Tuesday, January 13, 2015

NCUA Risk-Based Capital: The Truth, The Whole Truth, And Nothing But The Truth

As We Await RBC #2: Was All This Mess Necessary?

The whole truth is
"not explicitly required"...

Well, take a look at the following statement that appeared in The NCUA Report (May, 2013):  

"While not explicitly required to adopt the Basel Capital Accords, NCUA is required by statute to maintain capital and other standards for credit unions that are modern and comparable to those of other federal regulators."

Hopefully you noted in reviewing the many CU penalty provisions half-baked into NCUA's proposed risk-based capital (RBC #1) rule, that the Agency had a recurring tendency to take substantial liberties with the axiom: "the truth, the whole truth, and nothing but the truth"

Let's take a minute "to parse" that simple paragraph a bit

A fork in the
tongue… ?
1) First, U.S. credit unions aren't mentioned at all in the Basel Accords - "the truth, the whole truth, and nothing but the truth" wording should read: "NCUA is not required to adopt the Basel Capital Accords."

Z-Z-Z-TAM !!
Magic !!
2) Second,  the phrase "… is required by statute…" refers to the Federal Credit Union Act (FCUA) not the Basel Accords, Dodd-Frank or any new or recently enacted law. "The truth, the whole truth, and nothing but the truth" is that NCUA has, since 1998, been "…required by statute to maintain capital and other standards for credit unions that are modern and comparable…".  To meet the requirement for modernity & comparability, NCUA has since 2000 maintained a system of net worth, prompt corrective action (PCA), and risk-based net worth (RBNW) as required by statute.  The legal, statutory requirements for RBC have not been changed for credit unions since 1998 !!! .... except for what NCUA has decided to invent on its own!

RBC Bull !
3)  And lastly for the younger set, you should be aware that the Basel Accords have been around since 1988! So, either NCUA through the use of net worth, PCA, and RBNW has been maintaining a modern, comparable CU system of capital with Basel since 2000 !!! .... or they have not been telling "the truth, the whole truth and nothing but the truth" to Congress, credit unions, and the American public.

If all that seems a bit obscure, ask yourself this:

  "Did NCUA's RBC #1 rule meet the standard set in the  first paragraph above... "comparable to those of other federal regulators."?  

             …nah, NCUA's efforts and thinking on RBC #1 
were simply

** incompenterrible - Eng. adj. meaning a weird aberration, a gross concoction, an incomparable blend of incompetence, robustly terrible.


Anonymous said...

Politics have no relations to morals~Machiavelli

Anonymous said...

Jim! You should have some compassion for the Chair of NCUA. She is forced to tell untruths because she simply does not have a examination staff that can meet and deal with individual situations. She is forced to do by excessive heavy handed regulations what examiners can't get accomplished with logic during an exit interview with the board.

SECU is a case in point. (Please don't show your graph over the last century about how you keep your reserves between 7 and 8%,don't provide statistics concerning how your capital using a risk based evaluation is higher than bank requirements) These fact are simply incompenterrible to the Examiners of the ONES (Office of National Examination and Supervision).

I am sure that if the Robust Examiners of the ONES approached you board with a simple request based on the fact that SECU's dividend rate is higher than peer, and loan rates are lower than peer, and fees are incompenterrible to Jim Blaine, that minor adjustments to each would increase the capital position to a level that gives greater assurance to the ONES future retirement prospects. The ONES examiners only concern is having a problem free career until they reach retirement age. Higher capital is believed to serve this less than noble purpose.

The ONES love SECU's peer for their capital position and do not subject them to the same aggravation because Navy FCU charges higher loan rates, pays lower dividend rates, and do not have an aversion to fees.

Clearly, if SECU did not return so much to members and only screwed members my half the excess that Navy FCU charges more that SECU, they would still be a great deal for SECU members and reserves would blossom to a level where this RBC 2 would hardly be necessary! SECU's excessive return to member is clearly the problem in the ONES mind. It may be incompenterrible to Jim and other traditional credit unions leaders, but return to members is just not as important to the ONES examiner than a career in a hammock and a fat retirement. The ONES examiner would think that they had a vested interest in creating more SECU to increase their comfort level, but they seem to think that crushing regulations that restrict credit union growth and prosperity is in their best interest. To most rational people this belief is truly incompenterrible? Less credit unions seems to be inconsistent the ONES examiner's goal of a long inconsequential career with fat retirement benefits but what do I know?

One last shot at Navy FCU. Could a case be made that they are charging excessive interest rates to enlisted men? Navy FCU may not be paying a fair dividends to enlisted men? Is Navy FCU extracting excessive fees from enlisted men? Screw the Navy Officers that Navy FCU was originally chartered to serve. The Officers allowed Navy FCU to forget who they were supposed to be a benefit. so they deserve to pay extra for allow Navy FCU to become Ubiquitous FCU!

Jim Blaine said...

Need to keep the torpedoes appropriately focused... let's not sink the fleet with friendly fire!

Each CU hopefully creates a special service niche for its members and should be permitted to do so without the seeming dangers of an erratic, incompenterrible regulatory agency - as was so painfully demonstrated by RBC #1 - dictating policies based strongly on ignorance - as was so painfully demonstrated with RBC #1!

We all have critics, but it is hard to argue against the very clear success that NFCU has created for the folks they serve... stop trying to bully Navy (that's an interesting oxymoron, isn't it!)

Anonymous said...

Sorry about my failure to frame the target properly. Any comment about Navy FCU should properly be considered bull. I clearly am not Charlie Hebdo. Just a wannbe! Was trying to point out given an incompenterrible view of the world you could twist anything. I am just glad Admiral Hughes is no longer with us to set me straight.

Need to work on my satire. The target was and always will be the feckless NCUA ONES, TWOS or any other way the identify their Robust Examiners.

Guess SECU is not going to consider raising loan rate, dropping dividend rates or charging a fee? Logic be dammed!

Anonymous said...

Could not help but be amazed that Charlie Hebdo's cover translates: "All Is Forgiven".

Metsger acted as Ms. Matz lapdog during the first run at RBC. I suppose credit unions can follow Hedbo's lead and forgive his rookie mistake and give him a chance to prove he is capable of independent thought.

He has pretty much acted in lock step with the Grand Dame of Duke Street, which should be pretty much a concern for all credit unions. There is a budget item that pay for Mr. Metsger's services and this mean he does not leave his brain at the door. If he continues to sit on Ms. Matz's lap and allow her to display her ventriloquist skills, there is an expense that credit unions should demand a prompt refund.

I am pretty much all about forgiveness and providing second chances. However, when it come to wasting member's money forgiveness is limited. Action from Metsger now speaks louder than words. Doubt he should get a pass if he continues lapdog and can not reasonably support his independent vote expected of him.

Forgiveness for a rookie mistake may be warranted. Continue tolerance of him acting as the Vice Lapdog should not be accepted.

Jim Blaine said...

Really hadn't ever pictured an NCUA Board meeting as the Howdy Doody Show, learn something every day!

Anonymous said...

Does Metsger get the role of Phineas T. Bluster or Flub-a Dub?

Anonymous said...

What is occurring at NCUA as RBC 2 awaits its debut is callous political maneuvering.

Much discussion took place on this page yesterday about whether or not the trades will step up and voice the truth about why a RBC rule at all?

NCUA will make every attempt to placate the trades, industry and press by saying "look it will only impact a few credit unions". Then will anyone ask the question why a rule for the entire industry when the "few" could have been guided along as needed?

And will any one challenge the cost to put in place and enforce the RBC reg? Will anyone challenge the low ball estimate NCUA will give? And will anyone ask about the cost of manpower to date to get this reg out?

For many, many months this has been the only focus of scores of staff members at NCUA. They have been instructed that that is their only priority. And if you were able to ask them and if they would truthfully answer they would tell you not only is that true but also their work in other areas has suffered as a result. And if they dare speak the truth, it would be "off with their heads".

The orders have come down from above. Flood the market place and the halls of Congress with people and material to justify and bolster the actions that will take place on Thursday. Show the masses that we listened, we changed and this time we got it right. We know what's best for credit unions. We are the NCUA, an independent, autonomous federal agency that reports only to ourselves.

Anonymous said...

Looks like Berger at NAFCU may actually take a stand and challenge for secondary capital.

Is NAFCU the trade you thought might step up?

Anonymous said...

Have you heard the one about the League CEOs "high fiving" that they got "their man" appointed when Metsger was selected to NCUA board?

Pretty obvious that the Ducks aren't the only thing from Oregon that ain't ready for prime time.

Anonymous said...

One more good reason to can the leagues.

Anonymous said...

His prior career was as a talking head broadcaster which proves that he can read out load, but that's about it.

Anonymous said...

Dan Berger was a lobbyist. There is a saying on Capitol Hill that goes: "The secret for success on Capitol is to make friend then F... them!"

Not sure how much of a foxhole friend Dan and NAFCU truly are?

Anonymous said...

Don't know Berger but Carrie Hunt can get it done if they'll unleash her.

Hope they'll sue over alt. capital. Even if they don't win may be it will shame cuna into doing something.

Anonymous said...

Agree on Metsger lapdog, can read but can't think, at least not at same time or while chewing gum, but wouldn't recommend you set foot in Oregon anytime soon with that DUCKS attitude

Anonymous said...

Metsger, Oregon Ducks, Quack

I think there may be a message?

Anonymous said...

Who is afraid of a lapdog that only QUACKS!

Anonymous said...

If he walks like a lapdog, quacks like a lapdog, he probably is a lapdog.

Jim Blaine said...

It's after 5pm on the east coast and one of our commenters has clearly already gotten into the martinis, cheese and quakers!