Wednesday, July 31, 2013

The Past As Prologue.... Derivatives.

"Corporate System Remains Strong"

"... the very low level
of risk..."
" The assets of the corporate system remained relatively stable in 2006.  In March 2006, corporate assets reached a high of $128.5 billion and declined toward the average over the next several months.  The dollar amount of capital continues to increase. " 
"Capital levels are appropriate considering the very low level of risk in corporate credit union investment portfolios."
- The 2006 Annual Report of the
National Credit Union Administration*
*(page 21 just for the record.)

Tuesday, July 30, 2013

Beach Ball Regulation.... Derivatives.

An American Classic !!
Can't imagine that anyone who has grown up in America is unfamiliar with that classic summertime plaything - The Beach Ball. 

Everyone and his cousin have splashed about in a backyard kiddie pool or amidst sand and surf with one of those inexpensive, tri-colored, "couple of puffs" to inflate, plastic orbs.  Great toy - no assembly required, no rules or instructions, easily mastered by young and old alike.

Bought one last week; it had been awhile.  Back in the mode of having some "first time users" around the house.  Still pretty much the same design with the same old challenge of trying to tuck the mouthpiece back under the cover after inflation.  

"Inflation" sounds pretty elitist doesn't it (almost "robust"). We use to "blow up" a beach ball; but with the NSA monitoring everything these days, I don't want to even mention blowing anything up - if you know what I mean.

A word to the wise...

Had a moment of concern after inflation, as one of the white panels appeared to have been damaged in production with black streaks almost covering an entire panel. With the assistance of some half-granny, bifocal glasses, the problem became clearer.

To my astonishment the "black streaks" represented a stern notice to the purchaser, which was printed in 23 - no lie! -  different languages, including  Russian, Chinese, Japanese, Arabic, Greek and Swahili!

The Beach Ball notice crystalized, in six brief words, the concern every credit union member and leader should have over NCUA's "hell-bent" pursuit of derivatives.  Here's what it said:

Monday, July 29, 2013

Is God On Our Side?

Unite for Reaction!

It's a bit embarrassing and somewhat disheartening to watch CUNA in such a dither over the issue of taxation.  

But, our leading trade association is always best in "reactive mode". Reaction rather than action is CUNA's specialty; panicky over-reaction its' forte.  

If credit unions have not justified our tax status over recent years; then no amount of astro-turf e-mails, seemingly
desperate hill hikes, or frenzied "twits 'r tweets" will make a difference.  Are we who we claim to be? If so, no worries; if not, well....

But over the last few years, CUNA has perhaps "become the problem".  CUNA has consistently not "stood up" for consumers and the credit unions which those consumers own.

Woof !
Instead CUNA has repeatedly played the role of political "poodle" - lap dog to the for-profit financial institutional interests.  
If Congress is having doubts about "the credit union difference", perhaps it's because CUNA continually appears at the legislative table arm-in-arm with the banks. You are, after all, judged by the company you keep.

Could it be a different political reality for credit unions if CUNA had taken action on bankruptcy reform, predatory mortgage lending, re-establishing usury caps, bounce protection, or payday lending?

Want to see what a great difference action rather than reaction can make in the real world....

Sunday, July 28, 2013

Rocket Science....

"It doesn't take a rocket scientist to follow the Golden Rule."

- Lilnette Phillips

(Amen to that !)

Saturday, July 27, 2013

Friday, July 26, 2013

From The Field...

"Tom Robertson went to the Federal Prison for a job fair last week..."
(Ok, well, the unempolyment rate is pretty high there...)

Thursday, July 25, 2013

From The Field...

A burning question... ?
"Our calendar is full, as employees schedule vacation time with their families.  It is a busy time, but we all look forward to the beach, relaxing a bit, and probably getting sunbuns..."

(I suspect they meant "sunburns", but one just never knows these days...)

Wednesday, July 24, 2013

From The Field...

Wonder if it was silver,

"Are the rural areas of the State the only places where our members carry bullets in their pockets?  We had a bullet go off in the coin sort last week..."

( And then there was the gold tooth.... )

Tuesday, July 23, 2013

NCUA on Derivatives: "Play It Again, Sam" ..... circa 2007

Derivatives for Credit Unions:
A Dynamite Idea!

In 2007 only one type of credit union was authorized by the NCUA to transact in derivatives. The NCUA permitted dealing in derivatives only to corporate credit unions; and then, only to those corporate credit unions which the experts at NCUA had closely scrutinized and deemed fully competent and capable.

NCUA approval for the use of derivatives was

"Well, look anyone can have
an off decade..."
not a haphazard, hit-or-miss process. Authorization came only after written application by the corporate and only upon receipt of a formal, written approval letter from the NCUA
.  There were several levels of derivatives authority depending upon NCUA's exacting evaluation of the investment expertise of the applying corporate.  In 2007 the biggest, NCUA-approved user of derivatives, with the highest level of derivative authority, was Wescorp.

The NCUA assured all comers that the derivatives authorization they had given to corporates was a "safe and sound" practice and "actually reduced the risk" on corporate balance sheets to the benefit of the entire credit union industry.

You know the rest of the story; that Wescorp imploded, triggered and then compounded by its derivatives portfolio positions (see CUJournal, "Inside the Failure of Wescorp", 7/8/2013). The cost of that failure to all CUs is about $6 billion.

So what?  What I would ask you to consider is that Wescorp had a partner in dealing in derivatives.  That partner, that enabler, that monitor and authorizer was the NCUA. And, of course, NCUA has never acknowledged that role as enabler; but even that is not the current concern...

Monday, July 22, 2013

Rants and Raves....

High Times !

The mountains of North Carolina are once again "aglow":

*  "Our Governor is from Ohio, our Senate leader is from New York, and our House leader is from Florida.  All other evidence would suggest that the rest of the Republican legislature is from Mars...."

*  "In America when a politician rolls into town, it's nice to know we don't have to believe all he says."

*  "They call it prison?  Free dental, free medical and three square meals a day, color TV. rec. yard, and education all from my hard-earned tax dollars.  Maybe I am the one being punished for working and being a law-abiding citizen."

*  "If, in the Nation's largest city, you can buy two 16-oz. sodas, but not one 24-oz. soda, because 24-ozs. of a sugary drink might make you fat... you might live in a Nation founded by geniuses but run by idiots."

*  "If your government believes that the best way to eradicate trillions of dollars of debt is to spend trillions more... you might be living in a Nation founded by geniuses but run by idiots."

*  "If you must show your ID to board a plane, cash a check, buy liquor, borrow a library book and rent a video, but not to vote for who runs the Country... you might be living in a Nation founded by geniuses but run by idiots."  

But, undoubtedly the most troubling question confronting the readers of the Mitchell News-Journal:

Sunday, July 21, 2013

Got Your Back...

Thanks a lot !

"If you fall, I'll be there to catch you."
- The floor

Saturday, July 20, 2013

From The Field...

"Excuse me, but..."

"With evaluations and vacations under way, June was already proving to be a hectic month; but two weeks into the month, a pair of cows began to monopolize my time..."

(No you just think you'd like to hear the rest of the story...  you really don't - promise!)

Friday, July 19, 2013

Unite For Groucho.... A Principled Approach For Credit Unions ?

"These are my principles, and if you don't like them... 
well, I have others."
- Groucho Marx

Unite for Groucho !

Thursday, July 18, 2013

Sports Nuts....

No, No ! Not again... !!

"Only a few years ago, they helped bring the global economy to its knees. Now the quants have football in their sights."  

That quote was a lead-off in a book review of: The Numbers Game:  Why Everything You Know About Football Is Wrong - by Chris Anderson and David Sally (Financial Times 6/22/2013). The use of statistics in attempting to analyze sports performance is old-hat for American readers of "Moneyball" and the success of the Oakland A's.  

But the review had much to say about the continuing "foolishness of failures" brought on by the "quant-lite" practitioners in the field - those knowing too little to be wise, but just enough to be dangerous to the rest of us.

"There is something disturbing [ in this book] 
Limitless  Pontificators !
in the 
lack of discussion
about the limits of statistical analysis. All involved in this area would do well to remember how badly the hubris surrounding the math whizzes in finance has served the world economy in recent years.  It is ironic indeed that just as business seems to be moving away from belief in the unbounded power of data towards a renewed appreciation of intuition and common sense, football is setting off in the opposite direction."
"If it walks like a quant and..."

Let me rephrase that:  "How badly the hubris surrounding capital markets "specialists" has served the credit union movement in recent years and... "

Wednesday, July 17, 2013

Regulatory Transparency: Another Missed Opportunity?... Or Just More Business (BS) As Usual?

George Will - 7/14/2013: "Information improves the efficiency of markets - and of governments, too. There are systemic reasons why democratic governments (and "independent agencies") frequently behave foolishly: Politicians' constant incentive is to confer current benefits on targeted beneficiaries and to defer costs."

"Secrecy is government regulation - the rationing of information.  The collection and dissemination of useful information by government serve the deregulation of life by empowering the public to direct the government (and "independent agencies"), to judge its performance, and to decrease dependence on government by invigorating the private sector."  

"In the absence of data, politicians pluck factoids from the ether..."

Tuesday, July 16, 2013

Derivatives: Smart, Strong Women Get It...

"Senators Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) are among a group of bi-partisan senators writing "the 21st Century Glass-Steagall Act," a reference to the 1933 law that separated commercial and investment banking activities before being repealed in 1999."

"The four largest banks are now 30% larger than they were just five years ago, and they continue to engage in dangerous high-risk practices," Ms. Warren, a critic of banks, said."

"She said lawmakers need to "keep the gamblers out of our banks" by separating traditional bank activities like home loans and checking accounts from riskier activities such as trading derivatives and investment banking."

- Wall Street Journal
July 12, 2013

Monday, July 15, 2013

How B@#k*rs And "Marketeers" Lose Their Credibility...

 waiting at the gate...
Was reading the label of an orange juice bottle the other day.  That's what one is driven to do when stuck in an airport with another "Flight Delayed - But we really don't care, since you have no other choice" situation.  Kinda reminded me of the TBTF "Pig" Bank "customer service model"...

Much like the often unfathomable consumer, bank account disclosures, the orange juice label made some interesting promises:

  • Contents: Vitamin C, juice of 4 oranges, double rainbows, happiness. (Well, who would have thought!)
  • All natural juice. (What's "unnatural juice", or should I ask?)
  • Naturally gluten free and vegan. (All fruits are, aren't they?)
  • No GMO. We chose not to use bioengineered ingredients when a choice exists. (Never sin if we can help it.)
  • Up to 100% plant-based bottle. (That "up to" leaves a bit of wiggle room too, doesn't it!)
  • 100% recyclable. (Thought everything was if you took the time?)
  • Give It Back ! (Translation: Throw this bottle away.)
  • Flash Pasteurized. (Organically?)

And, of course, just like the TBTF "b@&k*"consumer agreements....

Sunday, July 14, 2013

"Best Deal" Day

 The Bastille, July 14, 1789...

" Liberte, Egalite, Fraternite !!"

"Liberty consists of being able to do anything that does not harm others; thus, the exercise of the natural rights of every man or woman has no bounds other than those that guarantee other members of society the enjoyment of these same rights."

- Thomas Paine, Declaration of the Rights of Man and of the Citizen (1789)

Saturday, July 13, 2013

Say What?

Who-o-o said that ?

"A word to the wise ain't necessary -
it's the stupid ones that need the advice."
- Bill Cosby

Friday, July 12, 2013

Thursday, July 11, 2013

Overdrafts - Unite For Good ?

Better Check Bouncers!

Guess you caught the latest "Good News" story about credit unions in yesterday's  CUNA - News Now feature story.

 The article: "Overdraft Price Study: CU's Still the Best Deal" ( see  - 7/10/2013) touts the fact that a national study "shows credit unions again remain the best deal for consumers." 

Credit unions achieved this remarkable "best deal" rating by charging only $28 on average for a checking account overdraft, while those "big bad wolf" banks charged an average of $30!
Do you feel a draft?

CUNA, our national guardian of the philosophical flame, goes on to breathlessly proclaim that the $28 CU overdraft rate is... 

"considerably lower 
than what banks have charged the past five years."

As one of my astute, long-term co-workers commented about the CUNA article and this wonderful CU member advantage: "If you are going to be taken advantage of by your financial institution, we are proud to announce that credit unions will do it with a smaller screw and less often!"

Believe she was a bit too discreet in her hyperbole.  Think it would be more correct to say, that:

Wednesday, July 10, 2013

Of A Different Fabric...

Ed Callahan
... of a different fabric.

It's a bit difficult to explain to folks who never met him, what "a force of nature" Ed Callahan was as a person. (See post: 3/17/2011) He had an unusual instinct for listening to difficult issues, considering alternatives and options, and then "cutting to the chase"- clearly, decisively, on-point.

When leaving his position as NCUA Chair in 1984, he wrote a "Farewell Address" to President Regan about his view of the credit union movement. (See for the entire text).

For those looking for a defense against unnecessary taxation, a rebuke against inept and intrusive regulation, or a simple, concise statement of the hope and promise of "the credit union alternative", Ed Callahan's message still rings true:

"The only threat to credit unions is the bureaucratic tendency to treat them, for convenience sake, the same as banks and savings and loans.  This is a mistake, for they are made of a different fabric.  It is a fabric woven tightly by thousands of volunteers, sponsoring companies, credit union organizations and NCUA - all working together."

"Credit union boards of directors have made, and will continue to make, individual and collective decisions from their vantage point on the front lines of the marketplace."

"When left alone, they return to what they do best; providing basic financial services to their members on the most convenient and cost-effective terms possible."

Credit Unions: Woven From A Different Fabric.

Tuesday, July 09, 2013

NCUA Fiddles While Rome Burns...

Flaming out...
"As the Financial Times reported last week, Rome appears to have entered into interest rate swaps with investment banks in the mid 1990's. These flattered public finance figures through upfront cash payments from the counter parties, by stretching out the governments debt service over a longer period and by hedging against higher borrowing costs."

"It now appears derivatives worth $32 billion were restructured in the first half of 2012.  At current market prices, the restructuring may have cost the Italian Treasury about $8 billion. That is a big loss as a share of the derivative contracts' value...."

Think it is interesting to note that...

Saturday, July 06, 2013

From The Field...

"I am very excited about getting this new project roiling..."

(The real truth about project management...)

Friday, July 05, 2013

Strategic Defense.... Asheville: Part II

Asheville, N.C.
 ... A Must See !
OK, so here we go.... When we left off on Wednesday, the hotel was crawling with police and security and the hotel receptionist were trying to act like everything was normal in Asheville .... 

Anyway, the hotel was hosting a convention of biotech firms which specialized in DNA coding, gene splicing, and particularly in the genetic modification of plants and animals. The thought of modified plants and animals had created a lot of concern among "the tattooed

 and pierced set" in Asheville - and they had gathered across the side street to make a fuss.  

Walked out to survey the standoff.  

"Tahrir Square",
Asheville, N.C. 
protesters were a colorful group - mainly outfitted in t-shirts & REI - with beards, bandanas, and braids prevalent.  They had chosen to rally at the historic home place of Thomas Wolfe,  North Carolina's most distinguished writer (Look 
Homeward Angel and all that...). 

They held the high ground in the confrontation with the sun at their backs, highlighting the flutter of banners and signs. Their chanting however was noticeably unpracticed and their "2-4-6-8, we'd prefer to irrigate" wasn't all that convincing. Thomas Wolfe would have come up with a more rhapsodic verb...
Asheville cool...

Across the street, backs to the hotel boundary were some of Asheville's finest also dressed out appropriately, for the "eyeball-to-eyeball", in black with designer-matched helmet and nightstick accessories.  Being Asheville, the uniforms were finely tailored in body-sculpting, black Corinthian leather, accented with faux-silver metal brads and studs. The dark glasses appeared to be YSL.

But, that's not the "strategic positioning", I wanted to tell you about. 

The "Only In Asheville" feature to all this was that dead in the middle of the street, in between the two opposing camps, were stationed a dozen bicycle policeman wearing short pants and those - also silly - pointy, yellow and orange, space cadet, plastic bike helmets. 

As you can imagine, it is very difficult to look formidable, standing in the middle of a  city street, behind your big-wheeled mountain bike, in pretty much short-shorts, while wearing a bike helmet which makes you closely resemble a duck! These guys were doing the best they could "to bulk-up" by crossing their arms and trying to look stern, but - much like the protesters' chanting - it was not overly convincing.

So, here are the strategic positioning questions:

Wednesday, July 03, 2013

Strategic Defense...

Asheville, N.C. ... It's a WOW !!
Guess I ought to finish up with one other observation which arose on the way to "that less than spectacular" speaking engagement last month.  Although the CU chapter meeting was in Maggie Valley, stayed over for the night in Asheville, North Carolina.

If you haven't "Done Asheville?"... you should!  Now rated by just about everyone as one of America's most attractive cities, Asheville has got it all - natural beauty, thriving/diverse economy, cosmopolitan spirit - a great place 
Natural Neon !
to live with nice folks. And, in the Fall you get to see this... and of course there is the community "drum circle" on Friday nights !! (Sorry can't explain it, you just need to come see for yourself!) The Biltmore House, whitewater rafting, hiking, golf, vibrant Arts community, the Cherokee Nation, best roads for that Harley anywhere....

But, let's see, got a bit distracted there... the original idea was to tell you about an unusual strategic "positioning" I encountered in Asheville.  Checking into the hotel, there were lots of those guys "with dark glasses and antennas coming out of their ears" walking around, plus 2 or 3 dozen police cars in the parking lot.  Told the hotel clerk that I didn't feel that this level of security was necessary because the speech hadn't gone "quite that badly!!". He looked at me in a vacant sort of way while he tried to make some sense out of that comment...

Monday, July 01, 2013

Wall Street Welcomes NCUA Derivatives Guidance...

"We are so pleased the NCUA has recognized the benefits of bringing Wall Street to Main Street!
Thank you so much!"

- The Wall Street Dealers and Traders Association
"We'll take care of you!"