National Credit Union Administration Chairman J. Mark McWatters is firing back at the Independent Community Bankers of America’s assertion that more than $1 billion in taxpayer funds were used for the regulator’s legal bills.
In a letter sent today to U.S. Rep. Ann Wagner (R-MO), a member of the House Financial Service Committee leading the charge looking into NCUA’s $1 billion legal bill over recoveries from the failed corporate credit unions, McWatters reminded Wagner (and ICBA president Camden R. Fine) that “No taxpayer funds were lost through the restructure of the corporate credit unions and no taxpayer money was spent on attorney’s fees, either directly or indirectly. Instead, the funds to pay the legal fees came from the approximately $5 billion in recoveries and were paid from the proceeds of each of the settlements.”
While the regulator did establish a $6 billion line of credit with the U.S. Department of the Treasury in order to help fund the Temporary Corporate Credit Union Stabilization Fun (along with $4.8 billion in assessments paid by credit unions), last fall NCUA completed its repayment to the Treasury with interest, resulting in no loss of taxpayer funds.
While the bulk of the letter was devoted to defending NCUA’s stewardship of member-owners’ and taxpayers’ monies, McWatters also used the missive as an opportunity to once again remind lawmakers the current NCUA board was not involved in setting up the agency’s legal arrangements.
“I have made it clear I regard the fees paid to outside counsel to be excessive, and NCUA has endeavored to re-negotiate those contracts,” wrote McWatters. “Neither my fellow NCUA board member Rick Metsger nor I were involved in either vetting outside counsel or negotiating the terms of the corporate-credit-union-related legal services agreements. The agency should continue its efforts to negotiate a fair and transparent modification of these legal services agreements, where outside counsel has received, to date, over $1.1 billion in fees. These fees are regrettably excessive, yet our good faith efforts to reach an equitable accord with the recipient law firms have not succeeded.”
As Credit Union Journal has reported, former NCUA Chairman Debbie Matz and board member Michael Fryzel, respectively, have defended their strategy for recovering the corporates’ losses, noting that NCUA had neither the staff or the financial resources to sue multiple Wall Street banks.
“Everybody would have been concerned if NCUA had said we need to hire a team of attorneys to file suit against these guys and we need to pay them $1,500 an hour,” Fryzel told CU Journal recently. “The credit union industry would’ve been very upset. So you do the next best thing: You take a gamble and say ‘How do you guys work for us? The more money that you get that goes back to the credit unions, as that money goes back to them now, you will earn such-and-such a percentage.”