Wednesday, December 07, 2016

The NCUA Budget: Easy Money... Part 6

"Mama don't bluff..."
First, just for the record, the offer in Part 5 was not idle chatter; more than willing to "put up, or shut up"... and would be quite willing to provide some help for free if the NCUA Board had "a vehicle" - say an Advisory Board, like all the other federal financial regulators! - through which an open, transparent discussion could be held. Probably worth $100 million to give it a try, don't you think!? 'Course that's the Chairman's personal call...

While we wait on that decision, we need to look at the other NCUA staff "strategic error" which is misleading the NCUA Board into thinking that America's credit unions must cough-up $300 to $600 million in 2017 to prop up the NCUSIF. The first problem, of course, is the recent, incomprehensible long-term investing "snafu". The second serious problem is the 5-yr forecast of the NCUSIF equity level presented by staff to the NCUA Board on November 17, 2016 (here's the link).

Look at pages 11 and 12 of the power point. Page 11 gives you the NCUA's objectives in forecasting the equity level of the NCUSIF, only one of which is required by law (The Federal Credit Union Act - "1782(c)(2)(D)") [here's that link - pg. 26... on the right].  The FCUA requires the NCUA Board to act (say with a $300/600 million assessment!) only when the forecast projects the equity ratio to fall over the next 6 months below 1.20% - not 1.30%! All else is discretionary for the NCUA Board...

Page 12 shows you the four forecasting model inputs: future 1) interest rates, 2) insurance losses, 3) CU asset growth, and 4) growth in the NCUA operating budget. All you need to look at is the "interest rate inputs" - they are neither probable nor supportable, and appear to be intentionally misleading... purposefully driving the NCUSIF equity ratio "into a ditch" - and potentially costing you and your members hundreds of millions of dollars in 2017.  

Does the NCUA Board really believe the average 10-year treasury rate will be no more than 2.08% in the "worst case" scenario (1.47% in the base - "most likely" - scenario!) over the next five years...

... when the current 10-year rate is 2.39%?

 The Board's answer may cost credit union members $300 million - is it well-reasoned?



Anonymous said...

The main reason why some have disagreed with your assessment of the NCUA board (you consider them high quality, best in years or words to that affect)... because, in your parlance, with A C T, NCUA is a 5 on accountability, 4 in competence and -5 in transparency.
But it goes beyond that.
Take a deeper look at the acronym.
Accountability is reliant on others as most humans don't hold themselves truly accountable over sustained periods.
Competence is part DNA and therefore "ability" matter significantly. Competence can be achieved through the A and the T.
But here's where you lose sight.
And it starts at the top.

There is and has not been, ANY clarity in this agency's actions and motivations. We have to guess.
And, since we have to guess, we don't trust. And, since we don't trust...

Anonymous said...

Well said. NCUA is a waste of oxygen and our credit union members' money. Congress must hold NCUA staff accountable since we as credit union CEOs apparently can't and the NCUA board won't. And now our largest trade CUNA, whose acronym looks a lot like NCUA, has the rats scurrying off the that sinking ship. Rich Meade was so frustrated with the lack of leadership and real change at CUNA that he is going to take a HUGE (or as Trump would say, YUGE) pay cut for a new job. Granted, nafcu is eating their lunch in membership growth and probably leadership and focus, so he might not want an imploding trade on his resume. Time to hold all the trades and especially the NCUA accountable. Congress where art thou?

Jim Blaine said...

Very much like the first commenter's remark about transparency. Transparency is the core of the problem - if there is a problem - at the NCUA.

And, the NCUA, the NCUA Board, and most particularly the NCUA Chair has the ability to choose transparency as a core value for his role as leader, or to do nothing... and in doing nothing to remain indifferent and unresponsive to the legitimate interests of credit unions and the American taxpayer.

What harm can come from a more transparent Agency? Who will be hurt?

Anonymous said...

"If there is a problem"?????
Then what's this all about?
Now I'm really confused.

Jim Blaine said...

The "if there is a problem" phrase was simply to state the obvious... if NCUA were transparent, responsive, and accountable then these type of suspicions would go away.

Stated another way, if there is a reasonable explanation for this "mismanagement" of funds, most of us would welcome hearing NCUA's explanation and the underlying logic... and we'd all feel much better and be proud of the agency and its innovative thinking!

But it has been the character of the Agency for the last 6 years to believe they owed no one (including Congress, credit unions, and taxpayers - you and me) any explanation or response.

I believed that was because of past Board leadership and believed that with the new Board a new day was at hand....

Guess we're getting ready to find out very clearly what kind of leadership we really have on the NCUA Board ...