. The economy overall has been humming along and there were only 10 credit union failures last year. NCUA CAMEL codes 1 and 2 credit unions now hold 95.2% of the movement’s assets, the highest since 2007.

Yet late last year, NCUA allocated $818.5 million in specific reserves to cover what it says are probable failures with a reasonable estimate of those losses. The first 11 months was radically different. Only $73 million was expensed as loss provisions as of the November financial report. The resulting allowance at Nov. 30, 2017, was $265.9 million for general reserves and $20.9 million for specific natural person credit union probable losses.

Also read: Save The Share Fund From The NCUA

So, what happened in the 30 days after Nov. 30 that prompted the NCUA board and its staff to report a historic loss during a time of long-running economic growth and industry success?

How can an $800 million last-second adjustment occur for a loss of this magnitude? Who was responsible for the oversight and who provided misleading or blatantly erroneous data to the board and credit unions in the monthly NCUSIF financial reports prior to this?

The board would like to pin this on the problems with two conserved taxi-medallion credit unions. But how could its own staff fail to see problems that would necessitate raising specific reserves by $800 million in just 30 days? Given the NCUA has been in all taxi medallion lender shops every month for more than the past two years, that excuse seems highly suspect.

If this is the NCUA’s definition of transparency, then what does that word mean? And what else might be hiding from view? Is there something else happening that the board doesn’t want to attract attention to because it could be awkward to explain?

Did credit unions have their pockets picked as the NCUA board tried to placate them with the expectation of a $700 million dividend? What is the real story of what happened in December? 

Download the full audit here and start your review.  This fund belongs to credit unions, and it is the members’ contribution to it that is at stake.

 

Feb. 19, 2018


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