Thursday, May 16, 2013

Derivatives.....Passing the Buck..



Duke Street, Alexandria !!!
Well, y'know it really did come as somewhat of a surprise to many of us that you, one of the committed, hardcore, fearless, philosophical leaders in the warm and fuzzy, not-for-profit credit union movement, had decided to become a "wheeler and dealer" in Wall Street derivatives.  And that, you had been aggressively pushing the folks at NCUA to let you "get in the game"! 

 Credit unions represent a huge new opportunity for "derivative dealers"; just imagine, potentially 7,000 new, sophisticated CU "derivative traders" ready "to play" - 
ROLL 'EM, MAN, ROLL 'EM !!!

Nothing like a "sure thang", a "sure bet" to get those investment juices flowing is there !!! And, we've all taken the course and signed the pledge acknowledging our full, "over-21", fully liable, willing-to-go-to-jail understanding that a derivative is a contract between two parties - a buyer and a seller - seeking their individual best, self-interest in terms of RISK.  That both parties are placing risk bets based on a very uncertain future - right?

 ROLL 'EM, BABY, ROLL 'EM !!!

So here are the 3 key features of the new NCUA proposed rule:

  1. The rule will be unfathomable, but fully and whimsically enforceable.
  2. The CU Board will be held fully accountable for both what is implied by the rule and/or "concocted" by the examiner, who will use a "robust presumption of guilt" exam approach.
  3. The NCUA will "pull a Corporate" ("signed off but it's still your fault") should you have a problem.


 Welcome To Wall Street !!
Can we do lunch?

... actually the new rule represents the execution of your very first derivatives contract... 

"Heads they win, tails you lose" !!

  
ROLL 'EM , MAN, ROLL 'EM !!!  

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2 comments:

Anonymous said...

Derivatives to Credit Unions is like children with matches and should not be played with.

May 16, 2013, 8:15:00 AM
Dennis Moriarity said...

I would suggest that we create a pledge sheet that states "despite the newly authorized authority of Credit Unions to utilize Derivative's in their investment strategies we will not due to the complex and dangerous potential outcomes that could place, not only ourselves but our Sister Credit Unions, in jeopardy and require them to pay for our mistakes". Circulation of this type sheet and subscription (possibly within each state) would carry with it a public movement rejection of NCUA's misguided efforts to enable opportunity but by doing so increase risk exponentially without regard to the threat to the fund.

May 16, 2013, 10:39:00 AM

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