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A great deal of new information has emerged recently concerning the NCUA’s
program to deal with the cost of the conservatorships of five corporate credit unions
during the financial crisis of the past decade. The good news is that credit unions can look forward to partial refunds on
assessments, and refunds of some or all of their extinguished capital in probably
three of the five conserved corporates. The bad news is these
refunds are unlikely until 2020 or 2021.
We believe that credit unions should have a significant say in
how and when these liquidations should occur. It is after all credit unions who will
benefit or suffer from optimal or ill timed liquidation of the securities because gains
or losses on those transactions will flow right through to credit unions. At the
conclusion of an NCUA report on this matter are the following statements:
“As the liquidating agent, NCUA is responsible for ultimately disposing of the
failed corporate credit unions' securities collateralizing the NGNs. NCUA will
monitor market conditions and evaluate individual securities going forward
to determine the optimal disposition strategy for each remaining security.
In addition, NCUA will continue considering various options for large-scale
disposition strategies at the end of the Corporate System Resolution
Program. NCUA plans to engage stakeholders before implementing any
large-scale plans that materially affect the timing and amount of
potential refunds to federally insured credit unions.” (emphasis added)
CUNA appreciates NCUA’s stated intention to include credit union stakeholders in
the asset liquidation decision. This will require that credit unions are fully informed
of any trade-offs between faster refunds and the size of those refunds, and have a
say in the outcome. Indeed, we will hold them to it. In that regard, we believe an
appropriate trail run in anticipation of the major activity of 2020 would be for NCUA
to engage in that stakeholder consultation in 2017 when a significant amount of
securities become available for liquidation.
That is why we wrote the agency this week to ask them to do just that. We understand that this may be discussed in briefing at an upcoming NCUA meeting; we will encourage the agency to make this the first -- not the last -- step in the process.
Bill Hampel has done yeoman's work on a deep dive into this matter which can be found here.
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