Monday, July 26, 2010

Report Shows Sharp Rise in Administrative Actions at Credit Unions

I would like to acknowledge an excellent piece of investigative journalism that appears in the July 26th The Safety & Soundness Report by Aaron Steinberg (paid subscription).

According to this special report, at least 75 percent of all credit unions are under some type of administrative action letter -- Document of Resolution (DOR), Letter of Understanding and Agreement (LUA), and Cease and Desist Order (C&D).

The report states that "[o]f the 7,500+ CUs, both state and
federal, currently in operation:
• 5,711 are operating under DORs;
• 252 are operating under LUAs; and
• 21 are operating under C&Ds."

The report points out that the number of administrative action letters have grown rapidly, since the beginning of 2008. For example, there were 62 LUAs issued in 2008. LUA issuances climbed to 140 in 2009 and credit union regulators are on a pace to issue 226 LUAs in 2010 (based on January 1 thru June 1 information).

The data for this special report was obtained through a Freedom of Information Act request.


  1. How is it that none of this seem to be making the media headlines? The FDIC is totally upfront about the closures it conducts and makes no excuses.

  2. It is upfron about the closures, but does it state how many are under some administrative order? I haven't seen any data, so could you provide where that information is?

  3. The banking system is in a much worse situation than Credit Unions. So what if a credit union has gone below 7% capital and was issued a DOR or a LUA they still have more capital than most of Banks! The government will not even think of helping the credit union system out because credit unions have plenty of capital in the system. There are about 7,000+ credit unions and about 7,000+ banks and only 21 CUs have Cease and Desist Order but over 150 banks have been liquidated so far this year! How many banks have C&Ds, Every week another 5 or 10 banks are liquidated. This story should be about bank liquidations in my opinion. Any pain that credit unions are experiencing is directly related to the creativity and greed that banks have so irresponsibly been allowed to continue, while our liberal banking leaders pushed for more bad loans and more creativity. Get your head out of the sand on this stuff and quit sitting on the sidelines! Credit unions are doing well considering the alternatives. Tell everyone, it's time to spank the banks! Get excited, bankers have to write stuff like this to try to make themselves look good. How about we compare the 7,000+ banks capital to asset ratio to credit unions. You'll see some kick but there, credit unions rule because they are more sound than banks. Put that in your pipe and smoke it! Please... go on to Barany Frank's web site and check out his crazy associations and his passions. People like this in our government drove our banking system into the ground! Look when he served, guess what… he blames everyone else just like his fearless leader Oboma. Yes, either political party could have tried to stop the crazy lending in banking but remember the liberals started the craziness and then protected it with their lives attacking anyone who tried to be sensible and vilifying them, that horrible guy Bush tried to point out the problems in banking system, but he was chuckled at and called names. What do Americans need to happen before we get of the sofa and stop letting crazy politicians mislead us. I've never been more scared of government in my life as I have been in the last 18 months. This change is bad! I hope you guys sleep better than me at night. Do something, say something, it's time! The Goose!

  4. Information on enforcement actions are searchable at the various bank regulatory agencies. FDIC publishes a monthly list of state chartered non-member banks that are under various types of enforcement actions. I am providing below links to each of the federal banking agency websites as to where you can search various bank enforcement actions.

    Here is the link to FDIC:

    Here is the link to Federal Reserve:

    Here is link to OCC:

    Here is the link to OTS:

  5. Keith,

    Thanks for the links.

  6. Too funny, Bankers must really be desperate. Really stretching it aren't we? You even know what a DOR is for a Credit Union? It is evident you do not. Just another Banker tactic to try to fool the public like they do their customers day to day on products offered and fees charged. Here is come advice I would pay attention to your own back yard trying to repair your own crumbling world than do research on Credit Unions. I think you got into this because you didn't have your eye on the ball. Credit Unions are doing just fine. Hey at least they are covering any losses they may have with their own funds rather than continually dipping into our tax $$. Tisk, tisk, still haven't learned any lessons have you all?

  7. I googled Keith Leggett’s Bank Watch, found nothing. I too think it is comical the ABA is paying someone to watch an industry that is eating their lunch! Wow this is sad. Another example of bankers wasting $$. I agree with the last comments. Nicely put!

  8. Clarification for idiots:

    The report confuses facts. The blog post is not a restatement of an “excellent piece of investigative journalism,” but rather the conclusion of someone who doesn’t understand contemporary supervision and exam practices in various federal banking Agencies, combined with a rush to disparage a segment of the American financial system for personal/payroll gain.

    Documents of Resolution in the credit union space were historically exam findings, not available for public disclosures, nor in any manner in the same class as Enforcement Actions. In the past the topics of a DOR included the most important examiner findings needing correction as a priority, passed from examiners at the end of a review, and given mostly to troubled institutions. Today in both credit unions and in banks alike, vastly more examination is done remotely by computer modeling based on quarterly reporting, handled by the Agencies offsite and between regularly scheduled exams. Variances or trends of concern are communicated in writing, to all institutions, regardless of their state of health. The general format for these communications by the credit unions federal deposit insurer is via a standard Document of Resolution, often as pre-written DORs given to a CU at the first appropriate opportunity. Communication is written so an institution can respond.

    The Inspector General for the NCUA has reported on the growing number of DORs issued to all credit unions (including a high percentage of well-run CAMEL 1 & 2 institutions) for a number of years, and the NCUA has responded to these observations appropriately. In a number of these reports, the total number of DORs is reported in aggregate. FOIAs were not necessary.

    It is wrong to heap good and fair regulatory observations together with a relatively small number of published Enforcement Actions in order to suggest that 75% of all US credit unions are unsafe or unsound. Aaron Stienberg of The Safety & Soundness Report deserves an official rebuke from a national trade group or credit union industry official as well as the federal Agency NCUA itself.

    It is much worse for ABA’s trained economist to not understand the mismatch in the report’s data points. The rush to repeat the error in order to harm a portion of the US sovereign financial system may itself represent a liability.

    Lastly, it is wrong for blogger Leggett to suggest that banks’ exam findings, in writing and in similar structure to CU DORs, are available on any of the websites offered. Routine and/or summary bank examination findings are not public documents.

    Not good investigative journalism in any way--and all offered as a clarification for those appearing to be in desperate need of a remote exam, themselves.

  9. I agree with the commenters that DORs are not published, just like bank exam findings. I probably made too much of a case about the DORs.

    However, this is the first time I saw an actual number of credit unions under LUAs and C&Ds. I only wished that all these LUAs and C&Ds were published.

  10. Keith,

    I agree that on both sides it would be nice to see what is published and why. At least the Federal Reserve posts their written agreements, even though they don't have a ton of information about what is actually the problem.



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