WASHINGTON—A question nearly a decade in the making has been met by the two credit union trade groups on opposite sides of the answer.
Although they represent the same credit union community, CUNA and NAFCU have taken opposing positions on NCUA’s proposal to shutter the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and potentially begin making payouts to credit unions in 2018. It’s a rare divide among the two groups, which often disagree on details but largely agree on the major issues before credit unions.
In its comment letter to the agency, CUNA says it fully supports NCUA’s plan. CUNA filed its comment letter just a week after NAFCU filed a letter of its own expressing opposition to the plan that would merge the assets of the Stabilization Fund into the National Credit Union Share Insurance Fund. NAFCU said it doesn’t believe the combination at this point would be in the best interests of CUs.
But CUNA disagrees.
“CUNA’s number one priority is to ensure credit unions get their money back in 2018, no later, and we will advocate to ensure nothing slows down the process," said CUNA President/CEO Jim Nussle. "We engaged throughout this process with members of our Examination and Supervision subcommittee, leagues and CUNA member credit unions, and feedback has been consistent that refunds should be given to credit unions as soon as possible.”
Point/Counterpoint
The issue has also led to a point/counterpoint debate in CUToday.info’s The Tude section, with former NCUA Chairman Michael Fryzel writing here that there is self-serving rhetoric taking place, while NAFCU responded here that its position is the result of listening to its members.
At the heart of NAFCU’s dissent is the trade association’s contention that NCUA is “rushing” forward with a “complex proposal.” NAFCU asserts that the agency is attempting to “distract credit unions with the promise of dividends as it hoards nearly $800 million for itself by increasing” the Normal Operating Level of the Share Insurance Fund “to the highest level in the history of the SIF."
NAFCU President and CEO Dan Berger, in the trade association’s comment letter, asserted that if NCUA moves forward with the current proposal, credit unions would only receive about 40% of what is "rightfully their money." He called it a "cash grab" and said it amounts to a "60% premium charged to the industry."
Berger and NAFCU went on to state, "Although there could conceivably be short-term benefits to merging the Stabilization Fund with the SIF (Share Insurance Fund), NAFCU strongly believes such a move at this time would not be in the best interest of credit unions. Therefore, NAFCU and our members: (1) stand in opposition to NCUA's proposal to merge the funds at this time; (2) strongly oppose any increase to the NOL; and (3) advocate that the agency is not required to charge a premium in 2017."
But CUNA doesn’t see it that way, and in follow up to the NAFCU comment letter is now emphasizing that it is the “only national trade association advocating for stabilization funds to be returned to credit unions in 2018.”
Crisis Is Over
CUNA in its comment letter said it will work closely with the agency as the process of winding down the corporate stabilization fund moves forward.
"The corporate crisis is over and the purpose of the stabilization fund has expired. There is no argument to be made that NCUA is a better steward of these resources than credit unions," wrote Nussle.
In CUNA’s letter to NCUA on the proposal, the trade association was somewhat in line with NAFCU regarding concerns over authorizing NCUA to raise the normal operating level to 1.39%.
“CUNA strongly believes this is unnecessarily high and would be a sharp departure from NCUA’s past successful management of the equity ratio,” CUNA’s letter reads. Instead, CUNA recommends NCUA temporarily increase the normal operating level by four basis points to insulate the share insurance fund from any potential volatility in the legacy assets held by the stabilization fund.
CUNA also pushed NCUA to explicitly state the increase in the normal operating level is temporary, only lasting until the legacy assets remain on the share insurance fund’s balance sheet.
CUNA said it will continue its work with NCUA to return more stabilization fund assets to credit unions by returning the normal operating level to 1.3%. In addition, CUNA will work to ensure accounting of assets is done in a transparent manner.
Different Conclusions
How did the two trade groups arrive at different conclusions?
Lance Noggle, CUNA senior director of advocacy and counsel, said that both CUNA and NAFCU want the same things for credit unions—to get some of their assessments back. He acknowledged, however, that the paths to get there as outlined by the two trade associations differ.
Dan Berger
“Our members expressly said they want a payout in 2018, that is one of the most important things they communicated to us,” said Noggle. “I am surprised (NAFCU) would take a position that would cause that not to happen.”
NAFCU President and CEO Dan Berger told CUToday.info that the trade association’s position is “very simple—which is what makes it odd that it is being mischaracterized by some. We have always supported credit unions getting full and fair refunds from the stabilization fund as soon as possible. Unfortunately, NCUA's proposal to close the stabilization fund and increase the normal operating level for the share insurance fund from 1.3% to 1.39% falls short of that.
"Per this increase in the normal operating level, the agency would be holding onto close to $1 billion that rightfully belongs to credit unions," Berger continued. "To make it easier to understand the potential real world implications, we launched a calculator to help credit unions estimate their 2017 NCUSIF rebates. The feedback we've received confirms for us the merger may not be in the best interest of the industry. NAFCU members will continue to work with NCUA on a plan to make credit unions whole as soon as possible. Until then, we plan to continue to advocate for a better path."
Asked by CUToday.info during NASCUS’ Summit conference in San Diego whether he was surprised the two credit union trade groups have taken opposing positions on the proposal to close the TCCUSF, NCUA Board Member Rick Metsger also said he was “surprised” by NAFCU’s opposition to the plan.
The reason, he said, is that in November of 2016 NAFCU was asking NCUA to close the fund as soon as possible, but in its comment letter the trade group implied the process was being rushed.
Mestger's Reaction
Metsger said that in his travels to date and in the feedback he has received most credit union execs have expressed support for the move to being payouts from the fund in 2018.
“Going back to the financial crisis, no one expected to get a rebate and they didn’t even know how long their assessments were going to continue,” said Metsger. “To think that seven years later not only has there not been an assessment, they are going to get a rebate back. Most of the CEOs I talk to feel blessed the economy has turned out this well.”
Comments are due to the agency by Sept. 5.