An Industry That Can Hold Its Head High

July 26, 2013 at 7:00 am 3 comments

I have some good news for a change.  At yesterday’s meeting, NCUA announced that the 2013 Special Assessment (Temporary Corporate Credit Union Stabilization Fund) for credit unions will be 8 basis points, the low end of NCUA’s projections last year.  The assessments will be due by October.  In addition, credit unions continue to make headway in paying off the amount they owe to the Treasury.  This means that after the payments in October, credit unions will owe between $900 million and $3.2 billion to the Treasury, which effectively gave the industry an emergency line of credit after mortgage-backed securities purchased by the Corporates essentially became worthless.

There’s a lot of bad that can be said about the financial crisis, but when all is said and done, credit unions alone can hold their heads high.  Simply put, there is no branch of the lending industry that was less responsible for the financial meltdown, needed less assistance from the American taxpayer or has made more of an effort to repay federal aid.

This is a story we should be proud of and should explain more clearly to the American public.  Everyone knows about TARP and how the federal government gave the banks a line of credit of close to $1 trillion.  Banks have started to brag that they repaid the TARP funds, but without this initial line of credit the captains of industry would be lucky to be selling hot dogs outside Yankee Stadium rather than passing out bonuses.  A little less known is the story of the sainted community banks, which used a program ostensibly designed to provide funding for small businesses to instead pay back their debts to the federal government.

In an ideal world, the Corporate crisis would not have happened.  But the world is not ideal.  I know the payment of the Special Assessment continues to cramp the income of many credit unions but I also know that the American public respects people who pay their debts and don’t run to the government to bail them out when times get tough.  If Washington wasn’t such a bizarre place, then no banker could argue with a straight face that credit unions have not demonstrated why their not-for-profit model works to the benefit of the American consumer.  Occasionally, we have to look past the white noise of banker rants, hold our heads high, and point out that in a country that values free enterprise, personal accountability and individuals who stand on their own two feet credit unions both talk the talk and walk the walk.

Entry filed under: Economy, General, Regulatory.

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3 Comments Add your own

  • 1. Ellen Drollette  |  July 26, 2013 at 7:58 am

    Well said Henry. This would make a nice National TV Commercial….any takers?

    Reply
  • 2. Keith Leggett  |  July 26, 2013 at 8:40 am

    Henry:

    You got bailed out. The funding of the NCUSIF does not work, when exposed to financial stress. To avoid expensing the one percent NCUSIF capitalization deposit and paying 30 bps in NCUSIF assessment, the credit union industry went to Congress to shift the cost of the corporate fiasco from the NCUSIF to the TCCUSF. What would have happen to the credit union industry, if Congress had not shifted the cost from the NCUSIF?

    Reply
    • 3. Henry Meier  |  July 26, 2013 at 12:15 pm

      Hi Keith,
      Interesting how you avoid the larger point I am making. I agree that as a result of banker mismanagement that brought that brought the country to the brink of a Depression credit unions needed help from Congress as did the Community Banks and the investment banks. (Albeit at a fraction of what the banks needed) But whereas community banks repaid their debts to the government in part with taxpayer $ and banks were passing out bonuses within a couple of years of the crisis they created credit unions are paying back their debts out of their own pockets. This is something to be proud of. It speaks to stand-up nature of the credit union industry.

      By the way as someone who believes in the free market Keith aren’t you the slightest bit concerned that when corporate credit unions go bankrupt major regulatory changes are imposed while Goldman Sachs has the same CEO it had when the Mortgage Meltdown started ? What industry values accountability more? After all Goldman Sachs would be nothing more than an answer in Trivial Pursuit had the Government not bailed out AIG

      Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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