A former credit union CEO told me that he was making mortgages a handful of years ago he never would have if Fannie Mae wasn't immediately buying them, and he couldn't believe it was. Everyone was following the previous administration's directive to increase homeownership without regard to true affordability for the borrowers.

And the worst of it may not be behind us, according to Clayton. The firm pointed out that foreclosures have been kept artificially low by the GSEs' moratoriums, which were lifted in April, so losses are likely to increase. Additionally, Clayton said to expect losses to continue at the same pace for the next three years because of paltry documentation requirements and geographic concentrations.

At the same time, even worst-case scenario, Clayton expects the agency securities to retain 95% of their value. U.S. Central and credit unions had to know the garbage that was thrown into the nonagency securities-after all, if credit unions were generally wise enough to avoid the types of loans underlying the securities, they probably weren't good loans to begin with.

What genius decided that if you throw a bunch of poorly underwritten loans into a bucket, they would become a better risk and not just more of the same? But the returns were too tempting and rational people needed to quench the thirst for yield. As demand rose, creativity flourished.

Which is why certain regulatory restructuring may be in order. I firmly believe the NCUA, the FDIC, and Office of the Comptroller of the Currency should remain independent agencies to ensure a more thorough understanding of the industries they regulate. With this understanding should come better regulation, not just more regulation. If Washington were simply looking to streamline and save money, it would be prudent to eliminate the individual charters, which would lead to less regulatory expense and confusion. But government is there to serve the people, not make a buck though it could certainly use a few right now, and consumers are better served by a variety of financial services options.

Debbie Matz' confirmation hearing has been slated and in the not-too-distant future, she'll be returning to the NCUA's seventh floor. A Democratically controlled NCUA Board hasn't existed since Norm D'Amours (unless you count the month Yolanda Wheat sat in the chairman's seat). Matz won't have any trouble improving upon that tumultuous administration.

Unlike the Clayton report, the NCUA is very transparent with its budget, and surprisingly announced its $184 million budget would hold steady. At a time when troubled credit unions represent a mounting percentage of the share insurance fund, the agency would have a prime reason to bulk up its coffers. So long as it does not negatively impact oversight capabilities, the agency should be commended in its effort to hold down credit union expenses in this area.

In reworking its budget however, a huge chunk was taken from the human resources department, namely outsource examiner training was brought in-house to existing, more experienced examiners. I'm interested to hear what the National Treasury Employees Union, which represents NCUA employees, has to say about that.

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