In June, said Blaine, NCUA "raised Cain with us." He added, "They said our capital is too low, even though we have been in the black for 35 years. We believe we know what we are doing to protect our members' money."

That is when Blaine decided to offer vivid proof of his position that SECU has all the capital on hand it needs.

At mid-year, SECU had around $21 billion in assets, split between $14 billion in loans to members and $7 billion in Treasuries. When Blaine sold the Treasuries, "we could have mailed $7 billion in distributions to our members."

If SECU had done that, it would have $14 billion in loans on the books, more than 10% of cash on hand (those profits accrued from selling the Treasuries) and instantly SECU would have been in full compliance with the new, tougher standards that are emerging for credit unions.

But, insisted Blaine, that would make absolutely no sense. SECU would be smaller, it is hard to see how it would be deemed more stable, and it would have significantly less liquidity. "When we are invested in Treasuries, we can produce the cash in a heartbeat. We have significant liquidity even if the assets are not in cash."

"Your capital needs to reflect the risks the particular credit union has. In our case, we have no business loans. The overwhelming majority of our loans are adjustable-rate home mortgages on North Carolina houses. We believe we know the risks, and we are taking adequate measures. For us, that is around a 7% capital ratio."

Asked to comment on Blaine's assertion, Fred Becker, CEO of NAFCU, insisted that it makes more sense to set capital requirements on a case-by-case basis than to impose a flat rate. "It depends on the individual credit union and its loans," said Becker. Although noting he did not have detailed familiarity with SECU's books, Becker did point out that a 7% ratio might subject a credit union to real risk if it got caught up in the kinds of real estate meltdowns that are causing havoc in California and Nevada. "You cannot know such a thing won't happen in your region-that is what we have learned in the past few years," said Becker.

When asked for comment, the NCUA sent an e-mail statement in which NCUA Director of Public Affairs John McKechnie said, "NCUA does not comment on individual CU operations or disclose confidential examination information. Regarding the statutory 7% capital requirement, NCUA is unaware of any congressional efforts to increase that to 10% or any other number."

Does this mean Blaine is mistaken? Not so fast. For starters, SECU, of course, did not distribute $7 billion to members and that money is back in short-term investments that Blaine believes give SECU substantial liquidity. "What we did with the sale of the Treasuries was all about demonstrating our liquidity," he said.

Then, too, there are voices calling for higher levels of capital retained by credit unions, precisely to safeguard against the failures of the past few years.

For Blaine, all this means the fight is still on, and he is not backing away. "We are pretty well-funded. What SECU wants to do is get in a dialogue, not an argument, with the regulators, and this starts by looking at our books."

–[email protected]