Thursday, April 23, 2015

CUNA's Alternative Universe

In reading the risk-based capital comment letter from the Credit Union National Association (CUNA), I came to the conclusion that this trade association is operating in an alternative universe from the rest of us.

CUNA writes:

"From 2008 to 2012 the NCUSIF fund balance never fell below its historical range of 1.2% to 1.3% of insured deposits, despite the failures of 124 credit unions. This stability in the fund ratio was accomplished with just two share insurance premiums, in 2009 and 2010, totaling 24 basis points of insured shares."

However, this comment by CUNA is disingenuous.

It fails to take into consideration that the cost of the corporate credit union debacle was transferred from the NCUSIF to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).

If the losses from the corporate credit union debacle stayed with the NCUSIF, the equity ratio would have fallen to 0.11 percent of insured deposits, according to NCUA analysis. This would have been well below the normal operating level set in law for the NCUSIF.

In addition, credit unions paid $4.8 billion in assessments to the TCCUSF.

Maybe in CUNA's alternative universe, the corporate credit union fiasco did not happen. But for the rest of us with our feet firmly planted in reality, we know that without the corporate credit union bailout, the NCUSIF equity ratio would have fallen sharply below the normal operating level.


  1. CUNA has to be in an alternate universe to avoid the accepting the truth that resides in the real world. A truth that includes, but is not limited to:
    Their advocacy is an abysmal failure and the dues we pay have been money down a rat hole.
    Their existence is sustained thru unprofessional and unpaid directors that like being paid via conferences and trips that leads to less accountability than congress.
    Cuna's rush to squelch the CCU debacle included rushing out the drug induced Hample white papers that only he could read or understand but started in 2008 by saying "this will only be 10 bps and credit unions should just pay it and move on". While he was sent packing by wescorp when he tried to look at their investments and while Cuna had 2 board seats at the corporate.
    Cuna proudly proclaimed credit unions wouldn't be seeing a risk based capital regime and then looked amateurish in fighting it.
    Mis counting the new members during bank transfer day and mis counting the total number of members and the taxes they pay (question, does ANY person associated with credit unions believe for one second that Congress buys that drivel? Because here is the truth, they don't. Those idiotic ads are launched so that Cuna can tell credit unions they're doing something with the dues..wake up!).
    Cuna got scooped by Dr. Leggett on the recent NCUA proposal to change the insurance calculation to mirror FDIC...and STILL hasn't explained to credit unions what it could mean to us in total if NCUSIF cap goes to 2+%!!
    CUNA= Credit Unions Not Accountable to members because trips and conferences are a powerful motivator.
    Here's what we did.
    Quit Cuna.
    Use the money for members and send directors on trips to venues where they actually learn something (Disneyland?).

  2. We at CUNA have not ignored the huge cost of corporate stabilization. In fact, we mentioned it just a couple of week’s ago in our reaction (see it here: to NCUA’s whitepaper on possible changes to the National Credit Union Share Insurance Fund. However, NCUA’s Risk-Based Capital Proposal would change capital requirements for natural person credit unions. The fact remains that insurance fund losses caused by natural person credit unions during the recent financial crisis were minor considering its severity, and tiny compared to Bank Insurance Fund losses. Banks were under a Basel-style RBC system during that crisis, and natural person credit unions were not. So, we hold that natural person credit unions don’t need to be subjected to a Basel-style RBC system to protect the share insurance fund from future losses.

  3. Hi Bill:

    I will grant you that losses to the NCUSIF from natural person credit unions was limited. But there are numerous factors that limited those losses, such as the MBL cap and personal guarantees on business loans. If credit unions had the same level of exposure to construction and land development loans as community banks, I would suspect the losses to NCUSIF from NPCUs would have been higher.

    1. Bill, you go girl!
      More of that delusional "Fantasia" style logic that can only come from a Cuna!
      Dr. Leggett is correct yet leaves out something we have observed in our market and nationally...were it not for NCUA propping up texans and aea with 208, were it not for system wide regulatory forbearance on those 2 credit unions, Keys, Evangelical and many others the losses would have been much higher. In fact, when we were studying whether to leave the charter reluctantly, we determined it would be MUCH safer to be a bank. The troubled assets as a percentage of the industry were ALWAYS much lower (still are) under FDIC. And then, FDIC didn't tolerate them.
      The only reason we haven't left is ncua's illegal jailing of credit unions with their rules and the interference from you and others.
      We'd gladly trade taxes for a real regulator and to be able to run our shop like a real financial and no kore of this partially evolved nonesense.
      As you at Cuna just said, "if congress taxes credit unions, the industry is done"
      Couldn't agree more, no value other than tax free..
      ...and everyone knows.

  4. Unfortunately Dr. Leggett is correct (and saying that pains me greatly) that CUNA is in la-la land. CUNA continues to make piss-poor decisions... happened under Mica, Cheney and now Nussle. CUNA and NCUA were culpable in the entire corp crisis. Culpable in the creation of the CFPB. Culpable in white-washing the financial condition of small credit unions. Culpable in lying to us about having the votes on MBL. Culpable in getting run over by the banking lobbying. Culpable in running silly ads on, of all days, April 15, the day everyone else pays taxes but us (brilliant decision there lads). Time to be held accountable for making decisions that are not only detrimental to their dues-paying members but the entire credit union movement.



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