WASHINGTON (1/25/10)—At its first town-hall style meeting of the new year, the National Credit Union Administration (NCUA) shared some frank thoughts about its plans to revamp the corporate credit union system. Hosting what it called “an overflow crowd” of 200 participants at its meeting in Dallas, Texas on Friday, NCUA representatives, for instance, indicated some possible good news to the credit union crowd. The NCUA now estimates that ultimate losses for the NCUA's Corporate Stabilization Fund will be between $4 billion and $6 billion, notably on the low end of an initially reported range of $1 billion to $11 billion, and also representing potentially significant savings from the $6 billion currently earmarked. Agency representatives also acknowledged the prominence that the “legacy asset” issue plays in going forward with corporate restructuring. There are two issues of concern regarding legacy assets. First is the question: Can former capital holders, whose capital has been depleted, have their capital restored in the future if ultimate losses on the legacy assets turn out to be much less than expected. The second issue is whether, going forward, new capital depositors will be at risk if further losses occur on the legacy assets, that is, if losses turn out to be worse than expected. It is upon this second issue that the NCUA focused its attention during the meeting. NCUA staff said they continue to realize the urgency of dealing with the issue in going forward on a corporate plan. They said before a new rule is in place, the agency must find a way to wall off new capital from further losses if natural-person credit unions are to continue to capitalize the system—and that such credit union participation is crucial to an ongoing system. The NCUA noted it is “working around the clock” and with the U.S. Treasury Department on this issue. Also of particular note, the agency announced it is hiring a third-party consulting firm to study the agency’s modeled projections about the impact of its proposed corporate plan on credit unions and the credit union system. There is growing disagreement between the federal regulator and corporate credit unions about the impact the proposed corporate restructuring would have overall. The NCUA models indicate a viable system, but the corporates say the strictures are too binding to allow operational success. NCUA Chairman Debbie Matz continued to assure stakeholders that the current NCUA proposal is not “set in stone” and the agency remains keenly interested in comments. She urged the crowd to include constructive alternatives within your comments rather than just stating something will not work. After attending the meeting, Bill Hampel, CUNA chief economist, said, “There was a great deal of open and frank discussion back and forth between agency and credit unions reps. The credit union folks were very willing and forceful with their remarks and the agency made it clear that it continues to listen.” The deadline for comments submitted directly to NCUA is March 9. CUNA will accept comment from credit unions until Feb. 10, and its Corporate Credit Union Task Force met for three days last week for comprehensive discussion about issues to be addressed. The next NCUA Town Hall meeting will be held Thursday, Feb. 4 in Lake Buena Vista, Fla. Use the resource links below for more information on the NCUA corporate credit union restructuring plan.