Wednesday, April 30, 2014

Weights and Measures….

All it's quacked up to be?
One of the "bright spots" in the proposed risk-based capital (RBC) rule, according to the NCUA, is that the risk-weight assigned to CU consumer loans will be "75%" vs. the "100%" risk-weighting assigned by other federal regulators  to similar loans at banks.  Sounds terrific doesn't it!

You can watch NCUA senior officials explain
We need a 
good night's sleep…
that's all you need
to know!
all the "ins and outs" of the new RBC rule in a recently released YouTube video (Part II: FAQ on NCUA RBC).  You'll find Larry Fazio, the NCUA Director of E & I, around the 11:00 minute mark explaining the lower "75%" weighting. Mr. Fazio states clearly that NCUA looked closely - "even comparing to European Union weightings" - at the better performance of CU consumer loans - lower delinquency, lower defaults, etc. - vis-a-vis bank consumer loans and found the lower weighting justified. Again, sounds great - right?

Tuesday, April 29, 2014

Agency Accountability....

...answering to no one with impunity.
(Anyone come to mind?)

Don't wait for never...

Sunday, April 27, 2014

From The Field

Daft ?

"Working on the report, will try to finalize a daft for you by tomorrow…"


Saturday, April 26, 2014

The Creative Farce at NCUA....

Can you say "B.S." while smiling,
 boys and girls?
"NCUA remains committed to ensuring regulations are reasonable, innovative, and cost-effective, and to encouraging robust(!) public participation in the rulemaking process."

Pretty sure that most folks don't agree with
that perspective of the forces at work of late at NCUA.  In terms of regulatory modernization and creativity unfortunately, it appears there has actually been a real dearth of new ideas.

More precisely, at NCUA of late there has actually been a real.....

Friday, April 25, 2014

Tough Love...

Mr. Gerard Poliquin
Secretary to the Board, NCUA
Don't wait for never...
1775 Duke Street
Alexandria, Va. 22314

Dear NCUA,

  I am very concerned that your current actions are weakening both the strong financial integrity and the sterling consumer service reputation of the Credit Union movement.


                  One of your long-term supporters

Thursday, April 24, 2014

Risk-Based Capital: Commenting On Your Future - Part 13: Absence Of Democratic Controls

Attitude and hubris...
NCUA's proposed risk-based capital (RBC) rule is set to become 
"The Kodak Moment" in the history of America's credit unions.  

The reference is to the fundamental, crucial mistake the Kodak camera/film company made in deciding that "digital photography" was of little importance nor threat to the future of its business model.  Kodak quickly lived to rue its misjudgment, moving from virtual market monopoly to bankruptcy in less than a decade.  NCUA's RBC rule is a mistake of comparable magnitude, which should lead to similar results.   

"The NCUA Board
 sat on a wall,
The NCUA Board,
had a great…"
The NCUA Board today (4/24/2014) will perhaps take a "test drive" in fiduciary irresponsibility as it votes on the issue of a new "stress testing" regulation for larger credit unions. The "stress testing" rule is a "stalking horse" for the soon-to-follow RBC rule which will apply to all credit unions. Both rules suffer severely from similar logical flaws, consistency lapses, and implementation gaps. Both the stress test and RBC rules will result in substantial "collateral damage" to credit unions, resulting from a clear absence of adequate research, dialogue, and due diligence by the senior leadership at the Agency.

A Question of Leadership 
at the Board level...
Each individual NCUA Board member - Ms. Matz, Mr. Metsger, and Mr. Fryzel - has been directly and respectfully advised that the stress test rule needs greater review, more thorough validation, and additional discussion between the Agency and all affected credit unions.  There is universal support among the affected credit unions for the concept of stress testing and no resistance to moving forward thoughtfully and expeditiously.  

All agree there are no economic, legislative nor safety and soundness imperatives which compel the Agency to act pre-emptively, abruptly, or recklessly today (4/24/2014) on a final stress test rule. Affected, experienced credit union boards and staff have urged the NCUA Board "to temporarily table" the final stress test rule and create additional forums for discussion and review.  The affected credit unions don't feel they have the luxury of risking "unintended consequences" and "unforced errors" resulting from a hasty implementation.  NCUA seems indifferent to those prudential risks...

Wednesday, April 23, 2014

Quantitative Easing….

Chart This !!
Spent several days last week at an economics conference sponsored by the Federal Reserve Bank of Atlanta.  They hold it out in the north Georgia woods - a good distance from reality - which seemed appropriate.

There were a lot of really "scary smart" people at the conference including an economics Nobel laureate, several highly distinguished academics, global bank economists from the U.S., China, Spain, Japan, Chile, Italy, etc. and the leading economic theorists from government agencies such as the Fed, the FDIC, the U.S. Treasury, and the SEC.  You get the picture - the best and the brightest in quantitative economics. No one from NCUA was registered

Never been bothered much about not being "the smartest person at the table"(that's just the way life is); but it's a bit unnerving when you have to honestly admit that you're unquestionably and repeatedly "the dumbest person at the table"(it was that kind of group!).  Practiced being quiet a lot and trying to feign invisibility when the Q&A started soaring well above my head.

The Bernanke Solution !
What I found most intriguing was the open, heated debate among these very bright folks over the merits of the recent practice of "quantitative easing" by the Fed. Literally trillions of dollars have been injected into the banking system in an attempt to revive the U.S. economy.  Former Fed Chair Ben Bernanke colorfully labelled quantitative easing as the practice of "dumping helicopter loads of cash" on to communities all across America.  

Much of the debate centered around the future economic consequences of reabsorbing this excess monetary stimulus as the economy gains strength.  It was somehow both reassuring and refreshing to hear the best and brightest profess profound doubt and concern over being in these uncharted economic waters - with highly arguable and uncertain outcomes. All in decided contrast to the "inerrant robusterians" at the NCUA, who remain resolutely and insanely certain, about the unfailing wisdom of their myopia.

"Nah, just can't see it…"

It would have improved my self-esteem greatly to have had a few of them at my conference table...

But all the robust bashing aside, what was most startling was finding out that the Atlanta Fed had already begun the national monetary unwinding process with at least one way to use all that excess money!

Take a close look at one of the numerous notepads which were spread across all the conference tables…

Tuesday, April 22, 2014

Kafkaesque…. Credit Unions: The New "Criminal Class"?

Guilty, always guilty...

Franz Kafka was a Czech-German writer of the early 1900's. His novels often involved people caught up in struggles with mindless bureaucracies, which has led to the creation of the term "Kafkaesque" to describe such situations.

Wikipedia defines Kafkaesque as follows: "Examples include instances in which bureaucracies overpower people often in a surreal, nightmarish milieu which evokes feelings of senselessness, disorientation, and helplessness.  Characters in Kafkaesque settings often lack a clear course of action to escape the situations, which are incomprehensibly complex, bizarre, or illogical."

"The Trial" portrays the saga of Joseph K. a
These are the conclusions
upon which I base my facts...
worldly, young bank official who is arrested "one fine morning", although he has done nothing wrong.  The novel tells the story of Joseph K.'s struggles and encounters with the invisible Law and the untouchable Court. " 

K. can never quite discover the crime of which he is accused, the laws to which he must answer, nor the process by which guilt and innocence are determined.  K. is entrapped in a system which need not listen nor explain, and to which and from which there is no appeal.  And, K. of course, is inevitably executed by that system despite his innocence…

Perhaps you might like to reflect upon when "they" decided you and your credit union were part of the "criminal class" and whether or not you or your credit union are…

Monday, April 21, 2014

From The Field....

Life is a carousel...

"We seem to be off and running, sometimes in circles…"

(… the great mandala?)

Saturday, April 19, 2014

From The Field….

Winging it?

"Wasn't sure I was hearing the whole story on his past credit history, but there did seem to be a colonel of truth in his…"

(… and he showed a lot of pluck!)

Friday, April 18, 2014

From The Field...

He's one of our more difficult members, always acting above his raisin

(Thinks he's too grape…?)

Wednesday, April 16, 2014

Risk-Based Congressional (RBC!) Testimony...

 Spotting the high risks…

Here's a brief follow-up on a couple of comment questions, which asked for a bit of "fact checking" on the McKenna Congressional testimony posts.  

One of the points that the NCUA has manufactured to justify its new risk-based capital (RBC) proposal is the "high risk" threat posed  by "large, complex" credit unions to the NCUSIF.  

As mentioned, the NCUA in its RBC proposal attempts to change the Federal Credit Union Act (FCUA) by unilaterally declaring that 1) all credit unions below $50 million in assets are  a) "small" and b) "not complex"; and equally, 2) all credit unions above $50 million in assets are a) "large" and b) "complex".  

Neither statement is true, but who said the truth was important ?

Here are "the $$ numbers" which go with the charts in the 4/14/2014 charts…

Tuesday, April 15, 2014

From The Field… Back Taxes!

I are s…..


The member was filling out the intake questionnaire for the VITA tax prep program.  He stopped and asked the member service rep, if she could help him.  She said sure, what was the  problem?

He said the only thing left to enter were the birth dates of his two children, which he couldn't remember.  But, that he did have them tattooed on his back, if she would be willing to lift up his T-shirt and write them down….

( What happened ?…. don't ask!!)

Monday, April 14, 2014

The OGC Testifying Before Congress...

Legal Beagle or...
"BULL ["S"]" dog?
Well, while we're at it, let's take one more look at last week's [4/8/2014] oath-defying testimony by NCUA's chief legal beagle before the House Financial Services Committee:*

*(Caution: this quote is from the "unclarified" written version and may therefore be subject to revision, denial, or subsequent pleas of temporary insanity.)


"The proposed risk-based capital [rule][Version 1] also exempts two-thirds of credit unions, those with less than $50 million in assets, because they are not considered complex. Based on losses from several larger credit unions incurred during the past crisis, a final risk-based rule will be critical to protecting against future losses."


1.  "… not considered complex."  NCUA, in the proposed RBC[Version 1] rule, changes the Congressionally mandated determination of complexity to a simple, arbitrary formula: 
a) < $50 million in assets = not complex and b) > $50 million = complex. Pretty sophisticated "consideration" logic there, heh!? But, par for the course in the peculiar regulatory logic underpinning much of NCUA's proposed RBC rule.    

2.  "Based on losses from several larger credit unions…"  NCUA has started using the "large credit unions are riskier" excuse at every opportunity, in every forum. Mr. McKenna of course parades the "party line" in his testimony.   

The chart which NCUA uses before general audiences to justify this "logic" is shown above; which would indicate that the Agency needs to shift exam resources from small, non-complex CUs to those "under-microregulated", larger, riskier CUs.  

Since NCUA is callously killing off smaller CUs at a very rapid pace - out of negligence, indifference, or both; it makes great, self-preservation logic for the Agency to fabricate a "large CU bogey-man" to justify their continued existence in a rapidly shrinking field. If not, NCUA might have to do what private sector businesses and all CUs do - cut budgets, work force and overhead.  NCUA is desperately trying to equate risk to asset size, which would justify a perpetually increasing Agency - without any real consideration of complexity or risk.

By the way, would you like to see the risk chart NCUA uses internally (don't ask me who sent it!)….

Sunday, April 13, 2014

No Love Lost….

B-oink, b-oink...!!

Started to worry that you might have missed out in life on one of the greatest, classic "send-ups" of the b*#k vs. credit union debate.

Just in case:

Saturday, April 12, 2014

From The Field: Crazy...

Yes! We are so in-Clined!

"April started off crazy and then got worse…"

(… taxing to say the least!)

Friday, April 11, 2014

NCUA: Capitol Capital Clarification

Weaseling about capital
at the Capitol...

As you are well aware, since major Congressional hearing gaffs are pretty hard to miss; Mr. Michael J. McKenna, General Counsel of the NCUA, in testimony on Tuesday before the House Financial Services Committee, succeeded in publicly stuffing both of his spit-polished wingtips into his mouth .

Mr. McKenna's snafu was to state that NCUA was a long-time proponent of supplemental capital for credit unions and might - after decades of neglect - actually get around to doing something about this important matter - which to NCUA observers, came as quite a surprise . 

Unfortunately on Wednesday, Mr. McKenna issued a "clarification" of his testimony, stating he did not know what he was talking about - which to NCUA observers, came as no surprise.

What Mr. McKenna told Congress under oath about NCUA's efforts to reduce regulation (here's the link) is simply fibberish  particularly the following….

Thursday, April 10, 2014

Member Complaint


"I was diluted with the belief that credit unions were different…"

(… a mixed message.)

Monday, April 07, 2014

NCUA: Monday Morning Quarterbacks ...

"Robust" examiner  bullying 
appears to be on the rise….

"A professional makes it look easy; 
 an amateur 
  thinks it is."

(The NCUA Report - February, 2014)

(Can't make yourself sound much sillier than that…!!!)

NCUA seems to have a great deal of difficulty "explaining away" its past, let alone trying to lay claim to any expertise in predicting the future….

Sunday, April 06, 2014

A Twenty For Your Thoughts...

With good reason...

"I have always been afraid of banks."

- President Andrew Jackson
(in 1830 !!)

Making A Difference….

Thanks for those who do more than just talk a good game…

…for the kids.

They deserve the support
of every credit unions.

Here's how you can get in the race for those kids:

Saturday, April 05, 2014

From The Field...

"Now what ?"

"I'm less than one month in as a branch manager and I've learned a lot. Mostly that I have a lot to learn…"

Wednesday, April 02, 2014

You Would Think ...

That's quite a lot of bacon!

You would think that the banks would have the common decency to shut the "*@x!" up about credit unions when confronting press headlines like this:  


And the content of the article certainly didn't soften the blow any:  

"Wall St. banks have paid out $100bn in U.S. legal settlements since the financial crisis, according to an FT study of 200 fines and restitutions since 2007.  Just over $52bn of the total was paid out in 2013.  During stress tests last week,  the Federal Reserve found the biggest banks could still face a further $151bn bill for operational risk, repurchasing soured mortgage bonds…"

But, nothing seems to humble their hubris even though….

Tuesday, April 01, 2014

April's Fools: More Visionary Leadership Out of Alexandria….


Proposed Home-Base of 
St Marys Credit Union.
DATELINE MANCHESTER, N.H. (1909): "NCUA today refused the request from a group of local French-speaking mill workers, led by Monsignor Pierre Hevey, to charter the first credit union in the United States. The CU is desperately needed because traditional institutions have historically failed to provide basic thrift and lending services to French-Catholic working men and women in Manchester.    

The proposed credit union would have been called St. Mary's Cooperative and Credit Association and would have been operated out of the home of Joseph Bolvin, the credit union's first president, on Notre Dame Avenue.  An all-volunteer staff would have assisted with daily activities.  The safe was to be a metal box purchased from Manchester's French daily newspaper, L'Avenir National.  Operating conditions would have been basic, but it was the mission which mattered."  (St. Mary's Credit Union - click on "About Us" at top)

But NCUA these days can no longer be inconvenienced by "start-ups", or small "we-make-a-real-difference every-day" credit unions, nor with credit unions where