WASHINGTON-Issues surrounding corporate credit unions and the potential need for federal funding led CUNA to hurriedly add a special early morning Q&A session during its Governmental Affairs Conference.
But many of the questions didn't lead to answers; just more questions. Much of that was due to uncertainty over a still-pending review of U.S. Central's portfolio, lack of clarity of what might happen in Congress, and strong divisions within credit unions themselves.
The 75-minute session, before an overflow crowd of several-thousand, included Terry West, CEO of VyStar CU, who is leading CUNA's corporate task force; CUNA CEO Dan Mica; CUNA General Counsel Eric Richard; CUNA Deputy General Counsel Mary Dunn; CUNA Chief Economist Bill Hampel; and CUNA SVP-Legislative Affairs Ryan Donovan.
West, who said of the agency's proposed corporate rescue plan, "Whether we like it or not, at the end of the day we all said NCUA needed to do something," noted CUNA is pressing NCUA to consider alternative plans. "There is not a simple solution to any of these problems. We understand the anger, I have a board and they have shared theirs with me," West said.
Parameters Are Identified
West, who said he and others have tried to make clear to NCUA "how painful" the assessment is to explain to members, said CUNA's task force is now operating within some basic parameters:
* Corporate capital needs to be strengthened.
* Corporates must significantly improve risk management.
* Corporates need to be accountable, transparent.
* Corporates need to exist in the form credit unions need them to exist.
CUNA's Mica said he is well aware credit unions don't like the NCUA plan, but added, "This is a substantive problem that doesn't need a lot of finger-pointing but does need a substantive solution. We are all in this together. This task force has stepped into a firestorm."
He said whether credit unions like it or not it appears the federal regulator had no choice but to do what it did and make its proposal to recapitalize the corporates using natural-person CU funds.
He said CUNA is now pressing the agency for greater details on how it arrived at its decision.
Among Mica's other points:
* Each of the alternatives CUNA has explored has some big "bumps in the road. Each has a potential accounting problem tied to it. If you take the money from TARP or CLF and you sign a repayment agreement, you are going to have to book that as a liability immediately, and that negates any benefit."
* TARP funds come with more "palatable" rules.
* As for the decision to accept TARP funds, "As a system we are a barbell, lumped at each end. No TARP money, and absolutely TARP money. I understand the division. Let me explain to you the thinking in moving forward on this. There is no second chance on this. We may not need TARP six months or a year from now. You see what's in the papers. The door is closing on even having TARP as a backup. We're not saying go in and take it. We're saying that whatever that money is we want an earmark on it. If we don't tag it now that door will be closed in about a month. If you're not hurting as a CU today I understand the philosophical argument. But as a system, if it gets as bad as some say it will get, we need to make judgments on which we will fight."
* When Mica noted that "half of the problems" credit unions are facing are caused by accounting issues, he got applause from credit unions.
* Mica said that if natural-person CUs were to invest another $15 to $20 billion in term deposits in corporates, it would mitigate much of the problem corporates are facing by approximately a half-billion dollars.
* CUNA is estimating the 62 basis point assessment charged natural person CUs would push 60% to 80% of all CUs into negative ROA. NCUA, in turn, has indicated it will urge examiners to add that 62 basis points back when doing exams, Mica said.
