The management and the credit union’s board has requested that members vote for the change in deposit insurer.
If approved, accounts at Velocity CU would be insured through American Mutual Share Insurance (ASI), the last remaining provider of private share insurance.
The credit union cites several factors in favor of converting to private insurance.
Velocity points out that due to estimated losses in the National Credit Union Share Insurance Fund (NCUSIF), it was assessed a premium in 2009 of $675,106. Velocity CU stated that this premium payment adversely affected the credit union’s earnings and net capital in 2009.
Additionally, Velocity notes that with ASI coverage, each individual member’s account is insured up to $250,000 and there is no limit to the number of accounts insured up to the $250,000 limit.
However, a Las Vegas Review Journal article cites a Government Accountability Office (GAO) study from October 2003 study stating that “ASI has limited borrowing capacity and could find it difficult to cover catastrophic losses under extreme economic conditions because it does not have the backing of any governmental agency, its lines of credit are limited in the aggregate as to the amount and available collateral, and it has no reinsurance for its primary share insurance.”
ASI in response to the GAO study stated that “no member of an ASI-insured credit union has ever lost money” and it can reassess its member credit unions up to 3 percent of their total assets to raise more capital in the case of catastrophic losses.
But the Las Vegas Review Journal article points out that depositors in Rhodes Island did not fare as well when the private insurance fund in Rhodes Island failed.
For Velocity to convert from federal insurance to private insurance, at least 20 percent of the membership needs to vote on the proposal.
Below is a disclosure posted by Velocity Credit Union on the facts about the vote (click on image to enlarge).
As a Velocity CU member, I'd like to say that this whole affair was mishandled and miscommunicated. The first indications about the vote were the ballots arriving in the mail. No explanations other than The-Board-recommends-a-Yes-Vote was given. This was my unvarnished reaction:
ReplyDeleteSo the Board handling half a billion in assets is so mismanaged that it cannot handle an increase in premiums -- and its solution to this problem is to remove the government safety net out from under its depositors.
Perhaps I was to view their decision as a modern, savvy board looking at every option to make depositors' investments work as hard as possible. I didn't. I viewed it as an admission of their incompetence to handle fluctuating markets and a knee-jerk solution to jettison their depositors' financial security.
The gall! What did they expect from this vote? Voting it down still meant these folks can't be trusted with my money; and approving the vote would result in a mass exodus of assets further exacerbating the problem that caused the vote in the first place -- and the only ones at risk are their depositors.