Let's follow-up on yesterday's discussion of how
"the investment management expertise" (to use the phrase lightly!) of NCUA senior staff has created "the necessity" of a $300 to $600 million premium assessment on your credit union - and your members! - next year. Basically the premium is a penalty on credit unions for the lack of accountability, competence, and transparency at the NCUA - "they played, you pay!"
Here are the numbers (link - you can validate the #s here in the NCUSIF financials) We're going to track 4 figures related to the NCUSIF investment portfolio over the last five years: 1) the portfolio yield, 2) the weighted average life (WAL) of the portfolio, 3) the % of the portfolio invested in bonds with maturities over 5 years, and 4) the "unrealized gain/loss" (UR) on the portfolio (more on that later!).
Yld. WAL %>5yrs URgain
Dec. 2011 2.01% 3.08 yrs 11.2% $450 mil.
Dec. 2012 1.82% 3.34 yrs 21.0% $371 mil.
Dec. 2013 1.80% 3.76 yrs 31.8% $ 15 mil.
Dec. 2014 1.89% 4.25 yrs 36.8% $150 mil.
Dec. 2015 1.90% 4.89 yrs 47.9% $ 60 mil.
Sep. 2016 1.84% 5.00 yrs 50.0% $381 mil.
So, the key NCUSIF figures to focus on first are that the NCUA robusterian investment gnomes lengthened the average life of the portfolio from 3 years to 5 years and now have over half the portfolio with maturities of greater than 5 years (moving from just 11% to 50%!), including the $800 million in 9/10 year investments yielding around 1.70% purchased in the last 90 days!!!
THIS "GOING LONG" INVESTMENT STRATEGY WAS EXECUTED IN A RISING RATE MARKET WITH MARKET RATES AT THEIR LOWEST POINT IN OVER 70 YEARS!!!
Why would NCUA senior staff execute such a seemingly inane strategy, especially when the NCUA examining staff have been threatening "DORs" and LUAs" for credit unions which pursue the same strategy?!? Will admit that perhaps we should not be too harsh on a strategy executed in 2011, 2012, 2013, or even 2014/2015, but the $1.4 billion in 9/10 year investments in 2016 - $800 million in the last 90 days!!! - is indefensible and inexcusable... and seemingly negligent.
Would hope that the NCUA Board will ask for a public - transparent! - "explanation" from Mr. Fazio and his "experts". Especially since for the NCUA Board, to again quote Chair Metsger:
"We have a fiduciary responsibility to the Share Insurance Fund, and to U.S. taxpayers and we will not abrogate that responsibility or tun it over to anyone."
- Rick Metsger
ACCOUNTABILITY - COMPETENCE - TRANSPARENCY
[ I'm a "U.S. taxpayer", aren't you? "ACT!"]