The comments from Amherst Securities and other securities dealers (in the article titled "Analysts See Fallout On Image, Systemic Risk," March 30, CU Journal) are self serving. The credit union system had far more investment problems when investments were handled by each credit union. Let's wait and see what the actual losses are at Wescorp and US Central. The write downs are based on undocumented impairments. We don't have audited financial statements from either Wescorp or US Central. We don't have Supervisory Committees or an independent Board of Directors. We have not had an annual meeting at which members can ask questions. All we have is the regulator's statement of impairment. We have been told we won't see the analysis that supports the estimate of impairment. I have no doubt there is an impairment. None of us book our allowance without seeing the allowance. Yet we we are booking a huge write down without any documentation at all. How is that GAAP? How is it reasonable to judge the corporate system without documentation? As a former CPA I say-show me the evidence.
And speaking of evidence, we may want more of it before we determine the future of the corporate CU system.
I share Navy FCU's concern about the cost of the corporate credit union impact on the share insurance fund and the cost of writing off coporate capital shares. I would encourage Navy FCU to set aside any judgment at this time. Lets have a trial before we have an execution.
I ask that Navy FCU join other credit unions and ask NCUA to make available the analysis and support for the losses they have estimated at corporate credit unions. The cost to credit unions is based (almost entirely) on estimates of future losses. I have no doubt that losses will occur. The question is how much are the losses? And lets follow GAAP and have the loss estimates substantiated by audited financial statements. We don't have those yet. We have no substantiation of any of the losses.
I remind Cutler Dawson that credit unions have also had disasters managing their own investments. Penn Square Bank was one such instance. The investment in GNMA bonds was another. Credit union investments were far safer and better handled in my corporate, Wescorp, than at most natural person credit unions. Navy will pay share insurance losses if natural person credit unions make bad investments. Look at all the brokers comments on the corporate system. They are all ready to end the system too. Because they know the gravy train will begin again for them. I also remind Cutler Dawson that NCUA handled the CapCorp problem badly. I remind him that NCUA actively supervised both WesCorp and US Central. Let's ask NCUA to show us the examination reports for 2006 and 2007 and show us where they foresaw the dangers and risks that lead to the current crisis. Which regulator of all the regulators saw this crisis coming?
My credit union has lost $23.5 million in capital in this crisis. If the corporate credit unions made mistakes and are a bad idea, I'll be the first to join Cutler at the execution. But lets have the facts first. Lets have a careful examination before we end the corporate system.
Henry Wirz, CEO
SAFE CU, North Highlands, Calif.