The Federal Credit Union January-February 2014 - (Page 6)

INSIDE NAFCU After 5 Years, Are Corporate Assessments Over? By Susan Broaddus T his could be the year NCUA stops asking federally insured credit unions to remit millions in assessment dollars to repay costs of the corporate credit union debacle - at least, that is what NAFCU is advocating. On Nov. 19, NCUA announced it would receive $1.417 billion from JPMorgan Chase in a settlement that resolves four of the agency's legal actions targeting sellers of faulty mortgage-backed securities (MBS) to corporate credit unions. This amount is in addition to the $335 million in previous recoveries won so far by NCUA (as of press time) and very nearly covers the total estimated future assessment needs of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF). And NCUA has that LIBOR suit in progress as well. Given all this, NAFCU President and CEO Dan Berger is calling for an end to corporate stabilization assessments. What's more, he is urging the agency to consider refunding any excess to insured credit unions if the $4.8 billion collected to date turns out to be more than is ultimately needed from them. NCUA has already estimated it will need no assessment in 2014. Meanwhile, a refund, or a return of some sort, seems to be within the realm of possibility: NCUA also in November adjusted the TCCUSF's estimated range of future assessment needs. That range is from a low of negative $200 million to a high of $1.6 billion. It's possible that NCUA's recoveries from lawsuits will leave the stabilization fund with a surplus - more than the above-noted range would suggest - and a sustained economic recovery could mean greater returns through the NCUA Guaranteed Note (NGN) program. In any event, NAFCU wants any surplus to be distributed back to insured credit unions. 6 This is the proverbial light at the end of the tunnel for insured credit unions. It was five years and some months ago that the corporate crisis was just coming to a head. Back then, a longstanding effort begun by NAFCU to get Congress to remove, once and for all, the artificial cap on the Central Liquidity Facility's (CLF) borrowing and lending limits was nearing fruition. Why? Credit unions were turning more and more to the CLF to meet their liquidity needs, and at the same time the corporates saw their own liquidity draining due to losses on their MBS investments. NCUA Board Member Michael Fryzel, in an October interview with The Federal Credit Union, recalled learning about the corporates' problem the first week he joined the agency as its chairman. That was in late July or early August 2008, and he said the crisis threatened to take down some 2,000 natural person credit unions. Over the next many months, Congress removed its artificial cap on the CLF's lending authority, and NCUA rolled out a number of investment programs designed to keep capital within the system. In May 2009, Congress also authorized the creation of the TCCUSF, which could borrow, on a revolving basis, up to $6 billion from Treasury to pay the expenses of corporate stabilization. These costs would be repaid by insured credit unions. Numerous other steps followed, including the eventual liquidation of five corporates (including the two largest, U.S. Central and WesCorp), a wholesale revamp of NCUA's regulations for corporates and the creation of the NGN program. Debbie Matz - having been brought back to the agency by a new administration to serve as chairman in August 2009 - was present for and presided over those later efforts. The stabilization fund's ending balance will depend on the value of the NGNs when underlying securities mature, and both the TCCUSF and NGN program are scheduled by law to continue until June 2021. In the meantime, NAFCU is pressing NCUA to let 2013 stand as the last year of corporate stabilization assessments on federally insured credit unions. And who knows - maybe insured credit unions can anticipate a return, at some future time, on that $4.8 billion paid thus far. THE FEDERAL CREDIT UNION JANUARY-FEBRUARY 2014

Table of Contents for the Digital Edition of The Federal Credit Union January-February 2014

Voices & Opinions
From the Chair
Inside NAFCU
Business Talk
2014 Economic Outlook: Slow Speed Ahead
Waging the War Against Cyberthieves
Meet Rick Metsger
2014 NAFCU Vendor Directory
Getting to Know...
Compliance Central
Inside NAFCU Services
From the President's Desk

The Federal Credit Union January-February 2014