Monday, March 31, 2014

Risk-Based Capital: Commenting On Your Future - Part 10: Misleading America.

Try that again...
Was asked to provide an example of why NCUA's use of a 60+ day definition of a "non-performing asset" ( most often loan delinquency) vs. the use of a 90+ "non-performing asset" definition by bank regulators was important.  

The best example is the very clear danger that the public ( and Congress !) will be misled into believing that CU loans are weaker and riskier than those held by banks; when every historical analysis shows that CU lending results have always been much stronger, more positive!

Certainly comparing > 60+ CU delinquency with > 90+ bank delinquency "on an equal basis" is comparing a good orange with a bad apple! Comparing 60+ day delinquency to capital for CUs will always create a higher (less favorable!) ratio than comparing 90+ day delinquency to capital for banks - always!  

NCUA is knowingly permitting the public to be misled - and hurting all credit unions.

"Can't happen, you're just making things up!"  Wanna bet….

Sunday, March 30, 2014

No Relief in South Carolina….


Was driving down to Myrtle Beach, South Carolina to brawl with some of my CU brethren there; crossed the border, and was a bit perplexed by the following flashing highway sign:


(… is there ever any other reason to stop? Guided tours? Civil War re-enactments? Sound and light show? Lie in the grass with the dog… uh-h, never mind!)

Saturday, March 29, 2014

A Forceful Thought...


"I was not born to be forced.  I will breathe after my own fashion."

- Henry David Thoreau

(Amen, Henry!)

Friday, March 28, 2014

Rants and Raves….

The Mitchell News Journal:
Home of "Rants and Raves"
(Figured we all needed a break!)

*  Steve Jobs is gone,Bob Hope is gone, and Johnny Cash is gone.  Now we have no Jobs, no Hope, and no Cash.  Please keep Kevin Bacon alive.

*  If you are eating at a fast food joint, salt is the least of your worries.

*  Neighbor, allowing your unsprayed (!) dog to….

*  Having women modeling bras on T.V. ? I   certainly object! By the way, on what channel and at what time are those ads shown?

*  Glad folks are aware of PETA.  They do so much to keep nutheads from abusing animals.

And this week's showstopper….

Wednesday, March 26, 2014

Risk-Based Capital: Commenting On Your Future - Part 8: MAKING DELINQUENCY COMPARABLE...

Ashamed to show their faces
 and the beauty of their logic?
NCUA has festooned the proposed risk-based capital (RBC) rule with such a wide-range of missteps and unforced errors that it's easy to become discouraged.  Who were "the experts" who drafted this proposal?  What were they thinking? Where is the data to support their lack of reasoning?  How did this rule pass muster with the NCUA Board?

We've seen how the proposed RBC rule penalizes credit unions and increases costs for credit union members in the areas of 1) mortgage and MBL lending, 2) member savings, 3) CU investments, 4) overrides the Congressional definition of "net worth" and "complexity", 5) dispenses with any form of "redress of grievances" by a CU against an increasingly capricious and autocratic Agency, and 6) makes a mockery of the cooperative nature of the NCUSIF.

Should be enough - right?  It isn't.  Not even close….

Monday, March 24, 2014

Risk-Based Capital: Commenting on Your Future - Part 6: KEEP IT SIMPLE STUPID!….

Run that by me again!
Was asked to clarify the issue of being "complex" in NCUA's new risk-based capital (RBC) proposal.

Under current Law: The Federal Credit Union Act (FCUA) specifically states a definition of "net worth" and the levels of net worth a credit union must maintain to be considered "well capitalized", "adequately capitalized", etc.  Additionally, the FCUA suggests an additional level of reserve requirements "if" a credit union is "complex". The additional level of reserves is called "risk-based net worth"(RBNW).  

Under the current law,  "if" a credit union has a RBNW ratio of greater than 6% "and" the credit union's RBNW ratio is also greater than it's net worth ratio, "then" additional reserves may be required.  So, if a credit union is not "complex", then risk-based standards do not apply under current law.  Effectively the credit union system already has a "risk-based" system for determining "riskier credit unions" and has had that system since 2000.

One would assume that the largest credit
Say what?
unions by assets are the most "complex" - a mis-assumption that the NCUA purposefully and wrongfully keeps attempting to insinuate to justify much of it's recent efforts at self-justification and self-preservation. The NCUA Chair even has taken it beyond the pale describing the largest credit unions as the "riskiest"!

Here's a look at the RBNW ratios of the largest credit unions. Don't let the truth shock you…

Sunday, March 16, 2014

Reader Feedback…. Get Lost?

You could at least have sent
 a round trip offer...
While I appreciate your generosity in forwarding me the "Fly Free - Air Malaysia" gift certificates,….

Saturday, March 15, 2014


Gibberish - On a Roll !

Gibberish or gobbledygook refer to speech or other use of language which is nonsense, or which appears to be nonsense. Officialese, legalese , and bureaucratese are all distinct art forms within the realm of "g & g"!

Here are some very fine examples of gibberish from the February edition of The NCUA Report:

"Of course, communication is a two-way street. Credit union officials can also take the initiative toward improving the exam process.  Some small, but important, steps include:

*  Proactively recognizing areas of concern and preparing potential solutions, then presenting these to your examiner in advance of the exam. (Why not make it easy on all of us? Go ahead and "turn yourself in", we know you're up to something!)

*  …establish a strong working relationship with the examiner in charge, even meeting daily for coffee. (Our folks, with little real work to do, always have plenty of time to sit around and drink coffee.)

* Remember, examiners are people, too.  (Even if we frequently forget that you are.)

And, everyone's all-time favorite for "G&G" Award of the Year honors:

Thursday, March 13, 2014

Clubbing Baby Seals....

On very thin ice...
The majority of credit unions in the United States are smaller in terms of assets, but small credit unions "punch well above their weight" in terms of member impact and community importance.  Every credit union was created for a purpose, rarely did that original purpose have anything to do with "growth"

With small credit unions representing over one half of the raison d'être for the existence of the NCUA, let's take a look at how the Agency is doing in nourishing the heart and soul of our movement...

  • Office of Small Credit Union Initiatives(OSCUI)
  • The Resource Center
  • The CU Connection
  • The Partnership Connection
  • The Training Connection
  • Secondary Capital Program
  • Community Development Revolving Fund
  • ... and more!  NCUA's been working hard on this issue!

      With Record Results:  Number of CUs less than $10 million in assets...

    Clearly another "robust" effort!
    • 2004 - 4,255
    • 2005 - 4,020
    • 2006 - 3,805
    • 2007 - 3,500
    • 2008 - 3.274
    • 2009 - 2,944
    • 2010 - 2,781
    • 2011 - 2,572
    • 2012 - 2,348
    • 2013 - 2,181
              .... seems to be a trend line shaping up here... 0 for 10…. down 2100+ ! Another fine example of consistent planning = consistent results at the NCUA!   ("ERM" - Entirely Ridiculous Management.) 

    Would you continue to run programs in your credit union which produced such an obvious record of failure over a decade?  If you had this type of record at your credit union, wouldn't your desperately inexperienced - yet foolishly smug - "examiner" be slapping you around with DORs, demands for expense cuts, and threats of LUAs?

    Director intimidation, examiner condescension, and adversarial regulations do not seem to be working so well. But the Agency remains unaccountable, "unappealable" and, once again, demonstrably inept.


    We're in the midst of an "CU ecological" meltdown….



    Wednesday, March 12, 2014

    One Member, One "Whatever"...

    Credit Unions:
    Soaring on principle!

    The favorite mantra of all true credit union believers is "One member, one vote!"  That, after all, is what co-operatives are all about - right? 

    Democratic, egalitarian control is the key, fundamental idea, the core principle, the distinguishing hallmark of the credit union movement.  One for all and all for one - right?
    The Imbalance of Power

    As a result of the March 10, 2014 post ("Diversity"), several readers asked for a bit more data on how membership voting rights in CUNA were determined.  Here's the info: 

    At September 30, 2013*
    (* NCUA always is LATE with their quarterly data!)

    By Number of Credit Unions
                                                       # of CUs    % of CUs    % of Votes

    Class A (25,000 members):        5,961             88%             25%
    Class B (>25,000<94,000 ):          613                9%             25%
    Class C (>94,000 members):         179                3%              25%
    Class D (League CEOs):                      0                 0%              25%

    By Assets

                                                        $$$              % of Assets   %Votes
    Class A (25k memb):              $231 mill            22%            25%
    Class B  (>25k<94K memb):  $325 mill            31%             25%
    Class C  (>94k memb):           $502 mill            47%             25%
    Class D  ( League CEOs):        $    0                     0%             25%

    And lastly, the "all important" member category…

    Tuesday, March 11, 2014

    Just Wondering...

    Where do we get off ?


    If so, what does the interstate exit sign say?

    Monday, March 10, 2014


    How do you feel about diversity?
    One of the interesting buzz words creating a good bit of angst within our society these days is "diversity". That one word can draw a lot of heat, depending on who you are, what you look like, where you come from, and how you view the world.  Discussing diversity is akin to playing with dynamite - beware of short fuses and explosive reactions! 

    What's the problem?  Diversity at heart is a synonym for fairness, isn't it?  And, who could be against that? Well, sometimes it can get a little complicated!  
    Life is not a "bell curve",
    it's far more
     "robust" !

    Many times fairness is difficult to judge, especially when it isn't clear how the difference between good, better, and best is measured.  Being experienced human beings, we often suspect the worst.  Could advancement in a career be as much about "who you know", as "what you know" - or, despite the law, wrongfully biased by one's race or gender?

    Touchy topic for sure!  Assume you have read that the Dodd-Frank legislation has a whole section on the issue of "regulating" diversity at all levels within the credit union movement. Going to be some interesting - perhaps divisive - times, some difficult - perhaps unanswerable - questions, some hurt - perhaps bitter - feelings.

    Unite for Good !
    Looked at our largest trade association, CUNA, the other day - especially in regard to the diversity of its 24-person Board.  The CUNA Board is elected from 6 geographic areas of the Country.  Each area elects 4 Board members: one from CUs with less than 25,000 members, one from CUs with 25,000 to 94,000 members, one from CUs with more than 94,000 members, and one chosen from among the league presidents in the area.

    While each of the three credit union categories ("small, medium, large") represents hundreds, even thousands of credit unions and literally millions of individual credit union members; that last category of league directors is chosen from a potential pool of just 40 people.

    Six CUNA directors - 25% of all votes on the CUNA Board - are selected from a cast of no more than 40 people.  Let's see how that works out on the diversity front….

    Sunday, March 09, 2014


    Stay on track !!

    "Never look back unless you are planning to go that way."

    - Henry David Thoreau

    Saturday, March 08, 2014

    Why Are You Afraid To Sing?

    "Most men [and women] lead lives of quiet desperation and go to the grave with the song still in them."

    - Henry David Thoreau


    Friday, March 07, 2014

    Any Fool….

    A rule to live by?

    "Any fool can make a rule, and any fool can mind it."

    - Henry David Thoreau

    Thursday, March 06, 2014

    Following Leaders...

    "If you can clean up the Hudson,
    you can clean up the Potomac…"

    (All the way down to Alexandria?)

    "If people lead long enough, leaders will follow."

    - Pete Seeger

    Tuesday, March 04, 2014

    Doctors Orders: A Radical Amputoid-crainiotomy?

    Mr. Dan Berger

    The National Association of Federal Credit Union's lead-dog, Dan Berger, had a guest opinion piece in the 2/26/2014 edition of the CUTimes.  Mr. Berger's beef? (read that again slowly.) NCUA's micro-encephalitic risk-based capital (RBC) proposal.

    "Where's the beef?" with Berger?  Mr. Berger plainly states:  "Enough is enough." And then adds this very fine diagnosis concerning NCUA's small-minded proposal:

    Licensed to kill?
    "The medical profession's oath to "first, do no harm" would be an apt principle for the financial industry's prudential regulators, including the NCUA, to follow. Unfortunately, the NCUA has released a proposed risk-based capital rule that would go quite the other way. It may just kill the patient."

    Perhaps of equal importance, Mr. Berger implies what many credit union folks, based on the evidence of recent experience, now believe; NCUA can no longer be trusted to write fair and balanced regulations.  Berger says it plainly:  "We support less capital for low-risk and more capital for high-risk credit unions.  But we need Congress to make statutory changes to achieve a fair system." 

    The "Answer"?
    If we must look to Congress to help assure a fair federal regulatory regime; if we truly feel that our federal deposit insurer no longer "listens"; and if we honestly believe that NCUA is no longer responsible nor accountable; then let's be bold enough to ask….

    Monday, March 03, 2014

    NCUA Risk-Based Capital… Dissing the FED?

    Jumping into 
    the "Wild NCUA Yonder?
    Hopefully, everybody and his sister will take time to comment on NCUA's recently released risk-based capital (RBC) proposal. One needs only look to the current risk-based net worth (RBNW) system that NCUA has in place - and which has never been updated! - to understand how much help the Agency desperately needs from CU expert practitioners. 

    Robustly essential or
    essentially robust?
    If you don't weigh-in on this important issue, then the best you can hope for is that "the NCUA risk experts"
     (think "jumbo shrimp", "pretty ugly", "Holy war", "educational TV", "working committee", "non-essential government employee","Rapid City, S.D."!) will be able to "copy off the paper" of its compadres over at the FDIC and OCC.  

    Unfortunately, in looking at NCUA's draft
    Less weight, more fat?
    proposal; the credit union movement can't even count on the Agency "to crib off" the already published and implemented 
     FDIC/OCC risk-based capital rules.  Let me give you the most embarrassingly obvious NCUA faux pas (among several!) in the proposed rule….

    Sunday, March 02, 2014

    On Writing...

    On Walden Pond...
    "Writing your name can lead to writing sentences. And the next thing you'll be doing is writing paragraphs, and then books….  
    And then you will be in as much trouble as I am."

                                               - Henry David Thoreau

    Saturday, March 01, 2014


    ISN'T IT?