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| "Give us your..." |
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| "Send us your Mama..." ( .. and some apple pie!) |
Were you and your members aware that you had adopted as your #1 CU priority for 2014 a goal of assuring that "long term assets do not exceed 35%"? Well, you, your members - in fact all 100 million American CU members - have done just that under the undemocratic (and apparently unaccountable!) auspices of the unelected (an increasingly erratic!) folks at the (you guessed it!) NCUA.
Let's take a look at a direct quote from NCUA's 2013 Annual Report:
"Agency Priority Goals"
"The Office of Management and Budget encourages all agencies to prioritize goals in their strategic and annual performance plans. An agency priority goal is a subset of the agency's performance goals and represents the highest implementation priorities. These goals represent near-term results or achievements to accomplish within approximately 24 months. In 2013, the NCUA established two agency priority goals:"
[Here Ya' Go!!! NCUA's #1 Goal For 2013/2014]
"Annual Performance Goal 1.1: Monitor and control risk in consumer credit unions, as measured by net worth growth in the consumer credit union system, the long term assets ratio, and net losses for current year failures as a percentage of average insured shares."
"NCUA successfully monitored and controlled risk in consumer credit unions in 2013 and achieved two of the three performance targets associated with this agency priority goal. We did not meet the goal for net long-term assets, which exceeded the target of 35 percent by 91 basis points. Growth in first mortgages and investments with maturities longer than five- to ten-years contributed to the increase in the aggregate long-term asset ratio. The Office of Examination and Insurance has developed additional supervisory measures for 2014 to address this trend."
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| Oh my !! |
So, now you know why your examiner is berating and bullying you and belittling your Board for those "long term investments" and those "dangerous member mortgage loans". And, now you have a more truthful understanding of why those bizarre risk-based capital (RBC) weightings are what they are....
But clearly The Office of Extermination and Insurance has some "additional supervisory measures" in store for all of us this year which is why the following is so important...
WE ARE GOING TO HAVE TO GO TO CONGRESS TO PROTECT THE DEMOCRATIC HERITAGE OF CREDIT
UNIONS !!
ARE YOU READY? WILL YOU HELP?
(By the way, have you checked out your "long term asset ratio" lately? Sure don't want to appear to be "NCUA risky" or "out-of-compliance-in-Alexandria" like First Community, Delta, Ent, APCO, Navy, Self-Help, Boeing, Xceed, OnPoint, Safe, State Dept., Bethpage, Eastman, First Tech, Golden 1, SECU-MD, SECU-NY, Vystar, American Heritage, Coastal, DFCU, Summit, Lake Michigan, Hudson Valley, Desert Schools, San Diego County etc, etc, etc... you know "the usual suspects".)
12 comments:
There is no provision in law nor regulation (other than "safety and soundness" which gives us unaccountable license to do as we please!) which permits NCUA to impose this arbitrary, unvalidated, and "unannounced " goal/requirement on the credit union movement.... one more example of boys and girls playing - unsupervised - with matches on Duke Street!
Jim: NCUA was just as wrong when they used to trigger action at 25% years ago. Guess NCUA believes they are doing you a favor by raising it 10%.
Did not see your credit union on the list of "usual suspects". What do you know that the others don't?
Not that I would ever be an NCUA sycophant, but one has to get a little concerned with the level that fixed assets on the balance sheets of credit unions with the Fed suggesting potential interest rate increases.
The long-term asset ratio at the CU I work for is 11%, but that has never prevented NCUA from hysterically "yelling fire" while floundering around in the middle of an ocean!
Believe with the McHenry letter and with the embarrassingly obvious lack of forethought that went into the RBC proposal, that a corner has been turned whereby the Agency will no longer be able to practice "shoot from the hip" policymaking... hopefully transparent accountability is at hand, which will be good for all.
If NCUA is "yelling fire" at 11%, what make Madame Matz's assertions that the new RBC requirement will not have examiners "yelling fire" if your capital comes within 1% of the potential new higher level believable?
As to the level of "fixed assets", you probably meant long term assets.... might suggest we all contemplate the true "risk exposure" of a 5, 7, 10 year investment by contemplating the shape of the yield curve and how one's IRR normally declines as you move forward in time...some folks even invest with the idea of "surfing the yield curve" in mind.
NCUA is prone to using blunt, "sky is falling" scenarios, which quite often seem to unfortunately match their level of sophistication and insight as to risk.
Much like a blunt #1 priority goal of "not to exceed 35% of long term assets" for 100 million CU members!
"Blunt Sophistication" - B.S.!
As to "believability", have always liked the wag's comment that "you can't believe anything they say until they have officially denied it..."
I did mean long term assets.
I could never be accused of being a cheerleader for the NCUA Bed Wetters on Duke Street that come up with these arbitrary and capricious priority goals, but I can understand their concerns for extension risk.
The Fed is creating the next mortgage problem. 4.5% 30 year mortgages will never pay off once interest rates eventually move up. The 30 year fixed mortgage has been the bane of the devil for financial institutions.
A greater than 35% long term asset ratio should be ringing all kinds of bells. This is just the wrong part of the interest rate cycle to be borrowing short and lending long.
A blind pig finds an ear of corn, a blind squirrel finds a nut and NCUA might sound an appropriate alarm. A Black Swan was found!
Agree on the dangers of the 30 yr. fixed rate mortgage , but NCUA's definition of "long term" starts at 5 years ! A great bit of foolishness.... to put it "bluntly".
Jim, correct me if I'm wrong, but NCUA's Long-Term Assets also include all member business loans, regardless of maturity/repricing, and investments with maturities greater than 3 years.
I have no problem with simplifying metrics, but when you dictate because the metric, and examiners aren't aware of the short-comings, it is dangerous.
Just my two cents. Thanks for all you do with this blog.
Jim, Remember back in 1998-1999 the NCUA was screaming "FIRE FIRE" -because credit unions would go dark on Jan 1, 2000? Credit Unions were too simple to comprehend the date change. Computers would crash. Fax machines would fail. Telephones would not operate. And so credit unions spent millions to proactively prove to the NCUA we all had things under control. Again the NCUA shoots from the hip with no basis in fact to support there position. And the result is credit unions suffer. And so too with the RBC proposal credit unions will suffer.
Bro, don't go talking about remembering stuff that happened last century!!!
Some folks will think we're getting old !!
I did resent having to do a contingency plan for the possibility that the Mayan calendar was right... a Day 2 plan for an end of the world scenario.. in a rising rate environment!!!
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