Written with a healthy dose of humor that made me SMH,Executive Editor Heather Anderson's column titled “SMH at FinCEN and the NCUA” appropriately criticized the U.S.Treasury's Financial Crimes Enforcement Network's embarrassing leakabout at-risk credit unions published in the Wall StreetJournal. Her column also exposed an important politicaldynamic that should be of great concern to officials within thecredit union industry. The U.S. Treasury has a long-held agendathat includes reforming, and restructuring, the NCUSIF.

Equally disturbing was that, whether intentional or not, theU.S. Treasury apparently leaked the so-called confidential reportto the WSJ, while neglecting to include the NCUA in theloop. Financial Stability Oversight Council member and NCUAChairman Debbie Matz would be justified in chiding FSOC Chairmanand U.S. Secretary of the Treasury Jack Lew concerning the matter.After all, among its duties, the FSOC is charged with identifyingand managing systemic risks, and protecting the financial systemfrom terrorists and drug lords is a national priority. As Ms.Anderson alluded, the FinCEN's faux pas could very well have beendeliberate.

Anderson also suggested that “the NCUA continues to focus somuch on protecting the share insurance fund while focusing toolittle on the industry's reputation risk that arises fromfraud.” Accurate again, yet it was probably anunderstatement. The NCUA's Fiscal Year 2015 Overhead Transfer Ratewas 69.2%, suggesting that the NCUA is really a federal depositinsurance fund that runs a side business doing a few other things.Take away the deposit insurance function, and little remains butunnecessary costs.

The NCUA, the NCUSIF and the Temporary Corporate Credit UnionStabilization Fund are separate eggs held in the same inseparabledeposit insurance basket. Although many within the credit unionindustry would prefer to purge it from their memories, the U.S.Treasury stepped in to assist the NCUA with tens of billions ofdollars to manage the corporate credit union fiasco that could havebeen an industry-killer.

The U.S. Treasury was the NCUA's major advisor during thattroubled time when the corporate system resolution program wasdesigned. The U.S. Treasury also told the credit union depositinsurer how to re-securitize the corporate credit unions'below-investment-grade legacy assets, back them with a federalgovernment guarantee, and get them off the books of the NCUSIF andthe TCCUSF through Government Accounting Standards (rather thanGAAP).

In the meantime, the NCUA had a secret plan to do what the FDIChad already done – double the capital required in the NCUSIF from1% to 2% over time, and give the NCUA Board the flexibility tochange the fund's threshold at which credit unions receive adividend when times are good. Whether the U.S. Treasury waspressuring the NCUA to restructure the deposit insurance fund is asubject for conjecture and speculation. Nonetheless, the TCCUSFstill owes the U.S. Treasury's Federal Financing Bank severalbillion dollars, and the U.S. Treasury has a creditor's keeninterest in the health of the NCUSIF and the TCCUSF.

And the U.S. Treasury's long-held political agenda evenpre-dates the Dodd-Frank Act and the corporate credit union mess.In March 2008, the U.S. Treasury's Blueprint for a ModernizedFinancial Regulatory Structurecalled for consolidating allfinancial depository regulators and deposit insurers. Based uponrecent developments, it would appear that no dust has settled onthat ancient U.S. Treasury tome.

Marvin Umholtz

Consultant

Olympia, Wash.