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!)….

 … kinda gives you a different picture of losses and risk at "larger credit unions" - doesn't it?

< $  50 mill.:             7% assets = 22% losses
 $ 50<100 mill.:        6% assets =  7% losses   
$ 100<500 mill.:      24% assets = 67% losses
  > $500 mill.:              63% assets =  4% losses     

… all under oath, before Congress.

No comments: