A "Shocking" Look At The NCUSIF ...

Budget-wise: It's always a
"good year" at the NCUA!

Talked a little bit last week about the flagrant (and soaring!), little skimming racket being run over at the the NCUSIF.  

As noted, the NCUA is abusing the overhead transfer rate (OTR) to fund its "Goodyear", good-timin' operating budget.  By draining the cooperative share insurance fund's (NCUSIF) earnings, NCUA eliminates any need for fiscal, budgetary responsibility and transparency in its operations. With the skimming having risen from 25% of budget to 71.8% of budget, NCUA has acquired an addiction, an unslakeable thirst for fiscal sleight-of-hand - funded by the NCUSIF.

The conflicts of interest for the NCUA, in the dual role of federal regulator and federal insurer, are numerous. The Nation's last experience with how dual regulator/insurer conflicts of interest "get played out" was when the Federal Savings and Loan Insurance Fund (FSLIC) had to be bailed-out, at great cost, by the American taxpayers in the 1990's. Deja vu all over again?

But, let's take a quick look at another of NCUA's "dual roles" in managing the NCUSIF on behalf of the NCUSIF's owners - America's Credit Unions and their 100 million individual members....

You will recall from NCUA CFO Rendell Jones' March 31, 2015 report to the NCUA Board (see here, page 7), that the $11 billion+ NCUSIF fund's average maturity has been extended from 3 years to 4.42 years over the last 5 years, while the average fund yield has dropped from 2.08% to 1.89%.  All occurring while NCUA Chair Matz has been haranguing individual credit unions about the imminent threat of rapidly rising rates! [A strange contradiction in the real world, not so at the NCUA.]

Capital markets' tetes-a-pointe

NCUA's capital market robusterians still rely on out of date tools like "net economic value" (NEV) to hype-up imaginary interest rate risk (IRR) at solid credit unions. The favorite little, schoolyard-bullyboy, NEV tactic is an "up 300 shock" test. The shock test estimates the loss or gain in value of an asset if rates were to jump up by 3% ("300 basis points") overnight - much as Chairman Matz has been predicting ad nauseum. 

Want to guess what happens to NCUA's 

$11+ billion NCUSIF investment portfolio 

in an "up 300 NEV shock test"....

WOW!!

The LOSS in value to the NCUSIF 

would be -$1.384 BILLION!!!**

"Shocking", isn't it !!!

Simply "Shocking"!!!

NCUSIF: IT HAS BECOME A QUESTION OF COMPETENCE 
- AND CONFIDENCE.

** Valued at market as of 5/12/2015.