It's Budget Time Again! Wink! Wink! The NCUA Overhead Transfer Rate....

Something Stinks
on the Potomac!

We have a little conflict of interest problem within the Credit Union movement.  It involves the NCUA, the NCUSIF, and something affectionately known as “ the overheard transfer rate ”(OTR).

As all of you know, federally insured credit unions commit 1% of their member deposits with the National Credit Union Share Insurance Fund (NCUSIF) to provide for deposit insurance coverage for member accounts.  If your member deposits grow, then you send additional funds to the NCUSIF during the year. If your deposits decline, part of your funds are returned to you.  

The NCUSIF is a great concept, beneficial to the Credit Union system.  NCUA is charged with administering the NCUSIF, but the money – remember it’s a deposit – belongs to you. The NCUA, as a fiduciary, is charged with the responsibility of administering your funds ( remember it's not their money!) in a prudent, reasonable fashion.

Few credit unions are convinced that the NCUA is properly meeting its fiduciary responsibility with your NCUSIF money.  If pressed NCUA will even claim it has no fiduciary responsibility for the Fund, a fact seemingly made all too clear with the collapse of the corporate system.

Washington knows how to budget!
But not in a "balanced" fashion!

Much of the concern revolves around NCUA’s almost whimsical and definitely arbitrary use of the earnings on your NCUSIF deposit to support an ever expanding Agency budget.  The fact that NCUA's budget grows year after year, even as the number of Credit Unions continues to plummet precipitously, defies the laws of economic gravity and financial prudence.


No one disputes that earnings from your NCUSIF deposits (now in excess of $10 billion) should be used to help manage the safety and soundness of the insurance fund.  But just "how and who" determines what percentage of NCUA examiner and administrative time is spent on regulatory matters and how much time is spent on insurance fund (it's currently 58%+) matters?
   

There's a "whiff' of
something here!

The NCUA claims to carefully measure (wink! wink!), through internal staff time surveys (wink! wink!), the exact amount of Agency time (wink! wink!) which is spent on “deposit insurance matters”.  Agency staff (wink! wink!) who complete these “impartial, statistically exact” time surveys, are well aware of what is at stake – mainly their jobs and their careers.  

Put yourself in the NCUA staff member's predicament - how would you choose between "loyalty" to the Agency, being a team player, your career prospects, your salary, family, retirement, and the truth?  What type of leadership would force this type of "lose-lose" process on to a staff? If the examination staff  "fudge the numbers" on this issue, won't they "fudge the numbers" at your credit union? 

This is at heart, the same type of "self-interest first" compensation system which corrupted both mortgage brokers and Wall Street moguls -  NCUA's credibility and impartiality appear equally suspect.  Guess now, you can understand why NCUA wants you to believe everything is a "safety and soundness" issue.... it feathers their nest!

Cat's out of the bag!
(If "someone"...)

NCUA claims all is on the "up and up" - perhaps you believe in magic and will be convinced.  But, it's budget time at NCUA and a few hard-edged questions might be appropriate and timely.  As NCUA claims to seek a new commitment to transparency, shouldn't "someone" (wink! wink!) ask them to be clear about this OTR hocus-pocus.  

Don’t forget, you too have a fiduciary responsibility to safeguard your members’ money.  You might even consider NCUA to be another "third party vendor" on which you're required (by NCUA no less!) to perform regular reviews and contract scrutiny.  After all, NCUA is controlling 1% of your members' money - for which you are responsible.   Periodically checking up on your investments is called “due diligence”.  Done that recently with your NCUSIF deposit?  

Remember, it’s your members' money and your responsibility. 

"Someone" (wink! wink!) should be accountable.... maybe we should ask our trade association leaders "to be someone"!!!