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?

Well now, have you ever seen "the data" Mr. Fazio used to support NCUA's "robust analysis" and conclusion that CU consumer loans deserve a more favorable risk-weight?  

Shooting from the hip…
no need for evidence!
Don't feel embarrassed , you're not the only one who has never seen any firm evidence of rigorous, validated, research by NCUA on any issue of critical importance to the future of credit unions.  NCUA apparently remains a "fire-aim-ready", "we're-not-required-to-justify-our-biases-to-anyone", "hip-shooter" Agency.  

A very dangerous proposition in a free, democratic society…   
Nighty, nighty???

Many credit unions are stunned to literally hear  senior NCUA leaders justify inexplicable operational and capital mandates with glib
 "It would just make us sleep better at night" statements.  It's a bit unusual and entirely inane to try and run a credit union based on the sleeping habits of senior NCUA leadership!

But that's not the key gripe. If NCUA can so diligently determine that CU consumer loans out-perform bank consumer loans and deserve a lower (75%) risk weight (which happens to be true!); then why wasn't NCUA equally able to discover the abundant evidence (the recent Filene study by Dr. Luis Dopico for example)  that CU mortgage loans out-perform bank mortgage loans (which is also true!) ? 
Do you smell something?

And what's worse with RBC, NCUA actually requires more capital against CU mortgage loans than bank regulators require against precisely identical bank mortgages.  What gives? How can that be? Y'know…

Something stinks on Duke Street.

Don't wait for never….


Anonymous said...

Dealing with NCUA is a fools errand. No greater waste of time than making rational observations to an irrational regulatory body.

Anonymous said...

A whiff of incompetency. Ncua has a Peter Principle team in charge, playing well over their heads.

The d-clucks are coming home to roost. A huge problem for the rest of us in credit unions.

Anonymous said...

Utterly, out of control. Beyond a rogue agency. It's give and take at the NCUA. Credit unions' give and the NCUA takes. And no there is no court for appeal. Decisions are final. Live with it. What exactly has the NCUA done for you lately?