Mike Shafer responded to my most recent article and offered a different view of the issue at hand as one in which the NCUA has the unenviable task of performing clean up duty. Firstly, thanks Mike for speaking up on this topic and sharing your opinion!
Thanks also for making my point that the NCUA did what it has always done, and we were all happy to let them off the hook. We will lightly criticize the NCUA for letting credit unions make this a system issue (raking in CU profits short-term with no plan for the ultimate rainy day), but then just forgive the NCUA when they have to deal with the consequences. Do you sense a pattern here?
Or is it just all part of the game? CUs maximize their independent success for as long as possible and then dump their ultimate failures on the system? Could you imagine if that was the game, and it was stated so directly? How would people see the design and how would they change it?
One perspective: CUs owe nothing to the system from their independent success year over year. In which case, the NCUA really has no role in assigning some premium or hold back from success against future ultimate failure. Alternatively, credit unions’ ultimate failures are equally divided by the system independent of their successes from the past. In which case, the NCUA really has no role in the end, but to write a check and tell the system about the bad news. (This is the opportunity to improve.)
After you gotten the bad news over and over, and you went back to the design statement over and over, do you think it reasonable to let everyone off the hook without trying to improve it? (Chip sure does not think that way.) What if we all pushed hard to stop getting the bad news and made the design work better.
- What happened to the $ represented by the extreme Net Worth? Were they extreme or should they have been seen as mandatory per the RISK? (This is a tough thing to size up – I am not a fan of RBC.)
- How did the system benefit from the independent success of these credit unions (direct sourcing CUs and the participating CUs)? Is there a reason to rejoice in the net returns to the system even after the failure?
- Who made the call it was time to declare Ultimate Failure? Here is my bone to pick with the current culture of the NCUA: they did.
- Who decided to end the CU work out, and stop working with the members? Here is my bone to pick with the current culture of the NCUA: they did.
- Who decided that writing a check was better than pushing through as owners of the situation with the members? Here is my bone to pick with the current culture of the NCUA: they did.
- Who likes to benefit from calling it a crisis and being the white knight? Here is my bone to pick with the current culture of the NCUA: they did.
- Who accepts the design and even justifies the writing of checks, the increasing budgets of the NCUA, and the liquidators profile? The industry does, because it can’t and won’t work to change the design.
Now don’t get me wrong, I have no simple fix to this design. Frankly, I am not sure I need one because I am ok with the net return to the system over the life of member economies (years of gains less the shut down costs model). But what I hate is the posturing of everything as a crisis and that the NCUA is doing a good job, instead of a mediocre one at best.
I am sure that Chip sees the design a bit differently. Perhaps he does not believe in this statement: The NCUA really has no role in the end but to write a check and tell the system about the bad news.
Maybe he believes and we should too that:
- The NCUA should do everything in its power to see that the independent credit union completes the work out directly with the members and delays the Ultimate Failure declaration until all is lost.
- The NCUA should write checks and ensure the ability of the system to complete the work out with the members, not just pay for the problem to be transferred out of the system without care or concern for the impact on credit union owners, their communities, and the sense of our independence as cooperatives.
- And in doing all of that the NCUA should be accountable for the situation of both success wasted, and failures not managed to the minimal loss.
- We all should look for more than convenience in dealing with failure, we should look to the pride of helping CU with their independent management of success and failures via a system that pushes them and us not to quit on customer-owners at the drop of a hat.
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