NCUA Makes Share Insurance Fund Safest In The World!

April 1, 2014 at 8:04 am Leave a comment

As readers of this blog will know, there are days when the amount of news is so great that I do away with my normal commentary to highlight the latest developments.  This is one of those days.

Most importantly, NCUA announced late last evening that it would modify its Risk Based Capital proposal to both accommodate credit union concerns for greater flexibility and NCUA concerns about protecting the all important Share Insurance Fund.  NCUA has decided to scrap its proposed placement of credit union assets into ten risk-rated categories.  Instead, all assets held by credit unions will be given asset ratings of 1250%.  This means that all credit unions will have to back up all their loans with 100% collateral. 

For example, if you want to make a $100,000 member business loan, the member will have to provide you with collateral equal to 100% of the loan. Chairman Matz pointed out that the new system will make the SIF the safest of all bank insurance systems in the world.  In addition, whereas the initial proposal effectively penalized credit unions for holding concentrations of residential mortgages and investing in CUSOs, the new system doesn’t discriminate against any type of lending activity.  When asked how credit unions could survive under this new regime, Matz responded that “the key is going to be volume, lots and lots of volume.”

“Besides,” she explained, “NCUA’s ultimate responsibility is to protect the Share Insurance Fund, not credit unions.”

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Following up on a ground-breaking speech yesterday in which she tried to convince people that the Federal Reserve Board really does care about Joe Six Pack when it artificially depresses interest rates that could otherwise be used to help fund retirements and help credit unions and community banks make more mortgages, Chairman Yellen announced that she would be converting the Federal Reserve Banks to credit unions.  She explained that credit unions really do care about their local communities and if they modeled the Fed after the credit union corporate system, what could possbily go wrong?  If the conversion goes through, it will reflect a trend where banks are converting to credit unions by the thousands to take advantage of the credit unions’ tax exempt status.  Once the conversion is finalized, Yellen will be stepping down and her job will be taken over by credit union expert Keith Leggett.  I have a soft-spot for Keith since he’s one of the few people I am certain consistently read this blog.  His new job as head of the credit unions will enable him to take advantage of the low rates and great service offered by credit unions without being fired by the Bankers’ Association. 

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Speaking of new jobs, CUNA has responded to the clear, decisive guidance of credit unions by publicly announcing the criteria it will be using to recruit a new CEO.  Specifically, CUNA has been tasked with finding someone who’s a cross between Mother Teresa and Karl Rove.  Rumor has it that CUNA already reached out to Pope Francis about taking the job, but he declined explaining that Popes cannot resign.  Another early candidate was Oprah Winfrey but she declined as one of the few candidates for whom the CUNA job would represent a pay cut.

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Yesterday was the drop dead deadline for the American public to sign up for health insurance or be required to pay a fine — I mean tax, sorry Judge Roberts — for refusing to purchase health insurance.  But if you haven’t signed up yet, don’t worry.  The Department of Health and Human Services is expected to announce later today new regulations under which only the politically popular parts of Obamacare will take effect and the public can ignore those aspects it doesn’t like.  The HHS explained that while the regulation may seem broad, it is perfectly consistent with the President’s power to do whatever he wants to do when Congress refuses to go along with his proposals.

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Speaking of Congress, House Republicans reacted with anger to Chairman Yellen’s speech yesterday.  They announced their own policies to increase employment highlighted by a bill to do away with all unemployment benefits.  They explained that by completely eliminating government handouts people will have to go out and finally get a job. 

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APRIL FOOLS?

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Finally, New York State passed an on time budget for the fourth year in a row late last night.  This is no joke, although if I said this just a few years ago, it would have been.  The truth is your erstwhile blogger can remember sitting around the Capitol on Easter Sundays watching the Ten Commandments while Legislative leaders tried to hammer out a budget.

On that note, enjoy your April Fools Day.

Entry filed under: Compliance, General, New York State, Political, Regulatory. Tags: , , , , , .

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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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