Monday, February 27, 2012

Section 208 Bait and Switch

When NCUA finalized its rule allowing Section 208 assistance counting as net worth, the agency wrote: "there is nothing in the statutory change that states that section 208 assistance can only be counted as net worth when a merger is involved."

However, the hearing transcript record paints a different picture. In her oral statement, NCUA Chairman Matz stated the following regarding Section 208 assistance:

"The first amendment would strengthen the ability of NCUA to complete emergency mergers. A recent change in merger accounting would dilute the net worth of the recipient credit union, thus discouraging the merger. Often, as a result, the troubled credit union has to be liquidated. We are requesting that NCUA assistance
to the failing credit union be counted as capital by the surviving credit union, as in the past. This would reduce the costs to the Insurance Fund and provide members of troubled credit unions with continued services from healthy credit unions."

No where in her testimony did she say that Section 208 assistance would be used to keep open a failing credit union by injecting it with capital from the share insurance fund. It is clear from her testimony this assistance was meant to make it easier for NCUA to complete emergency mergers by preventing the dilution of the net worth ratio of healthy credit unions.


  1. Suppose NCUA Chairman Debbie Matz made a mistake in her testimony. After all she is speaking on behalf of a federal agency. The NCUA has made mistakes before. Mistakes could happen again. Oh wait...they're happening now. You can't fix dumb.

  2. The Chairman is in the habit of making mistakes.



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