Industry Reacts to GAO Report
A day after issuance of the GAO report analyzing the failures of corporate credit unions and how the NCUA performed in the crisis, industry leaders have begun offering their reviews. A top line interpretation of the remarks is: hold your applause, there remains much to be concerned about.
Alloya board member – and also CEO of Motorola Employees Credit Union in Schaumburg, Ill. – John Fiore established the tone of much of the commentary with his remark: “The GAO confirmed what many credit unions had said from the very beginning – that NCUA played a role in the failure of the corporates by not taking timely actions and that NCUA never had a good handle on effectively estimating the total costs and impact on the credit unions.”
At Corporate America, CEO Thomas Bonds said, “I was surprised that NCUA could not explain how they arrived at the loss estimates on the failed corporates (and thus the NCUA Guaranteed Notes). That makes me wonder if the estimates for future Stabilization Fund assessments are reasonable.”
At Louisiana Corporate, CEO David Savoie said, “GAO states that NCUA agreed with their recommendations, and I agree with them also. Given the fact that the existence of many small credit unions may well depend on the accuracy of these loss estimates, the estimate range has been far too wide. I believe in transparency and oversight, and GAO’s recommendations to NCUA and Congress seem to be a good first step in improving the accuracy of this process.”
Industry consultant Marvin Umholtz said that to his eyes the report per se was of lesser importance than its audience: “Although there were not any major new revelations for anyone who had been following closely, the primary importance of this GAO report on NCUA is who will be reading it” – that is, high- level decision makers inside the Beltway as well as in the credit union industry.
Umholtz added, “The government watchdog missed a real opportunity to recommend a detailed wholesale overhaul of the NCUA’s approach to supervision and examination.”
At NAFCU, CEO Fred Becker said in a prepared statement, “This report on the actions of NCUA’s Office of Corporate Credit Unions confirms that examiners did not raise concerns fast enough and highlights the significance of proper and effective management,. It also underscores the ineffectiveness of applying the Prompt Corrective Action (PCA) model as a regulatory tool for all financial institutions, most particularly credit unions, which are not-for-profit institutions.”
Becker added: “Credit unions deserve greater transparency, timeliness and accountability from NCUA concerning corporate credit union stabilization efforts. While we recognize NCUA has made some progress in this area, there is still plenty of work that remains.”
The NCUA itself applauded the report and said it already has implemented some of the recommendations and would continue to do so with the others.