Tuesday, January 17, 2017

Rants And Raves...

Had about given up on everybody's favorite "Rants and Raves" until a snow storm delayed copy of Spruce Pine's finest newspaper arrived over the weekend.  

The sniping around Mitchell County had grown a
bit dull of late perhaps because the Mitchell-News Journal [link] had a new editor, or November's election shock still had hold, or maybe its just harder to be snide and snarky around Christmas - who knows? But "the quality" - or whatever you call it - of the
repartee was way down! Folks were simply asleep at the squeal! Well, until this one...

*  "Is anyone missing a very unusual pet rabbit  If so, call 828-765-7045. I have it."

Now I must admit that I didn't have the nerve to call that number to find out what was "very unusual" ; but...

Monday, January 16, 2017

All Of God's Children....

"Now is the time to make real the promises
                           of democracy."

"Now is the time to make justice a reality for all of God's children."

          - Martin Luther King, Jr.

Sometimes it's important to...

Sunday, January 15, 2017

Difficult Choices

If you had to choose between drinking wine and being CEO of CUNA, which would you choose?

Saturday, January 14, 2017

Airport Sit-uation.....

Next time you're flying through Chicago, don't miss the airline seat display in O'Hare Airport proclaiming the "greater leg room" a certain airline now provides? 

"Greater leg room" on an airline is, in and of
itself, a pretty peculiar idea.... 'bout as oxymoronic as jumbo shrimp, killed by friendly fire, pretty ugly, cold as hell, educational TV, compassionate conservative, fiscally responsible liberal, honest lawyer, happily married.... robust regulation!

....but nowhere nearly as strange as the folks at the airport who were sitting in the display seats while waiting for their flights!

Why do folks want to practice being uncomfortable....?

Friday, January 13, 2017

Insular, Isolated and (therefore we're all) In Jeopardy...

Fed Annual Reports:  Dealing with
 gloomy forecasts and "uncertainty"...
Was reading the Annual Report of the Federal Reserve Bank of Philadelphia recently.  That's the sort of thing one does on a dreary, overcast day, when you're down with the flu, fevered, somewhat dazed by antibiotics, and lacking the resolve to venture far from the couch or "the facilities" - if you know what I mean. (Otherwise, wouldn't recommend Federal Reserve annual reports to anyone under normal circumstances.)

Found two things of particular interest in the Philly Fed's annual progress report. First, the commentary piece [ "Fiscal Policy and Monetary Policy:  Restoring The Boundaries"] by the President of the Philadelphia Fed, Mr. Charles I. Plosser, is a strikingly thoughtful review of overall Federal Reserve policy since 2008, outlining much concern that The Fed may have dangerously overstepped its monetary mandate and outlining the daunting difficulties ahead. 

The Fed, the Congress, and the Country are at significant risk in trying to unwind the current fiscal "dire straits" in which we now find ourselves.  "Fevered or unfevered", the article is well worth your time - and most fortunately, it's written in intelligent, "non-robust" English and runs just a couple of pages. 

The second point of interest was the wealth of ways the Philly Fed is involved within the Fed district it serves. The annual report prominently marks the numerous sources of advice and feedback the bank has developed to assure it stays informed and attuned to the folks it serves. 

There is a nine member Citizens Advisory Council of which Mr. Plosser says:  "I am grateful for the continued advice and counsel of the nine citizens who serve on the board." There is also an Economic Council composed of leaders from District industry, manufacturers, and non-profits.  The Community Depository Institutions Advisory Council has 12 financial leaders, including two representing credit unions.  And, Mr. Plosser even speaks proudly of the District's representative on the national Federal Advisory Council which meets quarterly with the Chairman and full Federal Reserve Board.  

Yes, even "The Big FED" has several working advisory councils which meet regularly to provide insight, as does the FDIC, as do the Federal Home Loan Banks.  One of the very first initiatives of the brand spanking new CFPB was to create citizen/business advisory groups - in which credit unions were thankfully included.

So, here's Test Question #1:  Name the one federal regulatory agency which hasn't formed any advisory groups to provide periodic advice and counsel?

Thursday, January 12, 2017

Time For A Choice... Or A Complete Change?


The Federal Deposit Insurance Act

Section 1(a) Establishment of Corporation

"There is hereby established a Federal Deposit Insurance Corporation (hereinafter referred to as the "Corporation") which shall insure, as hereinafter provided, the deposits of all banks and savings associations [and credit unions] which are entitled to the benefits of insurance..."

Wouldn't  take a whole lot to....

Wednesday, January 11, 2017

NCUSIF Annual Assessments

NCUA's robusterian capital market folks are always primly proud of their "market savvy" and economic forecasting talents - they view themselves as without peer! And, most folks agree with that assessment! [Sorry to use that word; it just slipped out...]  

Immersed in their interest rate risk bi-polarity and non-maturity share hysterics, these mavens of "make-it-up" encourage credit unions
Never at risk! 
to develop and adopt a similar "strategic vision". But, there is one difference in your strategic planning and theirs - you actually have to live with your results; the robusterians at the NCUA are not challenged with the burden of accountability. You pay for their antics! [Prepare to pay... and pay... and pay again!]

Here's a little matrix you can use to build a recurring NCUSIF assessment into your credit union strategic plan...

Tuesday, January 10, 2017

Why the NCUA Can't Pay Its Bills Going Forward... Without Annual Assessments On Credit Unions.

No way out! Face the music...
... and the assessments!

The NCUA has   cornered a rat ! 

And, that rat  be you!

It's taken a few years of "indiligent" [and, of course, unaccountable, untransparent and perhaps incompetent] planning and management, but the NCUA staff has finally done it - worked us all into a corner!

On November 17, 2016, the NCUA senior staff announced they had run out of ideas - and money! - to an "awestruck" NCUA Board... and that a $300 to $600 million assessment on credit union members would be necessary in 2017 to maintain the targeted 1.30% equity ratio of the NCUSIF. [here's the link] 

What the senior staff evidently didn't tell the NCUA Board - and certainly hasn't mentioned to credit unions - is that additional annual assessments will be required for the next several years - unless NCUA changes "its thinking" - and we all know how "robustly" unlikely that is of happening!

Let me show the simple math on how you know NCUA is getting ready "to move your cheese" on a regular annual basis...

Here are the components of our equation:

#1) The approved 2017 NCUA annual budget: @$300 million.

#2) The % of the $300 million annual NCUA operating budget drawn from (called the overhead transfer rate - the "OTR") the earnings of the NCUSIF: @ 2/3rds or $200 million.

#3) The balance in the NCUSIF: @ $13 billion.

#4) The NCUA staff projected yield on the NCUSIF over the next 3 years: < 2.00%.

#5) Current level of insured shares: @ $1 trillion.

Alright, ready?!? We're going to do the simple math - OK? 

Monday, January 09, 2017

Size Doesn't Matter...

Nice rack!

Least most of us "normal" males hope so!

Probably a good time to stop and address the recurring reader comments which suggest that NCUA's budget should be compared to the budget of the FDIC, based on the asset size of credit unions vs banks examined.

The number of credit unions continues to fall year after year.


The thought being that since the FDIC spends substantially less "per dollar of assets examined" than the NCUA, then the NCUA is obviously "bloated, top-heavy, siloed, and inefficient" [to quote Jim Nussle talking about CUNA - btw, whatever happened with that?.]  

Let me suggest that "size truly doesn't matter" - in fact, size generally doesn't matter at all - in capturing the "risk" profile of a credit union.   Regulators examine to monitor the level of "risk" at an institution, not the volume of assets. Actually, it's pretty clear that the larger the credit union, the less likely the CU is to create a loss for the NCUSIF. The Agency's own data proves that fact:

NCUA Board member Mark McWatters has pointed out on several occasions over the last year, that the vast majority of recent NCUSIF losses have arisen from fraud losses at smaller CUs,
where controls and compliance more frequently break down. But, before we "run off half-cocked", do remember that less than 1% of all credit union assets are in credit unions rated "CAMEL 4&5", less than "safe and sound"

Small and large alike, credit unions pose little risk to the NCUSIF and no risk to the financial fabric of the Nation. But the NCUA is "in a bind" structurally and budget-wise, as the number of credit unions continues to plummet. 

Clearly if NCUA can't  shift the budget dialogue to "asset size = greater risk" then the Agency will have to face the unpleasant task of reducing its budget to reflect the statistical and economic reality that monitoring fewer, larger credit unions in an all electronic, cyber-digital world requires very few staff - and not the staff which the Agency currently employs.

But facing up to the reality that:

Matter Of Fact...

"Things that matter most must never be at the mercy of things that matter least."

- Goethe