NATIONAL HARBOR, Md. — When it comes to the corporate credit union debacle, there is more than enough blame to go around, and NCUA Chairman Michael Fryzel isn't shy about sharing it.
"NCUA, the people sitting on the boards of the corporates, the trades, natural person credit unions, all are at fault, all of us could have done a better job," he told a standing-room-only crowd at NAFCU's Annual Meeting. "But rather than looking backward, I believe it's better to look forward."
Still, when pressed to "look backward" by one member of the audience during the Q&A session, Fryzel held the line. "At NCUA I believe we could have done a better job. We've all heard the same arguments - the investments were good investments at the time they made them. Perhaps, looking, one question I asked early on was what is the real value of these investments at the corporates, and no one at NCUA knew, no one had the expertise to answer that," he said. "When we talked with the corporates [prior to taking U.S. Central and WesCorp into conservatorship], we asked some hard questions, but the answers we got weren't what we found out later on. Going forward, we will look at how corporates make investments, if they continue to make investments for credit unions."
One CU board member in the audience asked Fryzel point blank: have credit unions "paid the full bill" for the insurance fund, or will there be more charges in the future. "While the corporate issues have been in the spotlight, a number of credit unions, particularly in the sunshine states of Florida, California, Nevada and Arizona, have been having problems, as well," Fryzel replied. "That is starting to spread to other parts of the country. There will be additional hits to the insurance fund. But if there's not significant downturn, we'll be OK."
Fryzel said despite some calls for separating the National CU Share Insurance Fund from the regulator, he continues to hear that all plans call for leaving NCUA intact, as is — and that includes the NCUSIF.
Deloitte & Touche is the auditor for U.S. Central and is also the auditing NCUA, a situation that should require the firm to put up a firewall between the two audits. But Fryzel said he believes D&T has not done so, as the firm has been requesting information from one audit related to the other audit. He also expressed frustration with the speed — or lack thereof — of the firm's work, predicting that the audit, which NCUA had hoped would be done in July, likely won't be done until the third or fourth week in August.
When asked if NCUA intended to make it more difficult for federal charters to convert to state charters, and for state charters to convert to private insurance, Fryzel said there is no move afoot to make it easier or harder for a credit union to convert in any way, be it from federal to state, state to federal or even to a thrift charter.
NCUA has offered to help state regulators. "I know your resources are slim and you have budget cuts," Fryzel said he has told state regulators. "Our examiners can come help you. We have more resources. We established the National Exam Team for a reason."
