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| "TROUBLED CONDITION" |
According to the CUTimes (1/11/13), the NCUA Board yesterday approved another self-justified and self-serving new rule which permits the Agency to independently designate a state-chartered CU as "in troubled condition," which generally means a CAMEL 4/5 code rating.
The NCUA took this action over the "criticism from trade associations concerned it meant the dual chartering system would take a hit." NCUA's respect for our trade associations, particularly CUNA and NASCUS, is of course well-known and of long standing. The rule change, however, should not have come as a surprise.
In August 2010, NCUA officiously announced it would begin issuing independent CAMEL ratings for state-chartered CUs - ending a long tradition of concurrence with and deference to the CAMEL rating issued by the state regulator - the controlling legal authority on these matters. Those paying attention at the time raised questions concerning which CAMEL rating would take precedence should disagreements occur? Our national trade associations promised to write letters to and to "do lunch" with NCUA to resolve the concern.
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| L'etat-charter, c'est moi! |
But, take a look at what else NCUA said....
"Widerman [Steve Widerman, NCUA's attorney at the NCUA Board meeting] said the rule was not "an authority contest"and stressed that NCUA's new ability to override state regulator CAMEL codes only applies to the troubled condition status."(CUTimes)
"Widerman [Steve Widerman, NCUA's attorney at the NCUA Board meeting] said the rule was not "an authority contest"and stressed that NCUA's new ability to override state regulator CAMEL codes only applies to the troubled condition status."(CUTimes)
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| Someone thinks you're stupid.... |
Well yes, guess it really ... was not "an authority contest" if NCUA now unilaterally has the right "to override state regulator CAMEL codes..."
IN YOUR STATE, IN EVERY STATE IN THE COUNTRY....
Our state credit union laws, enacted by constitutionally authorized legislatures and by democratically elected State representatives; just got pre-empted by farce on the undemocratic whim of two unelected individuals - political appointees - fronting an independent (we answer to no one!) Agency famed with a clear, current, well-documented record of regulatory over-reach and failure.
Regardless of your charter or of your politics, you should be enraged as a citizen by this act...
What can be done?
14 comments:
The solution calls for the insurance function to be separated from the regulatory function. NCUA has to be overbearing as long as they are the insurer. Maybe a system of independent arbitration be in place when the state and the federal interests are not in agreement. Because everyone is tied at the hip on the insurance issue, you would not want to be liable for another state's regulator rating who is heavily influenced by a large state chartered credit union with significant political influence in the state.
Maybe it is time you questioned what your trade associations have done for you lately?
Sorry for the technical difficulties this morning in getting the post published...it is unbelievably difficult to type with clenched fists!
One continuing myth and misconception (which NCUA always conveniently fails to correct) is the assumption that the State regulator is in the wrong...that NCUA possesses a higher level of understanding and accuracy in its analyses.... maybe so, maybe not.
But, don't disregard the actual facts - that state chartered CUs are paying dearly for the clear ineptitude of NCUA's elite examiners via US Central FCU, Southwest FCU, Wescorp FCU, St. Croatian FCU, etc ... NCUA's errors are both larger, more costly, and more frequent than at the State level.. just check the facts. Did I mention Capcorp...sitting smack dab in NCUA's own backyard?
NCUA has quite a track record! In responsibly managed CUs, those who fail are not given greater authority... think a CEO or Board which repeatedly rewarded failure would be rightfully accused of negligence... at least that's what would happen at the State level!
Alexandria apparently has its own rules...
Everything you say has a lot of truth. No one is suggesting that NCUA is without a lot of SIN.
However, we find ourselves subject to the Golden Rule:
The Insurance Fund is credit union's gold and NCUA is rightfully or wrongfully in charge of the gold, therefore they rule.
Separate the authority from NCUA and change the power-base!
Separation of powers is a basic tenet of prudent, responsible CUs (or any business for that matter!)...often referred to as "dual control"! Those who don't practice dual control, separation of powers are generally regarded at best as reckless...with a lot worse adjectives also coming to mind.
So, a separation of the NCUSIF from the NCUA makes sound prudential sense... the combination of regulator and insurance fund under the FSLIC for S&Ls showed what will happen if the separation is not acted upon. Calamity, perhaps, is not a question of "if", it's only a question of "when". In fact, we just recently barely dodged that last fatal insurance fund bullet to the brain...
One problem is that the NCUA has increasing drained (some say illegally) earnings from the NCUSIF to support its operating budget which is suffering from profound fiscal obesity. Approximately 60% of those trips to DisneyWorld and "unusual" travel expenses are funded by the insurance pool - its called the "Overhead Transfer Rate" (OTR) for those of you who are new to the machinations and budgetary "sleights of hand" practiced by the Agency.
You see NCUA would actually "go away"- it can not justify its existence as a regulator - if it can not trump up concerns and fabricate new rules which "legitimize" its continued and increasing need "to vampire" the NCUSIF.
Really sucks doesn't it...
Didn't NASCUS publish a "white paper" addressing the separation of powers within NCUA? Whatever happened to that?
Ah, NASCUS now there is an interesting question... NASCUS according to the CUTimes article seems to have accepted the pre-emption of their State government employer, their local State Legislature, their State law, their individual State credit unions and members by rolling over....
Assume that NASCUS understands that they have acknowedged and acquiesed to the supremacy of NCUA over the State regulator/charter....
NCUA has clearly said, when there is a disagreement on CAMEL's 4/5....We're right, you're wrong.
State regulators are "The Duck" (see blog) in all this...
Every credit union manager, trade association and member should go to their Congressman and demand a simple legislative amendment that would add credit unions to the type of financial institutions that may be insured by FDIC.
If you want a strong deposit insurer - and why wouldn't you? (a weak one is so expensive to "keep up" !) - FDIC is without question "First In Class"....
Perhaps CUs which reach $1 billion in assets should be given a choice of insurers.... those reaching the $10 billion "CFPB range" might be required to switch to FDIC coverage...
After all, NCUA's leadership claims that the large CUs are where all the risk lies for the NUCSIF. If the NCUA leadership is telling the truth then:
1) Moving the larger risks to FDIC reduces the risk to NCUSIF.
2) Eliminating risk within the fund will lower the cost for the remaining CUs
3) NCUA will not have to withdraw experienced examiners from smaller CUs so exams will improve.
4) NCUA will not have to develop the new "ONES" section for the largest CUs... which will not be in place for quite some time. NCUA has tacitly acknowledged it does not have the structure, systems, nor personnel in place to be effective with the largest CUs... why go to the expense of "re-inventing a wheel" that already exists at FDIC?
5) Smaller CUs are paying millions in additional premiums for the past "sins" of their larger, primarily federally-chartered failing peers. Why would most CUs want to "stay on that risk"... with the same folks, systems, personnel, and leadership?
6) If "interest rate risk"(IRR) is such a "Mayan level" concern at NCUA these days... aren't they acting IRResponsibly by not mitigating themselves?
Kinda like that don't you: "NCUA - Mitigate Thyself !!"
NCUA would never "allow" such a thing. Also dont think Bank$ would be too hip on sharing an insurance fund with institutions they feel dont share an "equal tax burden". Would this be a platform for bank$ to push legislators on taking away CU's tax advantage? Especially large CU's? What would it mean to "commingle"?
Feel free to correct me on these, as I dont know the answers just asking folks who do.
U-m-m, maybe so. The "tax issue" helps the ABA, et al, keep its member dues flowing, but not sure the banks would object to having additional folks help with the insurance fund on an equal premium basis.
Think you might hear many welcome CUs into the FDIC, because they "waited too long"" with the FSLIC and when it collapsed many banks felt they "got stuck" paying the tab for the bailout of the S&Ls.
And, there are many not-for-profit mutual savings banks already in the FDIC... not to mention all those banks who these days are non-profit "by accident", rather than by choice! (They ain't paying any taxes on their losses!)
Of course another option is to create a separate CU fund within the FDIC. How much longer can CUs and banks justify the costs as their number of institutions shrink? CUs get the expertise of FDIC and we cut out the NCUSIF administrative expense. NCUA continues to supervise federally charter CUs not unlinke OTS did for many years.
Are credit union boards, managers, members or others exploring the FDIC option? As long as NCUA has control of your money they will use it to their advantage. Why do you allow this to continue? You exercised your right to vote for your Congressional representative, now exercise your right to free speech!
All good qustions ! Generally you would hope that our trade associations would give an answer and direction....perhaps "someone " should ask directly, publicly.
Or perhaps the deafening silence already provides your answer....
But let's be fair, it's hard to fit such trivial questions into an already packed schedule:
Monitor-Monitor-Do Lunch-Monitor-Monitor....(now repeat).
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