I’m not sure what it adds up to, but it is curious. For example, Congress
passed a law on the subject:
111TH CONGRESS 2D SESSIONS. 4036AN ACT To clarify the National Credit Union Administration authority to make stabilization fund expenditures without borrowing from the Treasury.
Just the heading of this scares guys like me. The purpose of the law is
to avoid Treasury from forking out money to the NCUA? That would be a
bailout. Everyone hates bailouts. But there is a large hole in the NCUA
system that should be filled. If that bucket is not filled by Treasury
then who will fill it?
I believe the plan for the empty bucket is to assess the individual
credit unions for several years worth of insurance premiums. This is
exactly what NCUA’s big sister, the FDIC, did last summer. The FDIC
collected four years of premiums upfront to bolster their underwater
insurance fund. In the case of banks, the prepayment shows up as an
asset on the books, the expense is recognized over the four years, so
there is no economic penalty for the banks to front the losses. The
question then becomes, can the individual credit unions pay the
premiums? That was addressed in the new law:
Any
insured credit union that fails to make timely payment of the assessment
or special premium is subject to the procedures and penalties described
under 21 subsections (d), (e), and (f) of section 202.’’
Basically this means if they don’t/can’t pay, they are toast. How big is this issue? Consider the following:
As of November month end, 372 federally insured credit unions, with assets of $43.4 billion were designated as CAMEL code 4 or 5. In addition, there were 1,792 CAMEL 3 credit unions with assets of $158.2. Overall, 22.3 percent of all credit union assets are in CAMEL code 3, 4 or 5 credit unions.
What does CAMEL 4-5 mean? Answer: Dreck.
What does CAMEL 3 mean?
There are of course losses embedded in this $200b of assets. How much? I
would estimate $20-40b. That may sound like a big number, but it is
not. There are about $900b of total assets in CUs so the problems are in
the 5% range. They are also concentrated in a few large corporate CUs.
Four-years of prepaid insurance covers the nut. The question becomes; “Who is going to step in to fill the roll of those that are in the process of failure?”
The answer to that (I think) lies in the minutes of a board meeting by
the National Credit Union Administration. The meeting took place on
December 16th. The exact same day that Congress was voting to approve
S.4036. (If you believe in coincidences, stop reading) The language:
New subpart C of Part 708a establishes procedural and substantive requirements for converting a credit union to a bank through merger.
They change the rules so that the commercial banks can play in this space? This change to the charter is also interesting:
The new
requirements apply to direct mergers as well as transactions where the
credit union first converts to a mutual savings bank (MSB) and then merges with another bank without operating as a stand-alone MSB.
This suggests that a CU can become a MSB in the morning, and in the
afternoon it can merge or sell itself to a commercial bank. What do
they need to get all of this done? SECRECY, of course. From the NCUA
12/16 minutes:
Finally, the proposed amendments to Parts 708a and 708b revise existing rules to enhance the secrecy and integrity of the voting process in MSB and insurance conversions.
Given that this can now be accomplished with the desired level of
secrecy I would anticipate that the process will commence sometime in
2011. I anticipate that some of the big banks will step in and buy up
the shells of a number of the corporate CUs.
Should this happen many will call it a success. The alternative was a
federal bailout that would have cost taxpayer dollars. This outcome is
the objective of S.4036. But here is my rub; the CUs provide
important banking services to millions of people. Were it not for the
legacy assets of 2006-08 the CU’s would be muddling along just fine
today. They provide an important alternative to the big commercial
banks. But now some key players who provide important services to the
smaller CUs are going to get gobbled up by fat cat bankers from Wall
Street.
There is big money to be made in this consolidation. Big players
will no doubt be involved. At the end of the day the big banks will make
another bundle. The cost, over time, from less competition and higher
fees to consumers will be more than the $30b that is being avoided.
This is another of those examples where if you are big and have muscle
you can bend the outcome and come out ahead. Guess who brought you
S.4036? Dodd/Frank of course (surprised? I hope not). These two guys have been the best friends the big banks ever had.
So we change Savings and Loans into "Credit Unions" and repeat the same scam on them till they die.
Fascinating write-up. Sure, the entire financial system is being buoyed through POMO, etc., and no deposits are safe as long as inflation and bank failure remain around he corner. I'm not so certain that safe banks would go shopping for CUs' because consumer banking is just cumbersome; this could be a guaranteed loan program, from banks to the CU. that shifts the paperwork onto consumers and off the fed balance sheet. OR, it could be the start of the hyper-sized bank as an attempt to proof the non-possibility of major bank failure...it could be used, hypothetically, as a means for major banks to cheaply buy a customer network across the country which would then be followed by TBTF curtailment regulation that distributes the banks tier1 reserves amongst the several states where they have business.
Bruce:
Thx for the post.
A few months back when several wholesale credit unions tanked (including Southwest Federal Credit Union in Plano, Texas) to the tune of $50 billion I posted the following which I am reposting here:
(I must re-emphasize, as per your post and several comments above, it's all about consolidation and driving the small players out of the market.)
I recognised one of the failed institutions named Southwest Federal credit union because I had done some $ transfers from my small local credit union account and they went through Southwest. It got me to wonderin' and the following Monday I shuffled into my local branch to ask some "dumb" questions - ended up talking to the CEO after loosing things up with a little fooetball/soccer chat.
Background:
Wholesale credit unions do business with smaller local retail credit unions and provide necessary services small CU's cannot provide on their own. They are for-profit corporations charted (I guess) to provide certain services in the retail CU market. They failed because, as a result of investing in bad paper like MBS's, their capitalisation had fallen below the legal limit to remain in business under the legal guidelines of their charter. Unable, after a grace period, to get their capital structure to comply with govt regulations, they were seized by the Feds. The reason they were not "sold" (with Govt backing) to larger wholesale CU's as in the case of bank failures is because there are only about 30 wholesale CU's in the country and the 3 failed ones were among the largest. Therefore, no possible buyers; therefore the Fed Govt had to take over control.
My local CU: $50 million capitalisation, nominal 10,000 members, 4 branches all located locally.
1, Found out that that Monday the CEO had sent out an interdepartmental e-mail on how to handle customers inquiries.
2. I always maintain very good relations with the personnel at the CU in case I need a favor.
3. Office manager let me see (even tho' she "wasn't supposed to") the e-mail. -Yes they would take a capital hit as a result of the failure of Southwest - didn't say how much.
4. Office manager said she would copy the article from the local newspaper if I wanted to see it. It was the same generic AP article I had seen on the net the previous weekend. - nothing about local impact.
5. While she was copying the article I started to engage the CEO who just happened to be in the lobby. - I played dumb and asked leading questions.
I found out:
1. Southwest provided electronic transaction services, foreign currency services and loan collection services for the the local CU.
2. They aslo provided legally required liquidity back-up services to the local CU.
3. local CU took a $160,000.00 loss when Southwest failed. This was some kind of initiation fee/stock purchase or something required to initiate the relationship with Southwest.
4. Local CU has 2 year grace period to locate another wholesale CU to provide necessary and legally required services previously supplied by Southwest.
5. Local CU likes to maintain 85% of its capital loaned out to its memebers.
6. Since no one is currently seeking loans only 70% of capital is currently loaned to members.
7. Other 30% needs to be put to work but T-Bills and other Treasury paper have too low of a yield.
8. So other 30% is loaned out to - - - - - - it's about here that the CEO started to realize, maybe, he was telling me too much. But I'll just bet at least some of this money was loaned to Southwest - just from the vibe of the conversation. Loaned to a bankrupt institution - but of course -"it was insured" - by the bankrupt Fed Govt.
So, how much does a retail CU need to have loaned out at what rate to stay in business? I don't know. But I am willing to bet that in a few years this little local CU will not exist as a separate entity because:
As the CEO told me, besides the low loan structure, what was really causing problems was the constantly changing and complex regulatory requirements they needed to comply with to stay in business that were the result of Obama's "Wall Street Clean-up Bill" from a few months ago. As a result of this legislation this little CU had to hire a full time compliance officer just to keep track of these requirements and keep them in compliance.
Now isn't that interesting! Because, buried in the Health Care bill was legislation that requires all medical institutions to convert all their medical records to an electronic format. Although a carrot is offered in this regard for seed $ to start the process medical institutions that do not comply will be fined after the compliance date in the future. Sound familiar? - as in all individuals are required at some date to obtain health insurance from a privte provideer or be fined if they have not. - and as in the compliance issues mentioned above with regard to small local CU's?
Complying with this legislation is a monumental task (my wife works for a large regional medical institution and is involved with compliance policy ) for any medical institution and only the largest will have the managerial, technical and monetary wherewithal to comply. Smaller institutions that cannot comply will either go out of business or need to be bought up by larger ones.
So what's the "god almighty con" on all this? Same con as always - forced consolidation of power in large centralized organisations under the emerging "fascist' business model. I don't mean to be strident with the word "fascist" due to its connotations regarding violence, racism, etc from WWII but, as most people are learning, fascism is simply the marriage of govt and business as on all powerful political/economic institution. And its happeninbg all around us as we speak.
But no one remembers - anything - anymore - that is more than 2 days old. Its a flash in the media and its gone - already the foreclosure mess is receiving less press. All we see on the front page are sports and the rescued Chilean miners and their mistresses! Deep water drilling in the GOM - game on!
So I have taken the time to report what it looks like on the ground around here with regard to the failed wholesale CU's.
I people wonder why I don't keep much $ in a bank!!! I'll take the Southwest bankruptcy as fair warning. The truth is there if you want to do the due diligence to reveal it.
Otherwise - - - -you'll get what you deserve.
Thanks for this info. I agree, consolidation to a few huge players is the playbook going forward.
They're tightening their grip on people.
"As the CEO told me, besides the low loan structure, what was really causing problems was the constantly changing and complex regulatory requirements they needed to comply with to stay in business"
---------
I would almost be certain the big bank lobby had something to do with how those regulatory requirements were structured, as we all know lobbyists write bills not congressmen. CU's for years have been widening their geographic scope and taking customers with lower rates, better fee structures and customer service and banks have been lobbying against for ages.
I am in an urban area of the Midwest. One major credit union here has 18 branches spread thought out the metro area. At last count they have already taken over 5 other failed CU's in the last 18 months. It is obvious this institution is much stronger than others.
That said, in this area of the country if you wanted a Home Equity Loan or HELOC, 2000-2008, you walked into a CU. Second mortgages seem to be their sandbox, and it was ultra competitive between CU's. How competitive - most are now sitting .125/.250% above prime, and this is typ when I talk to friends, family and acquaintances.
Contrast that with what banks and other financial institutions were/are commanding for a 1st. The contrast in spreads is startling, so are the fees.
We already had a prominent but smaller community bank in this area fail. They were competing with the local CU's. This Bank had been around since the late 1800s and were once a S&L, but survived that mess. Unforchantly, they couldn't weather this s*it storm.
Their M.O was much the same as the CU's. First and second mortgages, but concentrated in one region of the city. The acquiring bank is in the process of writing off the crap on the books - and it is decimating the southern part of the city in short order. The ramping up of foreclosures the last 90 days is insane in my obvervation.
As one aquantiance told me recently, (he sits on the board of directors of a larger community bank) "No institution under a 1 billion in assets is going to survive."
Tks for this. Especially: As one aquantiance told me recently, (he sits on the board of directors of a larger community bank) "No institution under a 1 billion in assets is going to survive."
You ought to get your friend to write a blog. If we get to the point where the only bank left is a monster bank, then we will have hit bottom. We need smaller institutions to create competition.
Well, if you ask me, Potterville looked like a fun town compared to boring old Bedford Falls anyway.
Let's say that if the CU's I work with quit working properly there is going to be hell to pay. They cannot give me rates low enough to compete with banks and I have a FICO that shits marbles. I am glad I did pay off my vehicles when I did at the rates I had em at.
However if the CU stops because of Government meddling, I will consider it a personal endaevor to prevent me from paying bills on time and recieving payroll on time as paid by employers.
I would become very angry at this point. And call all of my vendors (Electric etc) and tell them send me regular stamped postal mail bills to my mailbox.
I would have two choice. Risk being late on bill payments or pay the bills ahead once per year. It would only take a few thousand dollars to set the water bill ahead a year and so on.
In effect turning the billing providers of my water, electric etc into banks that must maintain a credit balance in my favor to the penny.
Oh yes, I would be very angry.
However the unsecured credit card? Hah. CU goes, so goes the card and anything on it.
Something going on in Dallas has been the appearance of new (previously unheard of) credit unions. My count is up to three all within the last couple of months. Be suspicious.
The predators-that-be are laying plans to confiscate all savings of all citizens who have anything vaguely resembling savings and checking accounts (and retirement accounts).
Yet one more reason to convert all paper assets to physical silver and gold... very well hidden.
bankstas hate the non-profits, if Obama was the big fat Socialist they say he is, he would be giving them a bigger role to play, especially small business, other than corporate, type lending. but I sorta think the small businessman is dead by the end of this Depression, just as the independent farmer was gone after the first.
I'm beginnig to think that banking in general is or has become so far beyond complex that the mattress is looking a like safer place to store my "money". I wonder if removing the tag means I have to pay a tax on what I put under it?
no... removing the tag simply makes you subject to imprisonment
I will reassert what i have posted twice before....
--------
Ahhhh, yes, the other battle royal that will happen in congress (not that BHC's haven't been lobbying hard already to do away with CU's). However, as BHC's raise fees enough to push out consumers to CU's. Well, dont think banks will sit idly by and see revenue walk out the door. If the Fed cant force you to spend and CNBC cant get you to buy stock, banks "will" at least force you to have an account with them. The BHC's push against CU's will be bigger than ever now.
I give it 2 years and we see some big slam down of CU's in congress, with some God forsaken bill, written with ink drawn from a cesspool, called campaign finance. Not even the likes of Liz warren will be able to stop it. Although, to some degree its a mute point, as allot of CU activities/clearing has to be done through a major Bank anyway. Im guessing those costs to CU's will be going higher in the future.
They (BofA, Citi, Wells, you know the lot) will stop the ever widening CU customer base; and their geographical areas of reach, one way or another. They have been campaigning against it for quiet a few years already. FinReg just made that push harder.
So, enjoy your CU now, cause my guess is they will be legislated out of competitiveness in the not to distant future.
Now, back to our regularly scheduled program “As Credit Derivatives Churn”, followed by the game show, “600 Trillion dollar OTC pyramid”.
That is all......
--------
http://www.zerohedge.com/article/main-streets-boycott-capital-markets-su...
http://www.zerohedge.com/article/three-wholesale-credit-unions-nationali...
Thank you, Bruce, for bringing this under-reported story to light. My local CU (Arrowhead Credit Union) was seized under what some consider to be very dubious reasons. I have commented to several people how it is interesting that much of that business is ending up at the big banks.
I appreciate your research and commentary. However, I have to quibble about this line, "Everyone hates bailouts" ..... huh? Where are you getting that idea? The international banks LOVE bailouts. That's currently the business model of choice. Run up huge debts with no risk and get bailed out by the cronies in governments, central banks, imf, world bank.
Get used to bailout after bailout until the people finally get wise to the scam and make it politically impossible.
Okay, I accept that. It would have been more correct if I had said: "Everyone who is of a sound mind and cares about the future hates bailouts".
Better?
In the end, there will be only one left: The National (dis) Trust of Goldman Morgan.
Wall Street’s Pentagon Papers: Biggest Financial Scam In World History
$12.3 TRILLION in taxpayers’ money.
by David DeGraw
http://www.globalresearch.ca/index.php?context=va&aid=22291
DIY:
http://housing.yakaz.com/old-bank-building-for-sale
Now I know why my credit union could not compete when I refinanced a month or so ago.
S4036 is intended to allow further engorgement of TBTF banks. If the goal were to help the credit unions, they would just be given access to the Discount Window.
Soon there will be no place to conduct even minimal activity such as bill paying without feeding the beast.
Latest Major Action: 12/17/2010 Referred to House committee. Status: Referred to the House Committee on Financial Services.
hope some one here keeps an eye on this.
when you "invest" your work energy (money) into a bank/cu you should do the same due diligence as any other time you invest your money. this means keeping abreast of changes in the law (such as this sneaky one) as well as knowing the finanical position of the organization (they will have annual reports and statements of financial position you can review). you should also check their ratings on the internet and google them to see if there are any new stories or other PR information about them.
if they do something you don't like, you are always free to move your money someplace else.
i would also think diversification is key here and not just at the fdic or ncua limits, but at limits you are personally comfortable with.
as an aside, many credit unions are heavy into auto loans. these are at least backed by the asset (a depreciating one) but it can be easily reposessed and part of the loan made good. a little different than CRE or residential housing. i have had most of my auto loans over the years at credit unions because they were more competitive on rates.
Coincidence? I think not.
Fate of Utah’s Beehive sealed long before it was seized | The Salt Lake Tribune (December 16)
http://www.sltrib.com/sltrib/money/50881162-79/credit-security-service-b...
Riddle me this: Where the fuck is safe to keep your money? Don't give me that fucking Gold crap either.
You can't trust US banks, you can't trust foriegn banks like HSBC, you can't trust credit unions. So where do you keep your money for business and personal safety? You need something where you can safely develop lines of credit, where you can park your savings and operational funds.
Any suggestions?
get over it fully. Have had gold since the 70's and have never once regretted it. It's always been worth a trade. Sure there's a lot of other ways to make more 'profits', but there's lots more ways to lose. As someone uninterested in wasting all day consumed in investing, and as someone equally untrusting of government and tptb, it works. Quit trying to be so smart.
United Mattress.
How adorable!
Gully wants safety and trust. That is so funny!
There is nothing safe about government and we know we can't trust them. Oh wait, we turned government over to the bankers to use as they wish and so they can write whatever laws they need to get whatever they want.
Oh no! The politicians lied! How could they? I believed them!
They told me regulation would control the predators. They said the SEC would watch Wall Street. They said the FDIC had plenty of money. They promised Social Security was safe. They said the terrorists took down the towers. They said there were WMD's in Iraq. They said Osama is in a cave.
HAHAHAHAHAHAHAHAHAHA! Maniacal evil laugh! They believed us! The stupid shits bought it hook, line and sinker!
Let me take a moment and make a suggestion: there is nothing safe. There are things that are safer than others. There are things the government and banks control more than others. In a worse case scenario, there are countries that your government doesn't control. They cannot control silver and gold if you have it in your possession and hidden or in an offshore location. If you stay, you play. It is a rough and tumble game and requires great sacrifice. America may never be the same. Europe as well. The people may rise up or fall down.
We are living in interesting times. Land, PM's, Lead, Food, Water, Seeds, Energy and in case of emergency- land in another country, access to some portion of your wealth and citizenship. Good Luck!
CUs are safe. Up to $250k they are insured. Same as FDIC with a bank. Don't worry about money in a bank in the US.
While your money is "safe" it declines in value while sitting there.
IIRC, there are about $8 Trillion in deposits in the Banks. The big 8 have around $4-5 Trillion. There is absolutely no way that the FDIC can cover that. Arguably, the FDIC is nearly broke now.
So I'd question the reliance upon insurance. Far more likely, IMO, is that the big Banks would be nationalized if there was trouble. At that point, you'd have to ask yourself what would happen to the deposits? If they guaranteed the entire amount, that would be another $8 Trillion added to the taxpayers bill. If they didn't guarantee them, a lot of businesses, State and local governments would be out of a lot of money. And you'd have to wonder what the Bond Market Vigilantes would think.
All choices seem ugly to me, when that happens. In any case, the reliance on just insurance seems overly optimistic to me, with all due respect.
You are right and you ar wrong. The FDIC has FULL FAITH and CREDIT of the US Government. This means that if FDIC were to fail Treasury would be obligated to write a blank check. Period. Full stop. If you have less than 250k in a bank you WILL get it back.
But you will be a loser anyway. If it gets to the point where the FDIC is busted and Treasury is paying off claims, pretty much everthing around us would be falling apart.
In that scenario (I don't think this happens anytime soon) the price of essentials would rise, assets would fall. The ultimate squeeze. But, you would get your money back. It wouldn't be worth much if this were to play out....
We're in agreement about the Treasury. And, while I agree about the U.S. backstop, there's the key issue of "when" you'd get your money back. That shouldn't be overlooked. Your money might be "safe", but inaccessible. We had a similar situation with the Bank holidays back in the 1930's. That was relatively short. More appropos would be Argentina's recent situation, where you couldn't get your money out for a longer period.
So I'd question the value of the safety if your money wasn't accessible.
I agree that, by the time your money was available, it might not be worth much. I'd add that they could very well change the currency; say, giving you one new dollar for every two.
I think the bottom line remains that one should count on one's own vigilence and knowlege of the game, rather than depend on an insurance program. For that, reading ZH will help you stay ahead of the game.
For medium term savings that you need to keep in dollars, Treasurydirect is the safest. Long term savings, goldmoney.com.
TreasuryDirect?! Are you on drugs?! If you're afraid of the banks/government stealing your 401K/gold, why on Earth would you put money into savings bonds?!
When Grandma' died we found $ 13,000 neatly spread out in thousand dollar wraps between her mattress and box spring. Just a thought.
Rainman
Try carrying that much cash. BIGOV thinks you are a dope dealer or something equally shady.
That is the problem so many restrictions on how we are allowed to handle our money are in place now that very little exists without risk.
I checked into credit unions last year, thinking the same as you. They're not safe. Nothing is safe. Safety is over. We're all on our own...I think we always have been but just didn't recognize the fact.
Been seeing the phrase "private banks" but don't know how to find one and if I did how to determine its safety.
Huge headache, reality is really frightening.
I'll have to respectfully disagree, somewhat. While I agree that nothing is safe, some things are safer than others.
For example, during the Great Depression, it was only about 35% of the Banks which failed.
During this one, I wouldn't be surprised to see 80-90% either fail, or be nationalized. My own strategy is to keep my money in the CU's with the lowest Troubled Asset Ratio (as per the link I posted above). I focus on the CU's in the lowest 5% TAR.
Still, that's not a guarantee. But I think it's a very reasonable bet. Plus, I stay knowledgeable and flexible. I am quite willing to move on a moments notice.
I'll have to disagree with the true doomers who think nothing will survive. Things don't work that way, but I wouldn't spend time trying to convince a true doomer otherwise.
Use a credit union. Your only risk is that they get taken over, in which case you will need to find another credit union.
With the glut of info available on the net, I believe some answers are pretty obvious, but you could hire a financial advisor.
jeffgroove102
"With the glut of info available on the net, I believe some answers are pretty obvious, but you could hire a financial advisor."
Like Madoff?
Or this guy
Celebrity Financial Advisor Kenneth Starr Arrested for Ponzi SchemeHappens in Canada too
MONTREAL — Financial advisor Carole Morinville, who has worked for a number of Quebec entertainers, has been arrested as part of a joint Surete du Quebec / Quebec Financial Authority (AMF) investigation
if i suggested silver would you think less of me?
blindman
"if i suggested silver would you think less of me?"
Yes. But if you had suggested land I would smile at your brilliant insight.
g,
i had a thought concerning this . it went like this ....
in the field of valuation and speculation and crime, our
current human map of the universe, players are playing.
they played and play using the basic elements of ideas
and consensus, confidence and valuations. anyway...
"we" have arrived at the point in the manipulated game where
a temporary capacitor or store of energy is desperately needed.
some place to store untold values, the likes of which man has
never needed to store. in fact, the need is so great and the values
so great that no one wants to be too close to it or have to store
too much of it for fear of being boiled alive by the proximity.
like a symbolic sacrificial anode for the value of all the bogus
and fraudulent debt. and much of this debt is currently associated
with .... real estate and by association land!.
so land is the final resting place for investment or this building up
charge but first the debt or it's inverse will be stored somewhere
else.. and temporarily. as to make the securing of the property
legal, systemically coherent, profitable and viable ?
that temporary storage place of the value deflating from bad debt
and shitty fiat pricing is ......
precious metals.
and with the insane run up in those asset pricing the players will
satisfy the insane fiat bad debts of bubble ville.
.
there, a narrative with some physics, economics, and fantasy with
just a little reality to make it almost believable.
recently the definition of money was stated.....
money = an idea backed by confidence.
http://maxkeiser.com/2010/12/19/money-an-idea-backed-by-confidence/
.
land is it but, as has been said there is then taxes! or serious political
reform or some use of the land to serve the infinitely hungry and
politically diseased fiat beast.
that is where the metals come in. imo
http://www.marketoracle.co.uk/Article25035.html
Land=bled dry by realestate taxes.
Gold / silver in your possesion > than land in preserving wealth / purchasing power (not that god-damned growth or return on investment, just MAINTAING wealth).
In my terribly bloated opinion of myself, of course!
land can be taxed, and taxed, and taxed...
Yes. That is one of the main problems with land. You never really own it. Just don't pay your taxes and see how long you keep it.
Eternal Student-
Thanks for the link.
TA Ratio vs. National average.