NCUA Uses the GAO To Weasel Representative McHenry...

This is going to be a doozy
of a hearing - under oath! 

NCUA apparently has absolutely no fear (and perhaps no respect!) for members of Congress - or perhaps the noblesse oblige applies just to Representative Patrick McHenry (R-NC).  Let's take another quick look at Chairman Matz's response letter of 7/18/2014 (here's  the link) to Rep. McHenry:

From page 4, paragraph 2:

"NCUA also proposed retaining the tiered risk-weighting approach in the current risk-based rule to account for the risk associated with credit unions holding higher concentrations of member business loans and mortgage loans. Maintaining the tier risk-weighting approach is consistent with a 2012 report by the General Accountability Office [GAO], which specifically recommended the NCUA address such concentration risk. Similarly, NCUA proposed maintaining the tiered risk-weighting approach in the current rule for long term investments in order to account for interest rate risk and liquidity risk."

Da Drop !

The NCUA has an unseemly tendency to "name drop" highly reputable agencies to enhance its less than stellar credibility, and to justify its own arbitrary actions  by insinuating other agency support. Let's take a closer look at exactly what the GAO said in that 2012 report (Here's the link to GAO - 12 - 247)....

From the GAO Report: 

[85 CUs failed between 2008 and 2011] "GAO found that poor management was the primary reason the 85 credit unions failed.  NCUA's Office of the Inspector General (OIG) has reported that NCUA's examination and enforcement processes did not result in strong and timely action to avert the failure of these institutions."

Recommendations for Executive Action:

(page 43 in the report)

1. [ GAO gives NCUA hell about the corporates!]

2. "To improve the effectiveness of the PCA framework, we recommend that the Chairman of NCUA consider additional triggers that would require early and forceful regulatory actions, including the indicators identified in this report. [**] In considering these actions the Chairman should make recommendations to Congress on how to modify PCA for credit unions, and if appropriate for corporates."

[**] The "indicators", the "additional triggers" identified by GAO were: 1) delinquency rate on MBL's, 2) high operating expenses, 3) cost of funds, 4) return on assets, 5) liquidity.  (pages 37-42 in the report) 

Ran the #s!

GAO actually took the time to analyze (and showed its findings in the report!) the data underlying the failures of credit unions and to identify the most prominent causes for those failures. GAO did not find that concentrations in business loans nor mortgage loans resulted in failures  - nor CUSOs, nor IRR, nor indirect auto loans, nor goodwill.  Those are all simply delusions, related to long time biases of NCUA staff, who have not, until now, been held accountable to document their reasons for imposing unnecessary costs and burdens on 100 million American CU members, their families, and the communities in which they live!

THANK YOU REPRESENTATIVE McHENRY !! 

(... for calling their hand!)

NOW AS GAO RECOMMENDED, LET'S GET

A FAIR RBC BEFORE CONGRESS FOR APPROVAL!!