Posts tagged ‘$736 Million’

Congratulations…I Guess

My wife accuses me of being a beater of dead horses. That’s not true all the time but…

Yesterday, the NCUA announced that it was officially closing down the temporary Corporate Stabilization Fund and setting the normal operating level for the Share Insurance Fund at 1.39%. The bottom line is that if all goes as planned, credit unions will receive what Board member Metzger gushingly referred to as a “historic rebate of more than $736 Million” in the 3rd Quarter of 2018. Here is a temporary rule describing how the funds will be distributed on a pro-rata basis.

Here are some of the Board member quotes which help explain why I am in the minority of those who feel that credit unions should be very cautious in planning how to spend their largess. As explained by Chairman J. Mark McWatters, “While we currently project surplus equity, I want to be clear that the equity ratio could decline between now and the end of the calendar year if additional reserves for credit union failures are needed or if other unexpected developments occur that would significantly affect the equity ratio. This could reduce or eliminate the actual distributions that would be paid. However, to the extent actual performance of the Share Insurance Fund permits, the multi-year process of distributing surplus funds to insured credit unions would therefore begin in 2018.”

Chairman Metsger, at least in his written statement, was much less reserved and sounded very much like a politician taking a victory lap before he heads off into the credit union sunset.

What Chairman Metsger was referring to is that, according to at least one hypothetical presented by NCUA at yesterday’s Board meeting, if the Stabilization Fund was not closed in 2017 and the Stabilization Fund merged into it, the Insurance Fund operating level would have been as low as 1.18%. Remember that the Insurance Fund can be no lower than 1.20%. In other words, credit unions would have had to pay a premium to ensure that the Insurance Fund stays at the normal operating level.

So here is my point. While credit unions deserve a tremendous amount of credit for hard work and sacrifices they made in paying for the corporate meltdown, and I have consistently said that NCUA did a phenomenal job in aggressively pursuing novel litigation against the world’s largest investment banks, there are still plenty of warning signs out there. We have the medallion situation and an overheated economy which, by historic standards is nearing the end of its expansion. I hope we don’t look back a year or two from now and realize that the money being returned to credit unions today could have been put to better use hedging against these uncertainties.

More BS (A)

Here we go again. Financial regulators in the Department of Justice made big headlines yesterday by announcing a $185 million civil penalty to be imposed against US Bank for “willful violations” of the Bank Secrecy Act. Take a look at what the bank did. It intentionally choice to break the law in a way that was so blatant that a compliance specialist a week out of CUNA Compliance School would have known something fishy was going on. To be crystal clear, if a credit union or small community bank for that matter did what this bank did, it would be out of business and its CEO would be retaining a white-collar defense lawyer. In contrast, in the too big to prosecute world in which we live, executives get to write a check, do a mea culpa and go about their day. This is utter garbage.

On that happy note, enjoy the long weekend.

February 16, 2018 at 9:12 am 1 comment


Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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