ALEXANDRIA, Va.-Addressing its decisions to place five corporates into conservatorship in 2009, NCUA restated that its actions were the best for the industry.
The agency has restated its opinion following the publication of data on the performance of the so-called "legacy assets" online at www.coops4change.org (CU Journal, June 17). The agency has had to respond to a suggestion by one source that it may have moved too quickly to conserve the troubled corporate credit unions and that its legacy asset losses were less than what the agency was sharing (see related story).
NCUA told Credit Union Journal that any suggestion it "knew all along" what the eventual performance of the legacy assets would be is to "fundamentally misunderstand financial and economic projections," said John Fairbanks.
Valuing the legacy assets incorporates numerous variables, said the NCUA spokesperson.
"Which is one reason the agency reports its projections as a range between best- and worst-case scenarios, rather than a specific target. It would have been simply impossible to precisely forecast, four years ago, the direction the economy would take or how well-or poorly-the bonds might perform."
Fairbanks asserted the decisions to conserve were the only correct moves at the time. "These corporates couldn't meet their obligations without extraordinary public assistance and were all economically insolvent," stated Fairbanks. "The loss of market value of the bonds they held far exceeded their capital. Even with the (legacy assets) improvement we've seen to date, none of the five corporates would have been viable today."
Fairbanks noted that any claims that the agency rushed to conserve the corporates should be measured against findings in the 2012 Government Accountability Office report on the corporate CU crisis and 2010 material loss reviews on the failed corporates from NCUA's Office of Inspector General.
"The reports concluded NCUA should have acted more aggressively to avert the failures. However, the agency acted assertively once trouble hit."
'An Orderly Resolution'
Fairbanks reminded that in making its decisions NCUA had several responsibilities, including:
* Ensuring the credit union system remained liquid.
* Making certain various critical services the corporates provided to other credit unions continued.
* Disposing of billions of dollars of troubled assets in a way that would enable a least-cost resolution that incorporated sound public policy.
"Conservatorship gave the agency control-and, more importantly, time-in order to develop the best solution for the Share Insurance Fund and for credit unions," said Fairbanks. "NCUA did not immediately liquidate the corporates or make any substantive changes to their core business models to promote an orderly resolution."
