Corporate credit union program gets another extention

ALEXANDRIA, Va. (11/24/09) The Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) has received another extension from its parent agency, the National Credit Union Administration (NCUA). The agency is pushing the expiration date past the current sunset of Dec. 31, 2011 to let the program run until . . .

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NCUSIF assessment may be much higher in 2010

CU 2010 assessment may be 0.15%-0.4%
ALEXANDRIA, Va. (11/20/09)—The credit union assessment to fund the National Credit Union Share Insurance Fund (NCUSIF) and the corporate credit union stabilization fund could range from 0.15% and 0.4% of insured shares in 2010, National Credit Union Administration (NCUA) estimated Thursday.
At the agency's open board meeting, Melinda Love, director of examination and insurance, predicted that NCUSIF losses for the coming year could range from $450 million to $1.68 billion—a substantially wide range. Those losses, she said, could require a 0.1% to 0.25% premium, And the assessment to fund the NCUA's Corporate Stabilization Fund could be between 0/05% and 0.15% of insure shares.

From CUNA News Now

Communists lecture Obama on U.S. economy

It could be an indication that the Obama administration's economic policies are on the wrong track when communist China is offering the best advice regarding the U.S. economy.

According to the Wall Street Journal ,Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to "massive speculation" that was inflating asset bubbles around the world. . ." "Bubble" :sound familiar?

The ironic part . . . they are probably . . .
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Some Credit Union Concerns Going Forward

The NCUSIF / Corporate CU restructuring plan will cost .15 basis points per year over the next 7 years, probably more. In addition, some corporates are writing down their capital; this will be handed down to natural persons CUs and cannot be recovered.

Increasing loan losses related to job losses and sluggish economic growth continue to be a concern. Unknown how deep the problem can go.

Interest margin pressures are a real concern. Deposit rates can move up much faster than loan rates.

Mortgage rates are being manipulated and are artificially low right now. Jack Brick’s (Brick and Associates) challenge question: “Do you really want to play in this Game”? Low yielding long-term mortgages and mortgage backed investments present risk of both lost income and market value risks when rates move north.

Bankruptcy “Cram-down” proposals were defeated in Congress for now, but may be coming back.

Interest rate risk is a major concern. Credit unions with a large percentage of long-term loan and investment assets are at risk. Brick cautions against reaching for yield in a low-yield environment.

Business loans can be an opportunity or an emerging problem. Brick warns against doing business loans as a “Hail Mary Pass” out of desperation for net income. Few CUs have the expertise and the market is risky as ever right now.

Loan modifications in problem loans – credit unions are finding that they don’t usually work unless there is underlying good credit, at least 20% equity in the collateral, etc.

New branches now take about ten years to start being profitable - be realistic in your analysis. Switching financial institutions is not a high priority with anyone, says Brick; few will switch because of a new facility.

Liquidity can be a major risk. Money Market accounts are projected to exceed recent 4.5% 15 year mortgages at some point. Selling mortgages or mortgage backed investments later will not be an option to fix a liquidity problem.

The pace of new regulations has been picking up with no abatement in sight. This can be a drag on efficiency and earnings.

President Obama hosted a conference of all the Native American tribes. I know the U.S. economy's in bad shape, but Obama told the Indians, 'Look, you can have the country back. Okay, fine.' –Jay Leno

The top ten economic concerns. A quick overview

The Dow Jones Industrial Average has begun to recover. Financial Institutions may see deposits flow out and back into the stock market. When confidence improves, investors are willing to accept more risk.

The ISM Manufacturing Index hit it’s lowest point in decades. However, the index has rebounded and has moved to over “50”. This is indicative of an expanding economy.

The Feds are purchasing debt and, in effect, printing money to finance record deficits. Once “slack” in the economy is . . .
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New Overdraft fees Rule. Per Yahoo Finance

WASHINGTON – Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.
The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.
For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.
Under the Fed's new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don't "opt in," any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.
Many consumers do want checks and regular electronic bill payments to be covered in the event of an overdraft, Fed officials said. As a result, those transactions aren't covered by the rule.
Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts.
Many larger banks, including Bank of America Corp., JPMorgan Chase & Co., U.S. Bank and Wells Fargo & Co. began instituting similar "opt-in" plans in late September after coming under fire for the fees.
But consumer groups and other regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair, said new rules were still necessary to ensure smaller banks followed suit.
Many lawmakers have criticized the Fed for failing to provide sufficient consumer protection in the past, a defect they say contributed to last year's financial crisis. Sen. Christopher J. Dodd, D-Conn., on Tuesday introduced a bill that would strip the Fed of its consumer oversight.
Dodd also proposed legislation last month that would have imposed limits similar to the Fed's on the banks' ability to charge overdraft fees.

Why the sinking U.S. dollar is helping the recovery and the stock market

If you have been paying attention to the relative strength of the U.S. dollar, you may have noticed that as the dollar slides, the stock market rises. And with no end to deficit spending in sight, the dollar's decline may have a way to go.

While the Obama administration and Treasury Secretary Henry Paulson claim to support a strong dollar, they may actually support a weak currency because, at least in the short term, it helps the U.S. economy more than the strong one they publicly endorse. The dollar has declined by . . .

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Good news bolsters the stock market, more to come?

The Labor Department reported that newly laid-off workers seeking unemployment benefits fell to 512,000 last week, the lowest level since January and fewer than economists had forecasted. The report also said, though, that many employers remain reluctant to hire.The report fanned optimism that the government's monthly report on employment Friday might prove
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The story behind the Feds decision to leave rates unchanged

Yes, the Feds kept their benchmark overnight lending rate at between zero and 0.25 percent, where it has been since December. But as always, there is much more to the story. A few things officials said and their potential impact on the economy:

The Fed completed its $300 billion program of purchasing Treasuries last month. By purchasing Treasuries, the Fed was monetizing the debt and, figuratively speaking, printing money. By putting this excess liquidity into the economy, inflation becomes more of a threat. In addition, the Feds are actually in competition with investors who purchase treasuries. A potential side effect is that
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Mortgage Rates May Hit 6% in March

According to the Kiplinger Letter, 30 year fixed mortgage rates will be in the neighborhood of 6% this Spring, even higher if . . . click here to see entire article

You'd Better Contact Your Corporate. More Losses at US Central.

On October 30th, U.S. Central (USC) released their financial statements for the third quarter. Their cumulative losses over the last three years is now up to $2.6 billion. If your Corporate Credit Union has considerable investments (capital) with USC, then it's a good bet that your Corporate's capital account with USC is impaired more than expected. So who pays the tab? Natural Persons credit unions, of course.

Examples from Cindrich Mahalak & Co, CPAs . . . Corporate CenCorp in Michigan has an unexpected 24% impairment, or $240,000 for each million in you capital account. On the other hand, Corporate One in Ohio has no impairment expected. According to CM&Co, "don't expect any recoveries here like you saw with the NCUSF deposit, as this cannot be written up under current accounting rules."

It is suggested that you contact your Corporate to find out where they stand. I would imagine that your Board of Directors does not like surprises, unless they are good ones.

The economy seems to be improving somewhat - this is the good news. However, with new credit union legislation, potential NSF/Courtesy Pay limitations, record high unemployment, and NCUSIF related expenses, credit unions will be navagating some pretty rocky roads ahead.