NCUA Spending Surges to Stem Expanding CU Crisis

ALEXANDRIA, Va. — The NCUA Board this morning approved a $23.1 million rise in spending for next year, it's largest increase ever, to help deal with the growing number of problem credit unions.
 
The new funds will help hire another 74 staff, 57 of them examiners — on top of 50 new examiners hired this year--to help implement a more frequent examination cycle and tighten monitoring of at-risk credit unions.
 
"I realize the projected increase in dollar and in (staff) seems extraordinary, but we're living in extraordinary times," said NCUA Chairman Deborah Matz. She noted the growing number of so-called CAMEL 4 and 5 credit unions, designated as troubled institutions, as well as increasing numbers of CAMEL 3s, those on the cusp of serious troubles. "If we don't take corrective action now, today's CAMEL 3s will become tomorrow's CAMEL 4s and 5s." said Matz.
 
In addition, NCUA said losses for the National CU Share Insurance Fund increased by $171 million in October, to more than $560 million so far in 2009. Most of October's losses are believed to be related to three big federally insured credit union failures in Nevada.
 
Next year's budget will also include $1.5 million to fund a new office of consumer protection at NCUA, which will help NCUA and the credit union lobby to convince Congress to leave them out of plans for a new Consumer Financial Protection Agency.
 
The budget will also incude $344,000 to recreate an office of the chief economist, which was scrapped almost 20 years ago after the death of the agency's then-chief economist.
 
Most of the new spending, more than $20 million worth, will be paid for by transfers from the NCUSIF. Operating fee rates assessed federally chartered credit unions will actually decline by 1.5% because of a projected 8.5% growth in assets for federal charters.
 
The board also issued for comment proposed reforms to its corporate credit union rules which would boost capital requirements, tighten rules on investments and on corporate governance. The proposed rule, however, does not deal with the major problem among the corporates, the diminishing capital, or make any recommendations for consolidation of the corporate network.