WASHINGTON — Likening NCUA's takeover of WesCorp and U.S. Central Corporate FCU to the unnecessary panic that surrounded the Y2K bug and the avian flu pandemic that didn't happen, one CU consultant urged CUs to flood the regulator, the trades and the press with their opposition.
Callahan & Associates CEO Chip Filson deplored the conservatorships of the two corporates, saying NCUA's own numbers indicated its previous actions to bolster the corporate system was working, and that needless panic has caused the agency to act in a way that will only cause further hardship for the corporates and the credit union movement as a whole.
"When you look at the [losses related to corporates] NCUA issued a month ago and the numbers they have just put out, you have to wonder what happened in 30 days," said Filson, who was part of the management team at NCUA in the 1980s when it recapitalized the deposit insurance fund. "Right now there are a lot of extremes and a lot of false prophets."
The "rush to judgment" is troubling, Filson said because NCUA took action after getting just one of the three analyses it had commissioned - the PIMCO report. "That renders the other two reports that haven't come out academic," he said. "By their own account, these numbers and the financial models they are using are very much in flux," which is exactly why NCUA should be waiting for the other reports, he added.
Particularly disturbing, he said, is the fact that the numbers upon which NCUA based its actions, were culled from the same financial analytical modeling that helped create the mess in the first place.
Moreover, there is evidence that the agency's previous actions, such as the CU System Investment Program (SIP) and share guarantee program, has been working to stabilize the corporate system. Filson noted that between Dec. 31 and Feb. 28, the six largest corporates grew deposits by $12.2 billion, reduced borrowings from $27.9 billion to $2.1 billion, the SIP reached $8.2 billion, and U.S. Central has no external borrowings in March.
"NCUA's [takeover of WesCorp and U.S. Central] could jeopardize the success they were having with their other actions," Filson said. "The bottom line is we were starting to see increased stability at the corporates, so why would they conserve?"
Equally disturbing, he suggested, is the fact that once a conservatorship is done, the credit union ceases to have any rights and NCUA is in total control. The conserved institutions have just 10 days to ask the U.S. District Court to review the agency's decision. "If nothing happens in 10 days, NCUA has total control over these institutions with absolutely no review or oversight," Filson said, urging credit unions to deluge NCUA, the corporates, the trade associations and the press with calls opposing the move.
Yet another cause for concern: NCUA has telegraphed its next steps, and those next steps, Filson said, aren't pretty. "Look at who they brought in [to run the institutions]-they're from the buy side and what they are already saying," he observed. "Clearly the plan is to go with a good bank/bad bank structure and sell everything off.
"This has been planned all along," he continued. "The process has been very misleading. This is a warning to the other corporates."
But perhaps the most vexing part of all, Filson suggested, is "(NCUA) clearly believes they can do it better, that they can run your credit union better than you can. And to that, I say, anybody can hold a garage sale."
