WASHINGTON – NCUA Chairman nominee Deborah Matz promised stronger oversight of the corporate credit union system during confirmation hearings before the Senate Banking Committee yesterday and denied a role in the agency’s easing of corporate restrictions.
Matz, who served on the NCUA Board between 2002 and 2005, told senators she voted against easing restrictions on corporate investments in 2002, the last time the agency rewrote the corporates’ investment rule, known as Part 704 of the NCUA Rule and Regulations. "I did not believe the crucial issue of risk concentration was adequately addressed," said Matz. "Additionally, I believed that the investment authority being granted was overly broad and permissive, particularly in light of the complexity of the financial instruments that were available to the corporates."
She was referring to an October 2002 vote by the three-member NCUA Board, which eased some restrictions on permissible investments for corporates. The rule passed two-to-one, with Matz voting against.
The rule expanded the investments corporates could buy by lowering the minimum credit ratings for long-term investments from AAA and AA to AA-; and for corporates with so-called Part One expanded authority to A-. Those corporates with Part Two expanded authority could invest in securities rated as low as BBB. This provision raised concerns among representatives of the Treasury Department, which Matz said at the time prompted her to oppose the rule.
The two Republicans on the NCUA Board, Chairman Dennis Dollar, and JoAnn Johnson, who succeeded Dollar as chairman, voted for the rule. The head lobbyist for the corporates at the time was Gigi Hyland, who was then a CUNA vice president and executive director for the CUNA-affiliated Association of Corporate CUs and who now sits on the NCUA Board.
The ratings of investments held by the corporates has been cited as one of the reasons for the failures of U.S. Central FCU and WesCorp FCU, as well as troubles at half-dozen other corporates, who have seen their mortgage-backed securities plunge in value, despite high ratings.
Matz told the two members of the Senate panel who attended yesterday’s confirmation hearing that tighter scrutiny of the corporates will be her top priority if confirmed by the full Senate. She said she hopes the reform of the corporate system being designed by NCUA now will have "regulatory flexibility and sufficient parameters to prevent this (the corporate crisis) from recurring in the future."
She said she hopes NCUA will issue its corporate reform proposal for comment by year-end.
Both senators at the hearing, Democrat Tim Johnson of South Dakota, a long-time acquaintance of Matz, and Republican Richard Shelby, endorsed Matz’s nomination and indicated it will be approved easily by both the committee and the full Senate.
