Federal accounting rules for nonprofits may be among the challenges preventing the NCUA from simply adopting the structure of FDIC's March 5 securitization of toxic bank investments.
Scott Waite, chief financial officer for the $3.7 billion Patelco Credit Union and a member of FASB's small business advisory board, said he's not privy to the NCUA's plan. However, he said credit unions' nonprofit status may trigger some federal accounting rules that trump GAAP.
Simply speaking, banks consider customer deposits a liability, separate from investments designed to generate profits for share holders. In contrast, natural person credit union investments are generally excess member deposits they are unable to lend to other members. Nonprofit corporate credit unions were created, in part, to handle those short and long-term liquidity and investment needs.
"So the thinking is that these investments are an extension of members' money or public funds, and therefore subject to a different fiduciary responsibility," he said.
Waite said he's anxious to see how the NCUA structures a deal that involves corporates, the NCUSIF and Wall Street.
"It's not a basic transaction by any means, and people will certainly be studying what they come up with," Waite said. "NCUA not only has a lot of smart people working on it, they will have to get the green light from several firms, too."