This is why going longer on investments is a good idea!

What are most cu's getting for their Investments now?  1% or 2% if they are lucky.  

REAL investment I made in 4/2010 that was called 10/2010:  Purchased at a start rate of 3% that eventually went to 7% over an 8-year period.   That's right, 8 years.  "HOLY COW!"... that's a long time for a cu investment you say.  Our policies won't allow us to go that long.  The auditor and the regulator says we should stay short as rates are going to go up (Unless he/she has a much clearer crystal ball than I do.. I see them staying down for a while).  We can't do that... it's un-credit-union-like (Like buying CMO's was? Or the  Interest-only-payment-optional-negative- amortized loans were not doomed from day #1?).  

Oh yeah, I forgot.. I bought it at a discount:  99.4% of face.  You could never get that at your Corporate.  AND, heaven forbid you had to access your funds, you would be charged an early redemption penalty.  

Ok... So it was called... I originally picked up $250K of this bond.  I wish I had purchased more!   I earned 3% for 6 months plus a $1,500 bonus when it was called at par.  My total return for the holding period?  4.20% -  purchased just 6 month ago.

But you have to reinvest it you say.  What will be the return then? Actually, this one stayed home.  My members are paying down their debts and our shares are being withdrawn so I didn't reinvest.  But, had I only received 1% for the rest of the year, my yield would have been 2.60% for one year... How are you doing?  If I had received 2% on a new step-up, my yield for the year would have been 3.10%.  Not too bad in this market.  

A funny thing happened at my regulatory review this year.  I had marked-to-market my Bank CD's.  I held them in Available for Sale and they have market values.  The two regulators at first said, Bank CD's don't Mark to Market.  Then I showed them the ratings and then they agreed with me.  I actually have a bunch of 5-year bank cd's I picked up a few years ago.  They are yielding 5% and have 3 more years of life left in them... I bought all I could get my hands on at the time.   They are all purchased at par, but the market value is 111% of par. Think about it.  What's a 5% 3-year investment worth now?  Back to the regulator... They wondered why more cu's didn't do this.  I don't know, but they sure purchased the heck out of corporate cd's that were paying much less, had no market value, and couldn't be sold.  My old corporate used to have a webinar for cu's about investing... it was the most condescending blather I ever heard.  They wondered out loud about step-up's. " Who would be so STUPID as to purchase one of those?  Let me tell you how much better our own investments are (YEAH, WE ALL NOW KNOW THE TRUTH OF THAT PROPAGANDA!).  We are the experts and the naive cu's need us to protect them.  OOPS, I used a big investment term here, I better back up and inform the poor slobs at the cu what that means... they OBVIOUSLY don't have a clue what that means. "  

Even if the new regulations for Corporates allows for purchasing of corporate cd's... THIS CU NEVER WILL - BECAUSE THEY NEVER EVER MADE ANY SENSE IN THE FIRST PLACE!

This hurts to say this, but NCUA actually did many cu's a favor.  Now they will go out there and search and find investments that actually pay better and serve them better than what the corporates were ever offering.  

The complacency of cu's, along with the "We built it, so it must be the best" mentality has cost us dearly.  $16 Billion at last count!

DOOOHHH! Bankers forget the "C" in CMO's

Wondering why the banks are just not getting around to foreclosing on their loans?  It was reported today on Bloomberg that in their haste to package up these deals, they cut costs everywhere... INCLUDING perfecting their lien on the properties.  So, we see a massive (up to 5 million homes) that are basically unsecured loans to the homeowners.

Seems you can't foreclose on a property you don't have a deed to!  Pretty basic lending... except if you're a bank... then you just do what you want and the taxpayer's pick up the tab.

"When's my next golf tee time?  I've got another big deal to close and the client loves to play golf.  Did my bonus get posted yet; my 5th house is due to close this week."

Tough to be a banker and keep it all together..

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THIS IS HUGE... AND, SO FAR, IT'S GETTING LITTLE PRESS....SECONDARY SOURCES:  

http://www.reuters.com/article/idUSN0521683520101005

http://www.housingwire.com/2010/10/05/the-greatest-heist-in-our-countrys-history

Hey, who's side are we on here?

  There wasn't much to talk about for a while until the dust has settled, but seriously, how can credit union's hold their heads up and say that they represent their members right now?

We went bonkers to protect the interchange income.  Gee, who really profited from this in the first place?  Not us and not our members?  We actually stood against our members being able to get a discount for paying cash instead of using a debit card that might actually overdraw their account and garner us another fee?  Are you SERIOUS?  I saw recently that someone lamented that we have become an industry instead of a movement. Well, this proves it in spades!  It used to be that if it's good for the members, it's good for the credit union.  Now I guess the measure is if it's good for the bottom line!!!

Are we now so profit oriented that we put income over service? Well, if it's all about "making the numbers and sending the board to an off-shore planning session", then that may be true.

7 brave credit unions are attempting to bring this reign of "crass capitalism" to a close.  A signal must be sent that you can not put the entire industry at risk because of excessive risk-taking.  Management and boards will be held accountable for excessive risk taking on a personal level.  We've all heard and know credit unions that are bank-like.  Going forward, they might just find themselves in a suit or two, like our new CUNA President.  It's a sad day when the best candidate for our national association is under two legal suits for potentially destroying the entire industry CUNA represents...... How ironic is that?

Then we have the still popular and undecided MBL.  Let's see, Arrowhead is under conservatorship and the fist action of NCUA was the stopping all MBL activity.  Could that be because Arrowhead had extensively and practically singularly promoted MBL for the last 4 years?  They and other cu's, like the banks of the 70's, are chasing the lending product du jour. Everyone seems to be determined to raise the ceiling on lending limits.  Surely, this will solve all our problems.   Perhaps we should rethink the charter of the "natural person" credit union.... You know... the one we operate under!  Patelco under a different ceo was rumored to come to SEGs and offer membership to the front-office people but not the back off folks.  That was wrong then, and chasing business members while leaving the natural person members on their own is wrong now.

Now our industry acts as if the Legacy assets of USC and WesCorp have somehow mysteriously disappeared.  We are fighting for MBL and interchange and we don't even know if we will survive the corporate debacle.

I find it surprising that everyone touted how well Arrowhead's eminent recovery was going to be.. and yet there wasn't one dime set aside this year for NCUA's assessment.  Did they think there would be NONE?  How about 10%, 20% or 40%, like most think it will be?  Surely it's not zero!  I wonder how many other cu's out there have turned a blind eye to the coming assessment and put nothing aside?  Are we more concerned about how we look, or how truthful we show our financial position to our members? 

NOTE TO CU'S THAT SEE THEMSELVES AS BANKS ----"DO US ALL A FAVOR AND CHANGE YOUR CHARTER ALREADY!!!"

If the credit union charter doesn't fit your business plan and your personal goals of glory and riches... We'd love to help you out  -- Which way did you come in?  Just leave your fair share of the assessments before you leave, please!

For those that are "Mad as Hell and aren't going to take it any longer!"

This blog is for credit union folk... not bankers hiding behind the credit union charter. Not for folks that have abandoned the original premise of credit unions for fun and profit.

This is a blog for those that want to take ACTION. If you are in "seminar" mode and want someone to tell you what to think... I can't help you out... but, I can give you some things to think about.

We are at a cross-roads for our industry. NCUA, CUNA, and even NAFCU have abandoned us for expediency and quick profits.

We used to be about members.. now we are about Asset Accumulation and Business Services (As if these are the end-all to our problems).

ACTION ITEM: Speak out.. loud, proud, and often. Get out of Seminar mode and into Action mode. This industry is leaderless at present. We've invited the bankers into our midst's and instead of them becoming credit union folks... we've become more bank-like. If you don't speak out, who will?