By Mike Fryzel
At its Feb. 15, 2018 meeting the NCUA Board took up the issue of who would share in the distribution of excess monies that remained in the Corporate Stabilization Fund (CSF). The CSF was recently merged into the Share Insurance Fund (SIF).
Listening to the remarks of the two board members it was apparent they wanted to justify what they were not doing as opposed to what they were doing. What they were not doing was allowing all existing credit unions who paid NCUA assessments between 2009 and 2013 to share in the distribution about to take place. Specifically, they said that even though you gave us what we asked for and you helped save the credit union system when it was in jeopardy, if you are now privately insured we aren’t giving you one penny back.
The two board members were falling over themselves in trying to justify their actions. One claimed his hands were tied and the law did not allow him to be fair and equitable like he wanted to be. He acknowledged an “inherent unfairness” but made no effort to correct it. The other boldly stated that as far as he was concerned that if you left the federal insurance program, regardless of your contributions during the crisis, you were SOL. He even tried to rationalize his position by comparing stock ownership and dividends to assessments and distributions. That is a comparison that made no sense. He compounded this by saying any payment to a credit union now privately insured would be “unjust enrichment” failing to explain how the credit unions he was casting aside would profit at another’s expense.
In 2009 when the CSF was created along with other programs to assist the recovery and lawsuits were filed to make those responsible pay, no one imagined there could be the type of money the board now has to distribute. At that time and in subsequent years credit unions were told not to expect anything as there were too many variables to predict what we now know.
Fortunately, the actions the board took then worked better than anyone could have imagined. As a result, most credit unions will now benefit.
'Broad Discretion' Went Unused
At the start of the meeting NCUA staff correctly pointed out that the board had “broad discretion” in the action they could take relating to the distribution. This was a unique event and even though Congress did not place “distribution” language in the legislation creating the CSF, its lack of doing so did not prevent the board for exercising its “broad and significant discretion”.
More than $700 million will be distributed to federally insured credit unions. If the board chose to include those credit unions who wrote checks when NCUA needed them and who have now converted to private insurance, those credit unions and their members would receive approximately $1.7 million. That is less than a fraction of 1% of the total distribution.
I do not agree with the legal analysis that the board requested from the staff to justify its position. I believe the law allowed those credit unions that paid assessments to share in the distribution regardless of their current insured status. The board had the authority and discretion to do the right thing. They failed to exercise it and failed in their responsibility to tens of thousands of credit union members.
Both board members called what they did “rough justice.” Sorry guys, what you did is called “no justice.”
Michael Fryzel is a former chairman of NCUA now in private practice in Chicago. Mr. Fryzel can be reached at meflaw@aol.com.