WASHINGTON CUNA has asked NCUA to consider suspending its annual corporate bailout assessments next year as losses on the remnants of the five corporate failures continue to decline.
“Any more losses are likely to be quite small,” Bill Hampel, chief economist for CUNA said this morning.
NCUA data shows that the estates of the five corporate failures—U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU—have realized $6.5 billion of losses, far less than the $11 billion of credit union contributions to the bailout ($5.6 billion in capital, $4.8 billion of corporate assessments, $280 million of transfers form the National CU Share Insurance Fund).
With an improving economy, the remaining losses on the corporate estates could be minimal, according to Hampel. “NCUA could pause the assessment program and collect the rest down the road,” he said.
Hampel’s statements came after NCUA last week assessed its latest corporate charge, of 8 basis points, or $700.9 million. NCUA plans to use $650 million of the proceeds to pay down some of the $4.8 billion in low-interest loans it has outstanding with the U.S. Treasury to finance the corporate bailout.
CUNA’s optimism on future assessments is based on the fact that many of the losses NCUA projected on the failed corporates have yet to materialize, due in large part to the recovering economy. As of Dec. 31, the realized losses were $6.5 billion, a figure that is likely to be increased when the data for mid-year is available—but still far less than the $11 billion bill paid by credit unions so far, according to Hampel. “Credit unions have over-paid for the losses,” he stated.
NCUA, he noted, could rebate any overpayment it assesses credit unions, “but that would mess up credit unions income statements,” he said.
NCUA itself has estimated total losses for the corporate bailout to be as much as $16 billion, but recent statements by agency executives indicate they believe the actual losses will be far less now.