You de­serve a mon­ey­back guar­an­tee

NCUA must re­turn all monies that come from merg­ing the in­sur­ance and sta­bi­liza­tion funds, and halt its pro­posal to in­crease the nor­mal op­er­at­ing level for the share in­sur­ance fund.

Credit Union Journal - - Front Page - BY B. DAN BERGER

IT SOME­TIMES SEEMS EASIER — OR maybe faster — to take the path of least re­sis­tance. To do what’s ex­pe­di­ent. But what if ex­pe­di­ency means sur­ren­der­ing the bet­ter part of $1.8 bil­lion of credit union in­dus­try monies?

Most would say ex­pe­di­ency isn’t worth the cost. In­deed, most in the credit union in­dus­try — no­tably, NAFCU mem­ber credit unions — have al­ready said as much in their own com­ments on the Na­tional Credit Union Ad­min­is­tra­tion’s pro­posal pair­ing the clo­sure of the Tem­po­rary Cor­po­rate Credit Union Sta­bi­liza­tion Fund with a sharp in­crease in the nor­mal op­er­at­ing level of the Na­tional Credit Union Share In­sur­ance Fund.

The NCUA has pro­posed to close the Sta­bi­liza­tion Fund as of Oct. 1, merge it into the Share In­sur­ance Fund and raise the NCUSIF nor­mal op­er­at­ing level from 1.3 per­cent to an all-time high of 1.39 per­cent. It says some $600 mil­lion to $800 mil­lion of credit unions’ sta­bi­liza­tion monies could be re­turned to credit unions next year.

The Na­tional As­so­ci­a­tion of Fed­er­ally-in­sured Credit Unions has his­tor­i­cally worked to en­sure a strong Share In­sur­ance Fund, and we have yet to be able to find a good rea­son for sup­port­ing a nine-ba­sis-point in­crease in the NCUSIF’S nor­mal op­er­at­ing level when, over the years, 1.3 per­cent has proved to be more than suf­fi­cient — even dur­ing the fi­nan­cial down­turn and de­spite the pres­sures of cor­po­rate sta­bi­liza­tion. The reg­u­la­tor has of­fered a va­ri­ety of po­ten­tial risks to the fund as rea­sons to push the NOL to 1.39 per­cent, but they are not com­pelling given that the fund is well-re­served for known risks, as well as some which have yet to show them­selves.

TOP PRI­OR­ITY

For th­ese rea­sons and more, NAFCU’S top pri­or­ity is to get credit unions all of their money back — not just a por­tion. For ex­am­ple:

• Un­der the NCUA’S cur­rent pro­posal, credit unions would only re­ceive about 15 per­cent of the $4.8 bil­lion they have paid in sta­bi­liza­tion as­sess­ments since 2010. The NCUA would re­tain al­most $1 bil­lion of the money ex­pected to be avail­able through the funds’ merger so it can de­feat a statu­tory ban on as­sess­ing share in­sur­ance pre­mi­ums to take the fund be­yond 1.3 per­cent. This money be­longs to Amer­ica’s credit unions and their mem­bers. • There is no com­pelling need to in­crease the NCUSIF’S nor­mal op­er­at­ing level. The cur­rent pro­posal fails to pro­vide any as­sur­ance that the in­crease to 1.39 per­cent would be un­wound in fu­ture years. On the con­trary, it sets a prece­dent for re­tain­ing ex­ces­sive funds in the NCUSIF that fu­ture NCUA Boards are likely to fol­low. The credit union in­dus­try sur­vived the Great Re­ces­sion with a 1.3 per­cent NOL, re­in­forc­ing the fact that keep­ing the NOL at 1.3 per­cent does not place the NCUSIF at risk.

• The NCUA does not have to charge a

pre­mium this year. A pre­mium charge is only re­quired un­der the Fed­eral Credit Union Act if the eq­uity ra­tio falls be­low 1.2 per­cent. NAFCU’S mod­els — and even the NCUA’S own base­case mod­els — do not pro­ject such a de­cline to oc­cur for years to come. The NCUA as­serts that be­cause of the merger of th­ese funds, it won’t need to charge a pre­mium in 2017. In re­al­ity, it wouldn’t need a pre­mium even if there were no merger.

With that in mind, let’s be clear: NAFCU is the only na­tional credit union trade as­so­ci­a­tion ad­vo­cat­ing for full re­funds for credit unions from the NCUA’S pro­posed clo­sure of the TCCUSF. We are ar­gu­ing for a bet­ter so­lu­tion — one that won’t force credit unions to ac­cept a par­tial re­bate or sub­ject them to the high­est NCUSIF nor­mal op­er­at­ing level in the his­tory of fed­eral share in­sur­ance.

“Ex­e­cut­ing the NCUA’S cur­rent pro­posal would pro­duce a dras­ti­cally smaller re­bate than what many credit unions might oth­er­wise re­ceive.” – Dan Berger, NAFCU

IN MEM­BERS’ BEST IN­TER­ESTS?

Years ago, some Wash­ing­ton pol­i­cy­mak­ers wanted the in­dus­try to write down the 1 per­cent NCUSIF deposit. NAFCU, act­ing in its mem­bers’ best in­ter­ests, ini­tially stood as the only na­tional credit union group to op­pose the plan (and that

plan was de­feated). Tak­ing the po­si­tion we took wasn’t dif­fi­cult to do, as our lead­er­ship struc­ture — our board and com­mit­tees — is made up solely of mem­ber credit union lead­ers. We take our cues from the peo­ple on the front lines who are mak­ing the de­ci­sions on how to best run their in­sti­tu­tions and serve their mem­bers.

The in­di­vid­u­als who serve on our board and the two com­mit­tees that unan­i­mously re­jected the NCUA’S cur­rent pro­posal rep­re­sent credit unions rang­ing in as­set size from $22 mil­lion to $82 bil­lion. Be­cause of our di­rect con­nec­tion to th­ese mem­bers and the in­dus­try, we are ca­pa­ble of tak­ing po­si­tions based on real-world facts. And as our popular SIF re­bate cal­cu­la­tor has demon­strated, ex­e­cut­ing the NCUA’S cur­rent pro­posal would pro­duce a dras­ti­cally smaller re­bate than what many credit unions might oth­er­wise re­ceive.

TAKE THE LONG VIEW

When look­ing at the im­pacts to in­sti­tu­tions, we must look at the longterm im­pli­ca­tions, not just what’s in front of us right now.

NAFCU strongly sup­ports credit unions re­ceiv­ing re­funds from the Sta­bi­liza­tion Fund as soon as prac­ti­cal, as long as it is done in a fair man­ner. The in­dus­try has paid $4.8 bil­lion into sta­bi­liza­tion, and those funds pro­vided sup­port for the NCUA’S pru­dent ad­min­is­tra­tion and dis­po­si­tion of the toxic as­sets that pushed many of the in­dus­try’s largest cor­po­rate credit unions to their end. The NCUA made the cor­po­rate credit union sys­tem safer by chang­ing its rules on cor­po­rate cap­i­tal and in­vest­ments so the prob­lems of the past can­not be re­peated. Now, it’s time for the NCUA to say thanks for the loan, and give credit unions all their money back. B. Dan Berger is the pres­i­dent and CEO of the Na­tional As­so­ci­a­tion of Fed­er­ally-in­sured Credit Unions

NAFCU CEO Dan Berger ad­dresses the crowd at the 2017 NAFCU Con­gres­sional Cau­cus in Wash­ing­ton.

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