By Frank J. Diekmann
Maybe a decade back you saw the first iPhone and thought, yep, no one will ever again get frustrated at trying to refold a map. Perhaps 10 years ago you heard the words “President Trump” and thought that sounded pretty realistic. And when you had a chance back in 2010 or so of taking that extra thousand bucks you found and investing it in long-time blue-chip Sears or something called Amazon, you had the foresight to see the future was in next-day delivery of items people could have lived without for a month.
But there’s no way you called what took place at last week’s NCUA board meeting.
The NCUA board’s decision to actually put the temporary in Temporary Corporate Credit Union Stabilization Fund was foreseen by exactly no one in credit unions back in 2009. At that time, the CU community’s mood was much more along the lines of Permanent Black Hole Fund, or Perpetual-Bailout-of-5-Corporates-That-My-Members-Shouldn’t-Have-to-Pay-For-&-Where-Was-The-Regulator-Anyway-Fund (or the PBHFPB5CTMMSHPF&WWTRAF as it inevitably would have been known is the abbreviation-mad CU world).
In other words, the mood was dark and somber with a dollop of considerable fear—and not without reason—that credit unions would forever be paying into the fund created following the conservatorship of five corporate CUs in the shadow of what had become known as the Great Recession (joining the Depression in ironic usage of the word “great”). Also not so great–it was just four years ago that, at its peak, the deficit in the Stabilization Fund was $7.5 billion in 2013.
Let us not forget, too, that this was a time when NCUA was creating something called “Bridge” corporates, and there were plenty of people who thought they’d be jumping off one.
The Group Funk
And credit unions’ credit unions weren’t all alone in their funk. In 2010, 28 natural-person CUs went to their unnatural deaths, causing $228 million in losses to the NCUSIF.
Finally, as recently as a year ago, at every conference I attended from Seattle to Miami, when talk turned to the TCCUSF the one indisputable certainty was that no CU would see a dime until 2021, if then.
And then came the Sept. 28, 2017 NCUA board meeting. And with it a vote to close the fund and start paying refunds to credit unions in 2018. Because everyone saw that one coming.
As CUToday.info reported here and here, NCUA Chairman J. Mark McWatters said the Temporary Corporate CU Stabilization Fund became the More-Temporary-Than-Anyone-Thought Fund after the equity ratio of the insurance fund began to slide thanks to all those millions of Americans who have moved to credit unions and brought their deposits with them. The declining NCUSIF ratio meant a premium would likely need to be assessed. Looking to avoid the as-popular-as-porcupine-pancakes premium, McWatters said he initially asked the agency’s director of the Office of Examination and Insurance, Larry Fazio, whether the NCUSIF could “borrow” from the TCCUSF. The answer was no. But the funds could be merged—and now they have been.
None of this ever could have happened, of course, were it not for the billions of dollars NCUA has recovered in lawsuits against the big Wall Street brokerages, which it should never be forgotten, seemed to be working to ensure credit unions were broke for the ages.
'Absurd' & 'Ludicrous'
Naturally, as soon as the agency proposed closing the fund and potentially making payouts, faster than Ed Filene could put on his hat there were deep divisions within CUs over whether it was a good idea. NAFCU called the NCUA plan a “cash grab,” which we learned last week has not set well with either McWatters or Board Member Rick Metsger, who referred to some of the statements that have been made as “absurd,” “immature,” and “ludicrous.”
Last week I even saw a statement made in a CU league newsletter that the TCCUSF refund represented a “victory over NCUA.” I get that you’re always looking to justify the dues, but seriously, what?
The Great Recession of 2007-08 seems to have become the Great Forgotten inside credit unions as 2018 approaches. As Rick Metsger observed, “It seems pretty ironic that people are now arguing over the size of their returns rather than the premiums they might be assessed.”
Sometime next year your credit union will most likely be witness to a modern-day miracle—funds coming back to you from Washington. Who knows what debate that will lead to or what claims the trade groups will be making. That's OK, because debates are what democracies are all about. But let’s hope everyone remembers what's not up for debate is that the money being returned should benefit the credit union members who paid it in in the first place.
Frank J. Diekmann is Cooperator in Chief at CUToday.info and can be reached at Frank@CUToday.info or @FrankCUToday.