WEST PALM BEACH, Fla.-The improving bottom lines at credit unions across the country have been a dose of good news that is tempered by just one outstanding issue: how many more assessments will need to be paid to cover the costs of the failed corporate CU investments.
In an attempt to answer that question, Credit Union Journal has spoken with analysts, economists, credit union CEOs and obtained information and data as the result of a Freedom of Information Act requests filed with NCUA. Right now, sources concede that no one really knows.
From the failure of five corporates-U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU-natural-person credit unions have already shouldered $4.1 billion in assessments
By NCUA's estimates, the costs of the corporate failures should come off the books sometime in the next seven to eight years. NCUA has also proposed an escalated repayment schedule to save credit unions money and shorten repayment time.
Many credit union executives are optimistic that NCUA's latest loss estimates are accurate. "I believe what NCUA is saying to be true," said Jim Blaine, CEO of State Employees' CU in Raleigh, N.C. "I have no reason to doubt NCUA is trying to provide a best estimate of the range of losses. I back them 100%."
But not everyone is so confident. NCUA has estimated the final tab will amount to $11.3 billion to $13.6 billion. But other analysts have suggested that figure could be as high as $25 to $30 billion.
"The problem could well be much bigger than what NCUA is saying," said Michael Moebs, who in 2010, at a time when discussions of the corporate losses addressed figures well below $10 billion, estimated losses at $17 billion or higher (Credit Union Journal, July 19, 2010). "Now with the performance we have seen of residential mortgage-backed securities, I fear the losses could be greater, much more than what NCUA is telling us."
Moebs is economist and CEO with Moebs $ervices in Lake Bluff, Ill.
Day of Reckoning? Or Not?
The biggest issue for many is what they say is a lack of transparency by NCUA. The agency, for instance, provided some details on the legacy assets, but not all that CU Journal requested. The Journal asked for the CUSIP (Committee on Uniform Securities Identification Procedures-the 9-character alphanumeric code which identifies a North American financial security) the original face, the label, and the original purchase price.
However, NCUA declined to provide the original purchase price. That data, said one securities expert, is key to determining whether NCUA's estimates are close to spot-on or whether there is a "day of reckoning" is coming.
In the coming weeks Credit Union Journal will provide a detailed look at the questions related to the final cost of the five corporate credit unions NCUA placed into conservatorship.
Following publication of this story, NCUA has since fulfilled all of the requests of the Journal’s original FOIA submission.
