“And I will restore to you the years that the locust hath eaten, the cankerworm, and the caterpillar, and the palmerworm…….” Joel 2:25 KJV
Last week, the National Credit Union Administration (NCUA) announced that Goldman Sachs had agreed to pay the federal regulator $575 million to settle claims the agency filed against the investment bank. As the liquidating agent on behalf of failing corporate credit unions, the NCUA litigated claims against certain large banks like Goldman that sold faulty mortgage-backed securities to the corporates prior to the financial crisis of 2008. Although highly rated, these same mortgage-backed instruments plunged in value, resulting in huge losses and ultimately caused the failure of five large corporate credit unions. An important point to make here is that the credit union industry did not receive a bailout from the federal government. On the contrary, the NCUA turned to natural person credit unions to absorb the losses via payments into the Temporary Corporate Credit Union Stabilization Fund and share insurance fund premiums. Seven years later and the crisis now over, it’s time for the NCUA to provide a little R&R. It’s time to refund and restore capital back to natural person credit unions.
Both leading trade organizations have gone on the record to state that the NCUA should someday return or refund capital back to natural person credit unions. The Credit Union National Association (CUNA) stated, “We welcome the news that NCUA has settled another suit related to the corporate stabilization fund. This will increase the amount that is ultimately refunded to credit unions, although those refunds are unlikely to occur for a few years.” According to the National Association of Federal Credit Unions (NAFCU), “NAFCU will continue to urge the agency to pursue its aggressive legal recovery efforts and to be transparent in how and when the funds recovered will be refunded to credit unions.” To date, the NCUA has obtained well over $3 billion in recoveries from large banks. Moreover, UBS has agreed to settle with NCUA for $69.8 million according to Reuters’ April 15, 2016 article and the agency is also poised to receive an additional $50.3 million from Credit Suisse Group AG. In the coming days, it is my hope that the NCUA will be more transparent regarding the settlement costs (e.g., attorney fees) and one day report the good news of credit union R&R. It’s time to refund and restore capital back to our credit unions!
The cuEvangelist – http://www.cuevangelist.com