How Much Will U.S. Central Cost?

Finally in September, we saw U.S. Central’s audited financial statements for December 2008. We still don’t have enough information to interpret the data into hard dollars for natural person credit unions. It’s complicated by the fact that there are corporate credit unions in the middle. And the waters are seriously muddied by accounting rule changes. But why the long delay? And why didn’t the auditor’s report state that US Central is a going concern? Could it be that it isn’t? The bottom line for credit union CEOs is still “How much will this cost my credit union?” You can’t possibly figure that out without knowing where the NCUSIF funds are going. Where is the transparency from the NCUA? On Sept. 11, U.S. Central’s audited financial statements were finally made public, showing $4.8 billion in losses for year-end 2008. Four days later, U.S. Central posts first- and second-quarter financial statements on its Web site, which are marked “revised 9/15/09.” They clearly are “revised,” as the value of investments did not change between the end of March and the end of June. How is it possible that fixed-income bonds don’t change in market value when the value of everyone else’s bonds change with the bond market? The FDIC closed 89 banks as of the end of August and has listed the impact on the deposit insurance fund for every one of them. How much are conserved and troubled credit unions costing the NCUSIF? Why isn’t this public information? So what are credit unions doing while the massive ball of corporate losses rolls downhill and is about to crush their strategic plan for perhaps years? Are the NCUA’s actions and secrecy in the best interest of your credit union? Although it wasn’t clear until September 2009, we now know the NCUA extended U.S. Central a committed borrowing facility of $10 billion (currently $5 billion is outstanding); authorized an additional $3 billion of cash and noncash assistance including a guaranteed prior undivided earnings deficit (negative retained earnings); and one or more additional capital notes. That’s potentially up to $14 billion. For perspective, $14 billion is more than double the 99 basis points of stabilization expense earlier this year. The NCUA can borrow up to $30 billion from the U.S. Treasury. If it’s all needed. One must wonder why it would ask for $30 billion if it didn’t need it. How many basis points will that be? And it’s not even clear that they expect U.S. Central to exist in a few years. As of June 30 call data, there were 133 natural person credit unions with less than 6% net worth. If the remaining paid-in capital and membership capital shares in the corporates evaporates there will be 251 credit unions with less than 6% net worth. So really: what’s the number? What will your credit union have to pay? And don’t you think you have a right to know? Your board might.