The market is expecting unemployment to rise ever so slightly from 9.4% to 9.5%. A lower than expected unemployment rate may be one more signal that the recession has hit bottom and the economy is turning around. A higher than expected rate could mean we are in for six more weeks of winter. No, wait, that's Puxatony Phil.
The employment report is considered the most timely and broad indicator of economic activity released each month. The average workweek is an important part of the employment report because it can be a determinant of personal income and a useful indicator of labor market conditions: a rising workweek may be the first indication that employers are preparing to boost their payrolls.
Why is this so important to credit union managers? Higher employment is likely to lead to what we will call a "normalization" of interest rates over the next year. If you are getting close to budget time, determining the direction of rates will go a long way towards providing you with a meaningful financial "road map" and help you plan for the coming year. Because interest expense is such a large line item, a wrong "guess" on interest rates can make a real difference in the accuracy and usefulness 0f your budget as a Board and management tool.
There is more information related to employment than you could ever want at http://stats.bls.gov/news.release/empsit.toc.htm.
Monday, August 31, 2009
SAR Improvements and Other Fun Facts.
Priority = High
Ever wonder whether anyone gets a Suspicious Activity Report (SAR) you filed? Does anyone really care about all the hard work you put into filling out the form just right? Unless the filing gets the attention of law enforcement (or you made a glaring error), you really can't be sure that the SAR arrived safely at it's destination. Until now, that is. on September 12, 2009, FinCEN will implement SAR Acknowledgements for BSA Electronic Filing submissions. More information can be found on FinCEN's SAR Acknowledgements and Validations Questions and Answers Guide.
A little bit about SARs:
A credit union must file a SAR when it knows or suspects that:
The funds come from illegal activity or disguise funds from illegal activity; the transaction is structured to evade BSA requirements, (for instance a member makes more than one deposit to circumvent the $10,000 cash reporting rules); apparent unlawful purpose; or, the credit union is being used to facilitate criminal activity.
Credit Unions are required to file an SAR report following the discovery of: insider abuse involving any amount, violations aggregating $5,000 or more where a suspect can be identified, or violations aggregating $25,000 or more regardless of a potential suspect.
Considering all the attention on Privacy rules, the requirement to file an SAR only upon a "hunch" seems oxymoronic (no moronic jokes, please). So it's tempting to error on the side of caution and file an SAR only when the law has clearly been violated. But be careful, there are penalties for those individuals that fail to file an SAR as required or disclose to the member that they have filed a SAR about them. Penalties include extremely high fines and long prison sentences if found guilty. In addition, financial institutions face penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions, even to the point of charter revocation.
But not to worry, the government says you can't be held liable for information filed on a SAR report.
Ever wonder whether anyone gets a Suspicious Activity Report (SAR) you filed? Does anyone really care about all the hard work you put into filling out the form just right? Unless the filing gets the attention of law enforcement (or you made a glaring error), you really can't be sure that the SAR arrived safely at it's destination. Until now, that is. on September 12, 2009, FinCEN will implement SAR Acknowledgements for BSA Electronic Filing submissions. More information can be found on FinCEN's SAR Acknowledgements and Validations Questions and Answers Guide.
A little bit about SARs:
A credit union must file a SAR when it knows or suspects that:
The funds come from illegal activity or disguise funds from illegal activity; the transaction is structured to evade BSA requirements, (for instance a member makes more than one deposit to circumvent the $10,000 cash reporting rules); apparent unlawful purpose; or, the credit union is being used to facilitate criminal activity.
Credit Unions are required to file an SAR report following the discovery of: insider abuse involving any amount, violations aggregating $5,000 or more where a suspect can be identified, or violations aggregating $25,000 or more regardless of a potential suspect.
Considering all the attention on Privacy rules, the requirement to file an SAR only upon a "hunch" seems oxymoronic (no moronic jokes, please). So it's tempting to error on the side of caution and file an SAR only when the law has clearly been violated. But be careful, there are penalties for those individuals that fail to file an SAR as required or disclose to the member that they have filed a SAR about them. Penalties include extremely high fines and long prison sentences if found guilty. In addition, financial institutions face penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions, even to the point of charter revocation.
But not to worry, the government says you can't be held liable for information filed on a SAR report.
Friday, August 28, 2009
Another $1 Billion Stabilization Assessment?
I'm going to be lazy today and just provide you a re-print from CUiSIGHT.com and the Credit Union Journal. But this is important. I know what my boss might be thinking . . . I'm always lazy!
NCUA Prepares Special Insurance Assessment August 28, 2009 – Credit Union Journal
ALEXANDRIA, Va. – NCUA is putting together a proposal that will require credit unions to pay another $1 billion into the National CU Share Insurance Fund in the face of rising credit union losses and expanded coverage on member deposits.
The additional charge will be voted at the Sept. 24 NCUA Board meeting, according to John McKechnie, NCUA chief spokesman. Credit unions would be required to pay the extra charge in the fourth quarter.
The new charge is on top of $1 billion credit unions are expected to pay annually over the next seven years to fund the corporate credit union bailout. Those charges have been moved from the NCUSIF to a new Corporate CU Stabilization Fund, which will effectuate the corporate bailout.
NCUA Prepares Special Insurance Assessment August 28, 2009 – Credit Union Journal
ALEXANDRIA, Va. – NCUA is putting together a proposal that will require credit unions to pay another $1 billion into the National CU Share Insurance Fund in the face of rising credit union losses and expanded coverage on member deposits.
The additional charge will be voted at the Sept. 24 NCUA Board meeting, according to John McKechnie, NCUA chief spokesman. Credit unions would be required to pay the extra charge in the fourth quarter.
The new charge is on top of $1 billion credit unions are expected to pay annually over the next seven years to fund the corporate credit union bailout. Those charges have been moved from the NCUSIF to a new Corporate CU Stabilization Fund, which will effectuate the corporate bailout.
Wednesday, August 26, 2009
Right to Financial Privacy (RPFA). Be Careful.
RISK LEVEL = HIGH
RFPA protects the personal financial privacy of federal credit union members by restricting access to the member's financial records.
A scenario: a local police officer comes into your office and tells you that he is investigating your member for his role in a fraud case involving the member's checking account. Just give him what he needs, right? Not so fast! The RFPA requires that the credit union obtain written authorization from the member, or secure from the government authority a subpoena or summons, a search warrant, a judicial subpoena, or a formal written request to release information about a member. Afraid to tell the cop you can't help him? Try this, it works for me . . . look around the room suspiciously, then quietly inform him that you can't help him because you believe he exists only in your imagination. He'll likely get scared and leave - at the very least, he'll go ask someone else.
In addition, policies and procedures for complying with the requirements of the Right to Financial Privacy Act (RFPA)are required. A good policy and due diligence to comply with the Act will keep you out of trouble. Compliance risk can occur when the credit union fails to implement the necessary controls to comply with RFPA; and Reputation risk can occur when members of the credit union learn of its failure to comply with RFPA. Risky business, that RFPA.
RFPA protects the personal financial privacy of federal credit union members by restricting access to the member's financial records.
A scenario: a local police officer comes into your office and tells you that he is investigating your member for his role in a fraud case involving the member's checking account. Just give him what he needs, right? Not so fast! The RFPA requires that the credit union obtain written authorization from the member, or secure from the government authority a subpoena or summons, a search warrant, a judicial subpoena, or a formal written request to release information about a member. Afraid to tell the cop you can't help him? Try this, it works for me . . . look around the room suspiciously, then quietly inform him that you can't help him because you believe he exists only in your imagination. He'll likely get scared and leave - at the very least, he'll go ask someone else.
In addition, policies and procedures for complying with the requirements of the Right to Financial Privacy Act (RFPA)are required. A good policy and due diligence to comply with the Act will keep you out of trouble. Compliance risk can occur when the credit union fails to implement the necessary controls to comply with RFPA; and Reputation risk can occur when members of the credit union learn of its failure to comply with RFPA. Risky business, that RFPA.
Wednesday, August 19, 2009
Warren Buffett, Mr. Know it All.
Warren Buffet is concerned about the tremendous mountain of debt the country is piling up. Last year he said we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover we need to curtail our out-of-control spending, or we'll destroy the value of the dollar and many Americans' life savings.
Some fun facts from Buffett's article today in the New York Times:
Congress is now spending 185% of what it takes in
Our deficit is a post WWII record of 13% of GDP
Our debt is growing by 1% a month
We are borrowing $1.8 trillion a year
$1.8 trillion is a lot of money. Even if the Chinese lend us a record $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we'll still need another $900 billion. So, where's it going to come from? The printing press. And, ultimately, Buffett says, that will destroy the value of the dollar. There goes inflation and by extension, interest rates.
But what does Warren Buffet know anyway?
My personal conspiracy theory: The Obama administration is counting on high inflation to 1. resolve the real estate crisis by increasing the nominal value (as opposed to the real value adjusted for inflation) of real estate, and 2. allow them to repay all the money the government is borrowing with inflated dollars. It won't be the first time in history that high inflation has had both positive and negative effects on the economy. Hope you are getting ready for the ride! The true test of the effectiveness of your ALCO/ALM Committee efforts today will show once inflation is a reality.
Some fun facts from Buffett's article today in the New York Times:
Congress is now spending 185% of what it takes in
Our deficit is a post WWII record of 13% of GDP
Our debt is growing by 1% a month
We are borrowing $1.8 trillion a year
$1.8 trillion is a lot of money. Even if the Chinese lend us a record $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we'll still need another $900 billion. So, where's it going to come from? The printing press. And, ultimately, Buffett says, that will destroy the value of the dollar. There goes inflation and by extension, interest rates.
But what does Warren Buffet know anyway?
My personal conspiracy theory: The Obama administration is counting on high inflation to 1. resolve the real estate crisis by increasing the nominal value (as opposed to the real value adjusted for inflation) of real estate, and 2. allow them to repay all the money the government is borrowing with inflated dollars. It won't be the first time in history that high inflation has had both positive and negative effects on the economy. Hope you are getting ready for the ride! The true test of the effectiveness of your ALCO/ALM Committee efforts today will show once inflation is a reality.
Appraisers Under New Scrutiny - Revisit Your Appraisal Policy
An article appeared in the Wall Street Journal on 8/18/09 that (again) scrutinizes the validity of real estate appraisals. (Click here for the complete article). The Regulators have been vilified in the press regarding their role in missing the housing debacle. You can be sure they are paying close attention to media scrutiny.
The role that appraisers played in the crisis is a matter of considerable discussion. Regardless of where you stand on the matter, the Regulators are taking a closer look at whether or not financial institutions use competent appraisers. It would be a good time to review your appraisal policy and at the very least, be sure you have all your "ducks in a row"; make sure you have a current list of approved appraisers, an updated copy of their license, etc. And don't just look at the bottom line value. Check each appraisal to be sure all required components are included. A checklist is always a good idea, and an appraisal policy is REQUIRED.
Speaking of crisis, the Chinese word for "crisis" contains two characters. One of them means "opportunity". Now that real estate values are correcting themselves, mortgage loans may have become a safer bet, at least as far as the underlying collateral value is concerned. But, due to historically low rates, be aware of interest rate risk. No need to stop selling to Fannie and Freddie. But to book mortgages in your portfolio, wait for the perfect storm - rates rise to a "normal" level, unemployment levels off, and collateral values can be trusted.
NCUA Regs require state-certified or state-licensed appraisers. The Reg states that appraisers must (1) have demonstrated competency, (2) subject their professional conduct to effective supervision, and (3) perform written appraisals in accordance with the Uniform Standards of Professional Appraisal Practice.
Do you need your state's appraisal licensing board contact information? Click Here
Real home values depend upon an appraisal about as much as the economy depends on economists as the weather does on forecasters. You should know your market, use common sense, and be sure your appraisers valuation makes sense.
The role that appraisers played in the crisis is a matter of considerable discussion. Regardless of where you stand on the matter, the Regulators are taking a closer look at whether or not financial institutions use competent appraisers. It would be a good time to review your appraisal policy and at the very least, be sure you have all your "ducks in a row"; make sure you have a current list of approved appraisers, an updated copy of their license, etc. And don't just look at the bottom line value. Check each appraisal to be sure all required components are included. A checklist is always a good idea, and an appraisal policy is REQUIRED.
Speaking of crisis, the Chinese word for "crisis" contains two characters. One of them means "opportunity". Now that real estate values are correcting themselves, mortgage loans may have become a safer bet, at least as far as the underlying collateral value is concerned. But, due to historically low rates, be aware of interest rate risk. No need to stop selling to Fannie and Freddie. But to book mortgages in your portfolio, wait for the perfect storm - rates rise to a "normal" level, unemployment levels off, and collateral values can be trusted.
NCUA Regs require state-certified or state-licensed appraisers. The Reg states that appraisers must (1) have demonstrated competency, (2) subject their professional conduct to effective supervision, and (3) perform written appraisals in accordance with the Uniform Standards of Professional Appraisal Practice.
Do you need your state's appraisal licensing board contact information? Click Here
Real home values depend upon an appraisal about as much as the economy depends on economists as the weather does on forecasters. You should know your market, use common sense, and be sure your appraisers valuation makes sense.
Tuesday, August 18, 2009
Growth Starts at the Top
It's said time and again that if you aren't moving forward in business you are moving backwards. Most credit unions desire some level of growth and there is plenty of advice out there related to setting goals, action steps, positive feedback, and on and on. This is all very useful information. But I've seen it time and again, the most effective leaders lead by example. Your most senior loan manager should be a top producer, ditto your branch or mid-level managers. It simply sets the tone for what is expected and definitely reduces underlying resentment from their teams.
A know a Senior Vice President at a $1.5 billion bank, (a busy guy, as you can imagine) who leads in this way. Month after month he somehow finds the time to make nearly the most business calls, and is often the top producer of the entire loan function. His team admires him and doesn't mind working HARD as well - and the results show. Actually, he was my boss at one time and now I'm getting all teary-eyed and nostalgic (OK, maybe I'm exaggerating a bit).
Do your senior managers lead by example, or just hand-down edicts to their "subordinates"? (I don't like this word, but it fits in this case). They don't necessarily have to be a top producer, but by being "in the trenches" with their soldiers, they will earn respect and you will likely see an increase in production across the board.
"A leader is one who knows the way, goes the way and shows the way". John Maxwell
A know a Senior Vice President at a $1.5 billion bank, (a busy guy, as you can imagine) who leads in this way. Month after month he somehow finds the time to make nearly the most business calls, and is often the top producer of the entire loan function. His team admires him and doesn't mind working HARD as well - and the results show. Actually, he was my boss at one time and now I'm getting all teary-eyed and nostalgic (OK, maybe I'm exaggerating a bit).
Do your senior managers lead by example, or just hand-down edicts to their "subordinates"? (I don't like this word, but it fits in this case). They don't necessarily have to be a top producer, but by being "in the trenches" with their soldiers, they will earn respect and you will likely see an increase in production across the board.
"A leader is one who knows the way, goes the way and shows the way". John Maxwell
Thursday, August 13, 2009
Shocker! FASB Proposal - Mark to Market Soon to Apply to All Loans?
The FASB met on 8/13/09 to consider expanding mark-to-market accounting rules to good old-fashioned traditional loans. I am NOT making this up!
Mark-to-market requires financial institutions to determine market values on their traded securities, but is currently not required for loans carried on the balance sheets of banks and credit unions. The FASB is expected to release a formal proposal on the changes in the first half of 2010.
This would be a MAJOR change in accounting rules and could force credit unions to take losses, and hinder their ability to meet capital requirements. Imagine this scenario: Interest rates move up quickly, which would in turn mean your loans have less value; who would purchase loans with a lower yield than market interest rates? You would have to sell them at a discount, yes? With mark-to-market applied, you will have to reflect the lower "value" on your books. How is market value determined? There are plenty of questions.
Sometimes, FASB proposals die on the vine, and this one may wither away too, especially with the banking industry gearing up for a dogfight. Hopefully, the credit union industry will nip at FASB's heels as well. But this one just may go through, as there has been a concerted effort to make accounting rules more international in nature - the International Accounting Standards Board has made moves towards mark-to-market for loans. Click here for a related CNBC Article.
I've been trying to come up with an alternative for the FASB acronym. So far I have (der) Fuhrer Accounting Sadistic . . . I need something for the "B" any ideas what the "B" could be?
Mark-to-market requires financial institutions to determine market values on their traded securities, but is currently not required for loans carried on the balance sheets of banks and credit unions. The FASB is expected to release a formal proposal on the changes in the first half of 2010.
This would be a MAJOR change in accounting rules and could force credit unions to take losses, and hinder their ability to meet capital requirements. Imagine this scenario: Interest rates move up quickly, which would in turn mean your loans have less value; who would purchase loans with a lower yield than market interest rates? You would have to sell them at a discount, yes? With mark-to-market applied, you will have to reflect the lower "value" on your books. How is market value determined? There are plenty of questions.
Sometimes, FASB proposals die on the vine, and this one may wither away too, especially with the banking industry gearing up for a dogfight. Hopefully, the credit union industry will nip at FASB's heels as well. But this one just may go through, as there has been a concerted effort to make accounting rules more international in nature - the International Accounting Standards Board has made moves towards mark-to-market for loans. Click here for a related CNBC Article.
I've been trying to come up with an alternative for the FASB acronym. So far I have (der) Fuhrer Accounting Sadistic . . . I need something for the "B" any ideas what the "B" could be?
Wednesday, August 12, 2009
The Story Behind the Fed Funds Target Rate Announcement.
The Feds left the target rate fed funds interest rate range steady at 0% to 0.25%. This was no surprise. Perhaps more importantly, though, they announced that they will begin reducing the amount of Treasuries they have been buying to help offset the amount of debt needed to cover the government's spending spree. This could reduce demand and contribute to a rise in the 10 year Treasury rate. The 10 year rate affects mortgage, commercial, and other consumer loan rates. Diminished demand for Treasuries will drive rates upward, as rates must increase to attract investors. Some other forces that could affect demand for Treasuries:
1. With more confidence in the economy, investors may move their money out of the safety of Treasuries and into investments that provide a higher yield.
2. The government will need to issue more debt (treasuries) than at anytime in our history, increasing supply.
3. Some say that foreign investors may begin reducing their purchases of our debt, or simply would not have the capacity to purchase the trillions in debt necessary to fund the stimulus and new White House initiatives.
If the government would have to raise the interest it pays on it's debt due to increased supply and decreased demand, it would prematurely drive up borrowing costs at a time the economy appears to be on the cusp of recovery.
Did you know that the Prime Rate was as high as 21.5% in 1980? For several recent decades, a 10% Prime Rate was not unusual. Can it happen again? What if it does, or something close to it? What would happen to your credit union's financial condition? The importance of a good Asset Liability Management program cannot be stressed enough.
Also during the Fed meeting, Federal Reserve Chairman Ben Bernanke said he would be willing to serve another term. He said, 'Where else would I get a job in this economy?'
1. With more confidence in the economy, investors may move their money out of the safety of Treasuries and into investments that provide a higher yield.
2. The government will need to issue more debt (treasuries) than at anytime in our history, increasing supply.
3. Some say that foreign investors may begin reducing their purchases of our debt, or simply would not have the capacity to purchase the trillions in debt necessary to fund the stimulus and new White House initiatives.
If the government would have to raise the interest it pays on it's debt due to increased supply and decreased demand, it would prematurely drive up borrowing costs at a time the economy appears to be on the cusp of recovery.
Did you know that the Prime Rate was as high as 21.5% in 1980? For several recent decades, a 10% Prime Rate was not unusual. Can it happen again? What if it does, or something close to it? What would happen to your credit union's financial condition? The importance of a good Asset Liability Management program cannot be stressed enough.
Also during the Fed meeting, Federal Reserve Chairman Ben Bernanke said he would be willing to serve another term. He said, 'Where else would I get a job in this economy?'
Tuesday, August 11, 2009
Business Continuity Plan (aka Disaster Recovery). Teacher's Manual.
When I was in elementary school, I was always amazed at how smart the teachers were. Then I found out that THEIR book had all the answers . . . .
The FFIEC has published their Business Continuity Plan examination manual. Because your examiner uses the manual, just follow the guide and you should have no problem passing your next exam with flying colors. A hint - examiners are BIG on testing. Put your plan in place, test the various parts of the plan, and document your efforts. If you don't document your efforts, then the examiner will assume it wasn't done. How many of us have learned this lesson time and again? I just raised my hand.
Follow this "examination manual" link and you will have all the Business Continuity information you could ever ask for, and more.
A little conversation I had with my fifth grade teacher one day. . . Me : I don't think I deserved zero on this test. Mrs Norton: I agree, but that's the lowest mark I could give you.
The FFIEC has published their Business Continuity Plan examination manual. Because your examiner uses the manual, just follow the guide and you should have no problem passing your next exam with flying colors. A hint - examiners are BIG on testing. Put your plan in place, test the various parts of the plan, and document your efforts. If you don't document your efforts, then the examiner will assume it wasn't done. How many of us have learned this lesson time and again? I just raised my hand.
Follow this "examination manual" link and you will have all the Business Continuity information you could ever ask for, and more.
A little conversation I had with my fifth grade teacher one day. . . Me : I don't think I deserved zero on this test. Mrs Norton: I agree, but that's the lowest mark I could give you.
Monday, August 10, 2009
USA Today Slams Credit Union Courtesy Pay Fees
Still not too worried about potential changes in Courtesy Pay regulations? It's the big bad banks that people worry about, not us, we're the good guys, right? The Courtesy Pay cash cow most credit unions depend upon may change your hard-fought image in a hurry. Frankly, Courtesy Pay is a little hard to defend. USA Today released an article that calls the Credit Union industry out on their "people helping people" image. Among the quotes from the article:
"they're just not any different than a bank."
"they find every opportunity they can to zap you."
"It's sort of like Robin Hood in reverse,"
"credit unions have also focused more on fee income — and strayed further from their mission of helping members"
They also point out that the Obama administration is pushing to create a regulatory body that could require financial institutions to get consumers' explicit consent for these loans, disclose the credit's high interest rates and warn borrowers at checkout if they're about to overdraw. These efforts, if successful, would cap how much federal credit unions can charge for overdraft fees. That's because if courtesy overdraft is defined as a loan, it would be subject to an interest rate cap — currently 18% — on loans made by federal credit unions. To put this in perspective, this cap could reduce your fee revenue to a small fraction of what you currently earn.
According to Evan Clark, a government based credit union CEO, "There are a lot of credit unions that, if they didn't have overdraft income, they'd go under". Is your credit union in this camp? As I've advocated in the past, it would be prudent to begin a contingency plan now, before the Courtesy Pay rug is pulled out from under you.
Speaking of rugs, also in the News : It was so hot today that thing on Donald Trump’s head was panting.
"they're just not any different than a bank."
"they find every opportunity they can to zap you."
"It's sort of like Robin Hood in reverse,"
"credit unions have also focused more on fee income — and strayed further from their mission of helping members"
They also point out that the Obama administration is pushing to create a regulatory body that could require financial institutions to get consumers' explicit consent for these loans, disclose the credit's high interest rates and warn borrowers at checkout if they're about to overdraw. These efforts, if successful, would cap how much federal credit unions can charge for overdraft fees. That's because if courtesy overdraft is defined as a loan, it would be subject to an interest rate cap — currently 18% — on loans made by federal credit unions. To put this in perspective, this cap could reduce your fee revenue to a small fraction of what you currently earn.
According to Evan Clark, a government based credit union CEO, "There are a lot of credit unions that, if they didn't have overdraft income, they'd go under". Is your credit union in this camp? As I've advocated in the past, it would be prudent to begin a contingency plan now, before the Courtesy Pay rug is pulled out from under you.
Speaking of rugs, also in the News : It was so hot today that thing on Donald Trump’s head was panting.
Tuesday, August 4, 2009
Big Bailout Banks Belly-up to the Bond Buying Bar.
According to Bloomberg, lenders that were bailed out by the Government have been purchasing Treasuries at a rapid pace. Whether the purchases are a return "favor" to the Feds to help keep interest rates low is purely speculation. Add this activity to the $1 trillion of debt the Feds have already pumped into the system (by buying treasuries), sprinkle the additonal $300 billion they plan to purchase over the next six months, and you have interest rates on ten-year treasuries being held artificially low (the ten-year is a benchmark used to set mortgage and commercial loan rates).
Let simmer for about a year with the 2.9 trillion in debt the government still needs to sell and you have a great receipe for inflation and rapidly rising rates. Or maybe not. The direction of rates are notoriously hard to call. But be prepared. This period of relative calm before the storm is a good time to get your ALM position in order.
Fun Fact: Did you know that a Billion in the U.S. is a thousand million, but a billion in Europe is a million million? I wonder if anyone has ever wired the wrong billion overseas. Anyway, it's all a gazillion to me.
Let simmer for about a year with the 2.9 trillion in debt the government still needs to sell and you have a great receipe for inflation and rapidly rising rates. Or maybe not. The direction of rates are notoriously hard to call. But be prepared. This period of relative calm before the storm is a good time to get your ALM position in order.
Fun Fact: Did you know that a Billion in the U.S. is a thousand million, but a billion in Europe is a million million? I wonder if anyone has ever wired the wrong billion overseas. Anyway, it's all a gazillion to me.
Monday, August 3, 2009
More Losses at U.S. Central.
In the 1942 classic movie Casablanca, Captain Renault, in an attempt to get himself out of trouble, said he was shocked, SHOCKED that there was gambling going on at Rick's Cafe (as a croupier hands him a stack of cash).
Likewise, I'm sure that U.S. Central's management team was shocked, SHOCKED to hear last week that USC had an additional $537 million of losses on their mortgage securities that they didn't know about before the audit. The losses will adversely affect its corporate members and, guess who ultimately gets to pay the tab? Yep, natural person members of most of U.S. Central’s 27 corporates. Translation - your credit union. Check your Corporate's website or with your Rep to determine the cost to your credit union; you may have to write down your capital shares with your Corporate.
More information can be found in a Credit Union Journal article.
Likewise, I'm sure that U.S. Central's management team was shocked, SHOCKED to hear last week that USC had an additional $537 million of losses on their mortgage securities that they didn't know about before the audit. The losses will adversely affect its corporate members and, guess who ultimately gets to pay the tab? Yep, natural person members of most of U.S. Central’s 27 corporates. Translation - your credit union. Check your Corporate's website or with your Rep to determine the cost to your credit union; you may have to write down your capital shares with your Corporate.
More information can be found in a Credit Union Journal article.
NCUA Deposit Insurance on Steroids.
By now it's old news that, in May, the Feds raised NCUA deposit insurance coverage to $250,000. Yes, the the coverage likely will become a permanent change, but the Act states that the increased coverage expires on 12/31/2013.
Many members believe that the most their deposits can be insured for is $250,000. The NCUA provides a nice brochure that does a good job of explaining the complexities of deposit insurance. One example they cite is that a family of four could be insured for up to $3.5 million if they structure the accounts properly.
A couple of handy resource links to have available in case members have questions.
1. The NCUA "Your Insured Funds" Brochure.
2. The Online Share Insurance Calculator.
You may find that the calculator puts members at ease when it comes to explaining increased coverage; print the results and provide them a copy.
In the News:
JAKARTA, INDONESIA—Its currency and economy decimated by the lingering Asian financial crisis, Indonesia received welcome news Tuesday, when the World Bank announced it would offer the struggling nation totally free checking.
"Indonesia can say goodbye to high checking fees," World Bank president James D. Wolfensohn said. "No monthly service charge, no per-check fee, and free touch-tone balance information are just some of the benefits Indonesia will enjoy with the World Bank's 'Totally Free Checking' program. And there are no strings attached and no hidden fees—that's the World Bank guarantee!"
Wolfensohn added that if Indonesia opens a Totally Free Checking account by Oct. 15, it will receive a free athletic bag.
(The Onion News excerpt)
Many members believe that the most their deposits can be insured for is $250,000. The NCUA provides a nice brochure that does a good job of explaining the complexities of deposit insurance. One example they cite is that a family of four could be insured for up to $3.5 million if they structure the accounts properly.
A couple of handy resource links to have available in case members have questions.
1. The NCUA "Your Insured Funds" Brochure.
2. The Online Share Insurance Calculator.
You may find that the calculator puts members at ease when it comes to explaining increased coverage; print the results and provide them a copy.
In the News:
JAKARTA, INDONESIA—Its currency and economy decimated by the lingering Asian financial crisis, Indonesia received welcome news Tuesday, when the World Bank announced it would offer the struggling nation totally free checking.
"Indonesia can say goodbye to high checking fees," World Bank president James D. Wolfensohn said. "No monthly service charge, no per-check fee, and free touch-tone balance information are just some of the benefits Indonesia will enjoy with the World Bank's 'Totally Free Checking' program. And there are no strings attached and no hidden fees—that's the World Bank guarantee!"
Wolfensohn added that if Indonesia opens a Totally Free Checking account by Oct. 15, it will receive a free athletic bag.
(The Onion News excerpt)
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