NAFCU president/CEO Fred Becker said Friday the revelation that the NCUA hired attorneys on a contingency basis to recover corporate investment losses is disconcerting because the $170 million in settlements received so far won’t be fully applied to corporate stabilization.
“The agency indicated they had recovered $170 million, from which I think the natural drawn conclusion was that money got returned to the coffers of the corporate system,” Becker said. “Obviously, that is not the case.”
Of the more than $170 million in claims the NCUA says it has received as a result of settlements with Citigroup, Deutsche Bank Securities and HSBC, more than $40 million has been paid to the law firms.
The remaining $127.25 million – not the full $170 million – will be applied to the corporate stabilization fund and potential reduce the corporate assessments charged each year to federally insured credit unions.
The NAFCU chief said the agency has a duty to fully disclose if part of the recoveries won’t be applied toward corporate losses, because those funds belong to the nation’s 92 million credit union members, not the NCUA.
Further, Becker said, the news calls into question the NCUA’s transparency regarding its handling of the entire corporate crisis, something NAFCU has been pushing for the past two years.
“People continue to question the corporate recoveries and how the bonds are really performing, and this brings all that back into the forefront,” Becker said, adding, “What else haven’t we been told?”
Becker said he was less concerned about the selection process of the legal firms, which was made by NCUA staff and may have political implications. The Wall Street Journal reported that the two firms retained for the suits had made significant contributions to Democratic candidates.
NCUA Public Affairs Specialist John Fairbanks said it was NCUA staff, not Chairman Debbie Matz, a Democrat appointed by President Obama in 2009, who hired the firms.
“Career legal staff selected specialized outside counsel for this litigation based upon their expertise and resources to conduct this type of litigation,” Fairbanks said, adding that NCUA Board members were kept informed of the action.
Fairbanks also said that retention of the firms was done “in accordance with NCUA policies and with applicable law.”
Rep. Darrel Issa (R-Calif.) has asked the NCUA’s Inspector General William DeSarno to investigate whether the regulator violated Executive Order 13433, signed by President George W. Bush in 2007, which prohibits Executive Branch agencies from entering into contingency fee agreements.
“NCUA is pursuing these actions as liquidating agent for the failed corporate credit unions, not as an executive agency, so the executive order does not apply,” Fairbanks said.