The proposal we consider today represents the culmination of an enormous amount of work by a large number of people, several of whom are sitting across from me and behind me today. I would be remiss, however, if I did not also thank the previous leadership of NCUA, especially former Chairmen Debbie Matz and Michael Fryzel, former Board Member Gigi Hyland, and staff too numerous to mention whose work in creating the Temporary Corporate Credit Union Stabilization Fund and the NCUA Guaranteed Notes program not only saved the credit union system and the Share Insurance Fund, but also made it possible for us to return most of the special assessments paid by federally insured credit unions during the crisis. They have spun straw into gold for credit union members across the United States.
As Larry, Rendell, Ralph and others have enumerated, we currently project that over the next several years that we will be able to return between $2.6 and $3 billion dollars in dividends and avoided assessments to credit unions and their members. We also project when the legacy estates of the closed corporate credit unions are closed-out, their shareholders will receive an additional $1.1 to $1.9 billion in depleted capital.
This means we project returning between 54 and 63 percent of the special assessments and between 20 and 34 percent of the depleted capital to credit unions and their members. The amount of depleted capital returned will vary, based on the quality of the legacy assets in each corporate estate.
This is an amazing recovery. At the time the Stabilization Fund and the NGN program were established, virtually no one predicted any recovery. And many projected that additional special assessments would be required.
As popular as it is to bash lawyers these days, we also have to thank both our General Counsel’s Office and our outside counsel that took these cases on a contingency basis—fronting all the expenses themselves—without any guarantee of success. If they had not accepted these cases on a contingency basis, we would have had to impose even larger special assessments on credit unions at a time when they could least afford them in order to file the lawsuits. These successful lawsuits have netted us approximately $4.3 billion. It is safe to say that without them we might not be returning even a dime to credit unions and their members—not today or in 2021.
I want to emphasize several points in the staff presentation and then ask them a few questions:
- The special assessments were essential to the success of this program. Without these assessments, the capital from the failed corporate credit unions and the line of credit from the Treasury, the entire system could have collapsed.
- Without the special assessments, we would have had to sell the legacy assets at fire-sale prices and there would likely be no recovery for credit unions and their members.
- The law did not permit us to return any funds to credit unions until our borrowings from the Treasury were paid off. Fortunately, they are fully repaid now.
- While the Stabilization Fund’s net position at this point in time is $1.6 billion, only about $700 million of that is in cash. The remainder is in receivables. So, unless credit unions want legacy assets, they have to wait until we have actual cash to get their full return. That’s why we are proposing a first installment in 2018. We also have to ensure that we have enough cash to meet our NGN obligations, which are in the billions of dollars, between now and 2021.
- While we want to hear your comments on this proposal, time is of the essence if credit unions want to receive a dividend in 2018. We need to merge the funds by September 30 if we want to be able to declare a dividend at the end of the year that’s payable in 2018.
By all means give us your comments. We will consider them seriously. But do not wait until the last day—September 5—to submit your comments. Submit your comments as quickly as possible. If we do not have time to fully consider and respond to the comments between September 5 and September 30, merger of the funds could be delayed and credit unions may have to wait until 2019 before receiving a dividend.
If you support a merger of the two funds or if you have alternatives you want us to consider, say so quickly so we can act quickly. Staff has a tremendous amount of work to do to merge the funds in time to pay a dividend in 2018. If you want it to happen, we need your prompt support.
In conclusion, I commend staff for putting this proposal together so quickly. I support it and I hope stakeholders will comment promptly so we can complete our work in time to pay a dividend in 2018.