That's the message contained in some of the comment letters sent to the NCUA in preparation for the agency's review of the structure and regulation of the corporate credit union system. Comments aren't due until April 6, but as of last Tuesday, there were 75 letters posted on the NCUA Web site.
Michigan Credit Union League President David Adams wrote that the "poor management and inadequate regulatory oversight'' caused the problems facing the corporates and the NCUA needs to "immediately improve its regulatory oversight.''
Adams said the agency should prohibit or limit high-risk investments such as net interest margin bonds and mortgage-backed bonds. The agency should also consider mandating special outside certification of corporate credit union investment portfolios.
Roshara Holub, president/CEO of the Missouri Credit Union Association, was more cautious in her recommendations. While conceding that the current market turmoil was "unprecedented,'' she urged the NCUA to use "extreme caution prior to implementation of any action to avoid unintended consequences.'' She also said that the NCUA shouldn't tie the hands of corporate credit unions by restricting their ability to invest in asset-backed securities, which would hamper their ability to be competitive.
Donna Blue, president/CEO of Jeffco Credit Union in Festus, Mo., also urged caution and said when the NCUA assesses the situation it will "find a spoke that is broken and not a whole wheel that needs to be replaced.''
Although the comments were supposed to deal with issues of restructuring, several people took issue with the premium that the NCUA plans to levy to shore up the NCUSIF as a result of the costs of the Corporate Stabilization Plan.
"The effects of appropriating our member-owned capital would severely impair our earnings, dramatically reduce our capital and thereby restrict our growth and member service levels. The impact would be long-lasting and significant,'' wrote William Raker, president/CEO of U.S. Federal Credit Union in Burnsville, Minn. He added that other approaches should be considered, including requesting assistance from the Troubled Asset Relief Program and the Central Liquidity Facility.
The Michigan league's Adams also said using TARP funds should remain an option-not to infuse capital in any corporate or natural person credit union but as a line of credit to be used "in the event of catastrophic circumstances.''
The two corporate credit unions that had filed comment letters as of last Tuesday urged the NCUA not to overreact.
Louisiana Corporate Credit Union President/CEO David Savoie said the crisis was not caused by structural problems but by "intense competition among overlapping fields of membership combined with expanded investment authorities, and have been aggravated by late and erratic financial disclosure.''
He also took issue with the idea of changing the rules to create regional fields of membership for corporate credit unions and said it would not reduce risk but would reduce choices available to natural person credit unions.
Mid-Atlantic Corporate Federal Credit Union President/CEO Jay Murray also took issue with changing the field of membership rules and said the industry's problems haven't been caused by existing rules but by market forces and risky investments by some corporate credit unions.
He said that the expanded investment authorities that corporate credit unions have under existing NCUA regulations didn't cause the problems in the system. Rather, the problems were caused by certain corporates "executing their authorities without the proper procedures or regulatory oversight.''