Money Doesn't Grow on Trees
I'm always amused when my father-in-law complains about living on a fixed income because my income is pretty-well-fixed too. It could make for great debate sitting around a Thanksgiving bird. I'd be wise to wait until the carving knife is safely out of reach.
The only entity that truly does not run on a fixed income is the federal government. (Or counterfeiters. In both cases, they'll just print more.) You know where this is heading: the NCUA issued its 2011 budget at its November board meeting, and it's a doozy.
Despite being a federal agency, the NCUA is unique in that it is funded by the credit unions it regulates and insures. Even though the NCUA increased the overhead transfer rate, the amount of funds transferred from the NCUSIF to the agency for insurance-related work, from 57.2% to 58.9% to cover an increase in insurance-related costs, the agency still boosted its budget by 12% or $24.5 million. Pay and benefits increased $17.1 million, or 12% agency-wide. Specifically, 37% of that increase, or $6.3 million, is due to the 6.1% pay increase mandated in the union contract, which covers 80% of the NCUA's workforce. So, that comes to 967 employees receiving an average pay increase of $6,514. Any CUs handing out this size pay raises?
Remind me whether the agency has downsized, as credit unions have, in the last couple of years? No, this is on top of a $23 million increase for the 2010 budget, which included adding 74 positions. Another 34%, or $5.8 million, is for the addition of 78 new positions in 2011. The regions will net 41 new FTEs plus the office of the chief economist is budgeted to increase from three to five FTEs. These seem like wise choices given the current economic mess; maybe if the agency had employed an economist 10 years ago the corporate crisis could have been foreseen and mitigated. However, after the inspector general's material loss report was issued on the WesCorp debacle, what is critical to avoiding future crises is not only adding examiners but also ensuring they are properly trained.
Aside from highlighting WesCorp management's excessive concentration in mortgage-backed securities and failure to identify the nature and extent of the concentration and other risks, the agency in its response to the report admitted that "examiners lacked the regulatory leverage to enforce limits." What the agency did not acknowledge in its response was the IG's note that "More importantly, despite the growing concentrations of RMBS associated with California and with Countrywide as an issuer, originator and servicer, we found no evidence OCCU examiners took notice of or questioned the concentration levels until the June 2007 examination-at about the start of the credit market dislocation." Either no flags were raised in time to make a difference or they were but they were ignored because the issue wasn't addressed in the regulation. Blaming the lack of response on not having regulatory leverage is inadequate when no one realized the problem to begin with. Not everything has to be in a regulation; sometimes you just have to think for yourself.
Which leads me back to overregulation and NCUA staffing increases: the NCUA is adding 21 FTEs to its office of consumer protection, currently staffed at eight. This division was established before the actual passage of the Dodd-Frank Act, which requires the agency to shift some of its staff to work with the Consumer Financial Protection Bureau in implementing and enforcing its regulations.
Dodd-Frank also required the agency to establish an office of minority and women inclusion, charged with overseeing equal employment opportunity and diversity at the agency; increased participation of minority- and women-owned businesses in agency programs and contracts, including standards for coordinating technical assistance to such businesses; assessing the diversity policies and practices of entities regulated by the agency; and preserving credit unions run by minorities or serving minorities.
These are all great goals, but they do not directly impact the safety and soundness of credit unions, which is the NCUA's mission. They are a distraction for the agency, and it's a duplication of efforts already in existence through other governmental and private programs.
Credit unions are the sole funders of the agency. They've been hit with premiums and assessments from the agency in addition to tightening net interest margins, lazy borrowing and an influx of consumer deposits. Credit unions don't need to be weighed down with still more unnecessary financial burdens.