GRAND RAPIDS, Mich.-As reported by Credit Union Journal, June 17, information on the performance of five failed corporates' so-called "legacy assets" are now available online.
As CUs determine the performance of those assets, one person believes credit unions may come to the conclusion NCUA had time to study the corporates' problems and possibly develop a different solution instead of shutting down the troubled institutions.
Randy Karnes, CEO of CU*Answers, told Credit Union Journal that the legacy asset data being assembled on the Co-Ops For Change website may show that the potential losses of the securities from the five failed corporates were overstated by NCUA. Karnes' suggestion runs counter to concerns shared by many within the CU movement-the subject of extensive reporting in Credit Union Journal (May 20)-that the legacy asset losses may be greater than what NCUA has stated.
The NCUA Office of Inspector General, as well, in its material loss reviews of U.S. Central and WesCorp, stated the CU regulator was too slow to conserve the institutions.
'Banking' Methods Used
However, Karnes suggested the agency used traditional "banking" methods in dealing with the corporates' problems, simply eliminating the faltering institutions instead of studying their problems and finding a path more suited to the industry.
"There certainly are situations in which credit unions have to be taken over," said Karnes. "But NCUA sold the corporate problem outside the industry, therefore dooming the industry to their conclusion."
Karnes insisted NCUA needs a more "dynamic" approach to regulation-one in which the agency is studying and learning what the best solutions are. "If they don't, they will destroy both sources of credit union soundness: member confidence and capital. In the case of the corporates, member confidence was undermined, thus blocking the corporates' only way to rebuild capital. That's how the independent cooperative liquidity system was dismantled."
Karnes added that if NCUA does not seek to study problems within the industry, and develop innovative solutions for addressing troubled institutions, "we have a ball rolling downhill. Generation after generation there is no studying if the solution really worked out."
What CUs may find in studying the performance of the legacy assets, offered Karnes, is that NCUA has "managed the message" of the corporate crisis "in their favor. The data may show that NCUA has known all along that the losses were not as great as they have shared, so in the end they come out looking like heroes."
No One Knows The Future
NCUA recently stated to Credit Union Journal that its actions were the best for the industry and that there was no way the agency, or any investment expert, could know the future value of the legacy assets at the time the corporates were conserved (see related story, below).
Karnes emphasized that what the industry finds in its analysis of the legacy assets will ultimately tell the story of NCUA's performance, and that he has not jumped to conclusions.
"I could be 100% wrong in my assumptions. But what I do know is that the industry is not confident NCUA has carefully studied the corporate problems . . . We are not coming up with innovative solutions and that might bite us in the behind two generations from now if we don't change."
