NCUA is Helping Durbin... Not CU's! CUNA's got it right!

According to the NorthWest CU Association: 

CUNA is concerned that a recent letter sent by the National Credit Union Administration (NCUA) to the Federal Reserve Board regarding debit interchange fees does not accurately reflect the costs associated with card programs.
At the urging of Senator Durbin, NCUA surveyed “direct costs and income” related to credit union debit card transactions. However, a chart attached to the letter appears to demonstrate that credit unions in the range of $500 million to $1 billion make $0.35 per debit card transaction, with credit unions over $1 billion making $0.36 per transaction. For those who take the time to read the letter, it clearly states that not included in those costs were factors such as “labor, facilities, equipment, and other overhead costs related to operating a debit card program.”
Further analysis would find, as credit unions know, that the costs of running a debit card program are not simply per-transaction fees but require significant back-of-house work, time, technology, and many other components.


Instead of just acknowledging that the analysis “likely underestimates costs for debit card transactions” in their letter, CUNA is pushing NCUA to revise this chart to include all costs related to offering debit cards.
Unfortunately, a document like this, as grossly misleading as it is, was provided to the Federal Reserve by NCUA as an accurate representation of debit card fees. It provides fodder for those opposing delay of the Durbin interchange amendment, which, without Congressional intervention becomes effective July 21, 2011.


So....... Who do we write to now.... Durbin or NCUA?  Or, Both.  


Gee thanks NCUA for the shot in the foot!!!!


Anyone besides me think NCUA is out to end CU's as we know them?  Run them into the ground, merge them down to just a few, and then turn the remains over to FDIC.

The dam is about ready to burst - $425 Billion in troubled loans to be "handled" at B of A!

According to the Financial Times:  B of A, aka Big and Apathetic, is about ready to dump $425 Billion in troubled home loans.  This in order to "resole problems" related to its purchase of Countrywide Financial.  B of A plans on doing this over three years.  Guess who's holding those loans for close to 30 years?  You and I are.  Remember WesCorp?  Remember how much they invested in Countrywide?  Remember how NCUA sold off the future cash flow of those loans?  Remember how we are holding the principle balance?  Remember how they said the eventual losses will be between $11 Billion and $16 Billion?  We are about ready to find out how much of that "stuff" WesCorp purchased.  Let's see how the "tranche warfare" worked out for the financial wonder boys.  I'm curious if the shoe will drop on cu's in this go-around of shedding loans, or will it come when B of A addresses the remaining $425 Billion in bad loans? 

Amazingly,  B of A is only addressing 1/2 their troubled loans here.  It seems that they are worried about the banks overall performance and that waiting may "tarnish" the reputation of Brian Moyniham, it CEO. Tarnish his reputation?  Really?  What positive reputation could he possibly have at this point? The key word there was PERFORMANCE.  You see, the real reason was the impact these loans have on bonuses.  I wonder how many B of A big wigs are paid multi-million bonuses and are still upside down on their home loans?  How ironic would that be?

We actually need this action by B of A and a few others.  We won't start a true recovery until the housing market is addressed.  It's kind of like watching the doctor bring out a big needle.  You know you'll be better for taking the medicine,  but you just don't want more pain!

Our first dose of medicine is coming up soon.  Let's just hope it cures us, not kills us.

I guess the 3 C's of credit are so old, they are new again!

Here's a shocker! According to an article in the CU Journal... members now will have to show their ability to repay the loan under new regulations.  Gee, what a novel idea!  Who would have thought that the ability to repay a loan would ever enter into the decision process?  Perhaps that's why nobody could do what Countrywide did:

WASHINGTON – Lenders would be required to make sure prospective borrowers have the ability to repay their mortgages before giving them a loan, under a proposal released by the Federal Reserve yesterday.

Perhaps if they enforced the regulations and "safety and soundness" issues at the proper time, we wouldn't have been saddled with assessments going forward for the next 10 years (or so).

Amazing that things got so out of hand that they would have to make a regulation concerning this issue.

But, it's OK because "everyone was doing it"; right?  Right?  And some wonder why folks are so upset!

Gee, no kidding! Greenspan says Dodd-Frank out of touch.

According to Financial Times:  "Dodd-Frank fails to meet test of our times"

By Alan Greenspan
Published: March 29 2011 18:31 | Last updated: March 29 2011 18:31

The US regulatory agencies will in the coming months be bedevilled by unanticipated adverse outcomes as they translate the Dodd-Frank Act’s broad set of principles into a couple of hundred detailed regulations. The act’s underlying premise is that much of what occurred in the market place leading up to the Lehman Brothers bankruptcy was excess (hardly controversial) and that its causes would be readily addressed by this wide-ranging statute (questionable).
The financial system on which Dodd-Frank is being imposed is far more complex than the lawmakers, and even most regulators, apparently contemplate. We will almost certainly end up with a number of regulatory inconsistencies whose consequences cannot be readily anticipated. Early returns on the restructuring do not bode well. "


There is more to the article, but FT frowns on cut and paste...  You can find them on the web.  They are a worthwhile publication you should consider purchasing a subscription.

Personally, I think it's the kettle calling the pot black... but then I never was a Greenspan fan in the first place! 

 

What's your time horizon?

How far down the road do you look when making decisions?  What environment's pertinent to your outlook?  Are you all about the "here and now" or do you look longer term?  If you follow the press... it's all about now.  If you follow your members needs, it's a much longer term that needs to be considered. 

In fact, I always take action following the following axiom:   Rule #1 -- Be here next year.

That's pretty tough when our numbers come out monthly, we have an annual budget, and we are constantly renewing our 5-year plan.  We really need to gaze further down the road than those short time-frames.

We certainly can't ignore current trends, but we should reflect how that will impact the future.  I've seen cu's making 3% auto loans for up to 60 months.  If they looked at their short-term investments, this may look to be a good idea.  However, 36 months from now, that may not have been the best use of their funds.  Especially when you figure in maintaining the account, statements, loss ratios... etc. 

Like a good poker player, you've got to know when to hold them and when to sit the hand out.

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