Trust But Verify: NCUA Coy on Settlement
Credit unions are going to have to trust the NCUA when it says it can see a light at the end of the corporate stabilization tunnel, because it's not providing key details.
Not yet, anyway. Last November's $1.4 billion settlement with JPMorgan Chase is one example.
Every time we publish a story about the settlement, I receive emails from readers asking why we’re not reporting the net amount the NCUA applied to the outstanding corporate stabilization bill.
If you’ll recall, Republican bulldog Rep. Darrell Issa of California barked in the NCUA's direction in October 2012, challenging the agency's contingency agreement with law firms outsourced for the suits. A George W. Bush-era executive order prohibits federal agencies from contingency agreements.
The NCUA argued that as conservator, it was taking on a role different from that of federal agency and was therefore exempt from the order. The NCUA's inspector general agreed with that opinion last year.
Issa was well on to another target by then and the issue died down until the record JPMorgan settlement, which was spearheaded by the Department of Justice.
Sure, you could make some assumptions of how much the NCUA received net from the settlement, but it would be tough to do so before the next corporate resolution update in April, when we’ll have some numbers on legacy asset and NCUA's Guaranteed Notes performance. The real estate market seems to be doing well, but how much that affects legacy assets, we don't yet know.
And the DOJ's involvement further complicates matters. The NCUA's cut was just $1.4 billion of an overall $13 billion settlement. There were other hands reaching into that cookie jar, not just the NCUA's victorious attorneys.
But credit unions should know, which is why we’ve been pressing the NCUA to reveal the net number. The corporate bailout wasn't a bailout – the nation's credit unions own it. That means full disclosure should be required.
But General Counsel Mike McKenna provided us with an intriguing statement Feb. 13 when he said the NCUA can't reveal the settlement's details because it would jeopardize negotiations with other Wall Street banks, whose suits are still active.
Normally, I’d file any excuse for not making details public in the CYA bin, but that comment intrigued me.
“When you are playing high-stakes poker against the most powerful, deep-pocketed financial interests in the country – with billions of dollars at stake – you don't show the cards in your hand,” he said.
It was a reminder that the NCUA isn't dealing with a credit union manager who defrauded an institution or a developer who behind a phony business loan.
Suits are still pending against the likes of Barclays, Credit Suisse, Goldman Sachs and others. Even the U.S. government has long odds fighting those powerful forces. Just hearing the words Goldman Sachs sends a shiver down my spine. I can make car lot sales managers break into a sweat but I wouldn't want to tangle with Goldman Sachs or its attorneys.
Speaking of the suits, I want to be clear I don't have any beef with the NCUA's decision to sign contingency agreements with outsourced law firms. Some settlement is better than none, I say. And it could be even worse than none: had the NCUA paid firms worthy of taking on the world's most powerful banks an hourly fee, with no promise of ever collecting a dime, I would have joined the industry teeth gnashing about throwing credit union money away.
I do think the NCUA's position on why Bush's executive order doesn't apply to them is a bit shady, but I think most credit unions are willing to take one for the team there and welcome the relief from corporate assessments.
Speaking of corporate assessments, another small, insignificant detail the NCUA is unable to provide is whether credit unions will have to pay future assessments or will one day receive a rebate because they paid too much.
Of course, the markets will determine the final tally, and nobody can say for certain how it will play out. I can appreciate the NCUA's concern that even saying too much about projections has the potential to cause credit unions to make harmful planning assumptions, should those projections not bear out.
But still, who doesn't want to know at least the current status and projected future of the biggest industry story since HR 1151?
I know I do. So we’ll keep asking.
Credit Union Times Executive Editor Heather Anderson can be reached at email@example.com.