CUNA and the Chip Filson-led Co-Ops for Change may be singingoff different song sheets, but the chorus is the same: Thecorporate assessment era should end.

CUNA President/CEO Bill Cheney made the statement on July 26,the day after the NCUA's monthly board meeting in which the federalinsurer revealed the 2013 corporate stabilization assessment of8 basis points.

“We strongly urge NCUA to consider, in the future, minimizing oreven eliminating future corporate stabilization fund assessments,based on today's action by the NCUA Board,” he said. “Our analysisindicates that this year's assessment amount of about $700 millioncould well be sufficient to cover the remaining losses on thelegacy assets acquired from the five failed corporate creditunions.”

The improving economy and housing market have decreased lossestimates on corporate legacy assets, said CUNA Chief EconomistBill Hampel during a July 29 press call.

“As of last December, and after this assessment is collected,the remaining losses will range from $900 million to $3.2 billion,”Hampel said. “Given the fact that losses are continuing todecrease, the bottom end is getting close to zero.”

Hampel said CUNA met with NCUA officials and told them thatunless the housing market takes a significant hit before nextsummer, there is no need for future assessments.

“We think that even if there are going to be more losses, theyare likely to be quite small and there is no need to rush tocollect them next year,” he said. “NCUA could pause the assessmentprogram for a few years and collect more, if necessary, a few yearsdown the road.”

NCUA Public Affairs Specialist John Fairbanks said severalfactors bear on the regulator's decision to set the annualassessment. He added that the NCUA will conduct its usuallegacy assets review announce the estimated range for the 2014stabilization fund assessment this November.

Any over collection of assessments now would be rebated tocredit unions in the future, Hampel said, but that would mess upcredit union income statements by making return on average assetsartificially low when the assessment was collected, and in turn,artificially boost ROAA numbers after a rebate.

The NCUA's line of credit with the U.S. Treasury is also anissue, Hampel said, and the regulator would rather pay that backsooner rather than later.

After collecting $700.9 million in October and applyingapproximately $650 million toward the credit line, the NCUA willhave $4.075 billion outstanding, leaving a little less than $2billion to act as a liquidity cushion for both the corporatestabilization fund and the share insurance fund. That's enough tomeet any systemic liquidity needs, Cheney said.

Hampel did acknowledge the NCUA has been under pressure to comeup with a liquidity backstop after U.S. Central was liquidated inOctober 2012 and $1.845 billion in CLF stock owned by the corporatewas converted to cash to repay depositors. The NCUA issueda proposedrule in July 2012 that would require credit unionswith more than $100 million in assets to establish emergencyliquidity relationships with one of two providers, theCLF or the Federal Reserve's discount window. However, thefinal rule has not yet been approved.

NAFCU General Counsel Carrie Hunt said upon first glance hertrade would like to see a little more cushion than $2 billion, butneeds to study the issue further. Although historically the creditunion industry had never needed more than $2 billion before thecorporate crisis, and new regulations on corporate investments havereduced loss risk, Hunt said the corporate crisis showed historyisn't an end-all predictor of the future.

And, Hunt downplayed the drama of requests to significantlylower or eliminate future assessments, saying the NCUA all alonghad projected a significant drop in assessments for 2014.

“This is nothing new,” she said.

Back in 2011 when the NCUA was considering allowing creditunions to prepay assessments, Hunt said the regulator projected thatassessments would be high in 2011 through 2013, and then take asignificant dip to 5 or 6 basis points for 2014. The housing markethas improved since 2011, which may have further reduced the 2014projection to just 1 or 2 basis points, she said.

“We've been asking all along for assessments to be as low aspossible for our members,” she said. “But if the economy hasanother hiccup, or there's another issue with NGN performance andthe NCUA does need some additional cash, it could put them in atough position.”

Ultimately, NAFCU has said the NCUA should be precise andcareful when it sets assessment rates, and that position has notchanged, she said.

“What we wouldn't want is for NCUA to postpone assessments ayear and double them the next,” Hunt said. “We're not supportive ofa shell game, either. We support NCUA being fully transparent withwhat they're doing, and we think they have been. The NCUA hasn'tbeen hiding the ball.”

Filson has taken a different approach, saying in a July 25release that the NGNs are already overcapitalized by 149%, to thetune of $10 billion in excess coverage.

Co-Ops for Change's crowd-sourced analysis of the fivecorporates' spreadsheets shows more than $5 billion in unused losswrite downs, he said. Interest collected on legacy assets adds upto nearly $50 million per year, Filson said, which means theearnings will help offset projected losses.

When the audited financial statements of the conservedcorporates were issued in December 2009, the auditors said OTTIreserves should be approximately 27% of troubled assets, he said.But when those same assets were refinanced outside the system,market funding required collateralization of 56%—more than doublethat percentage—even with an NCUA guarantee.