NCUA Board Member Todd M. Harper Statement on NCUA Guaranteed Notes Distributions

As Prepared for Delivery on June 25, 2020

Mr. Chairman, thank you for scheduling this briefing, as I requested, on the NCUA Guaranteed Notes program and the status of the failed corporate credit union asset management estates.

While we regularly update the agency’s webpages with information about these estates and the performance of the NCUA Guaranteed Notes, it is good from time to time to have a public discussion about these matters. Transparency is a principle of good government, and I am pleased that we are providing such transparency today.

And, Keith, Eugene and Anthony, thank you for today’s presentation and for your long-standing and ongoing work related to resolving the corporate credit unions that failed during the Great Recession. You and your teams have much for which to be proud. Please let everyone on your teams know that I am very appreciative of their hard work.

It has taken us more than a decade to get to today’s announcement about beginning to make distributions to the capital account holders at one of the failed corporate credit union asset management estates.

It’s often said that success has many parents, but failure is an orphan. That is very true. Here at the NCUA, the success in minimizing the costs and maximizing the proceeds of the corporate resolution can be attributed to the actions of many.

I’d like to highlight a few of those individuals today.

I remember very well when I worked on Capitol Hill when our now Executive Director Larry Fazio first briefed me on the need to create the Temporary Corporate Credit Union Stabilization Fund. I also remember when then-Chairman Fryzel testified before the House Financial Services Committee on the issue.

Under Chairman Fryzel’s initial direction and then the subsequent leadership of Chairmen Matz, Metsger, and McWatters, the agency worked diligently to implement and refine its corporate resolution strategy.

Former Executive Director Mark Treichel, who is retiring at the end of the month, also led efforts to conserve the two largest corporate credit unions and later guided the sale and securitization of $28 billion in NCUA Guaranteed Notes.

The NCUA Guaranteed Notes have been essential to the successful least-cost resolution of the corporate credit union crisis. The decision to pursue litigation against the Wall Street firms that sold faulty mortgage-backed securities is also a key reason why we are now able to make this initial distribution and why we might be able to make additional distributions in the future.

As both the conservator and liquidating agent for each of the five failed corporate credit unions, the NCUA Board has a fiduciary responsibility to collect debts and obligations owed the corporate credit unions. That duty includes using reasonably available legal means to seek recoveries from parties that contributed to the corporate credit union losses. Initially, many said that lawsuits would be a fruitless path to follow because the Wall Street securities firms had never lost a case.

Nevertheless, with the help of outside counsel, the NCUA became the first federal financial institutions regulator to sue and recover losses from investments in these securities on behalf of the five failed financial institutions. To date, as liquidating agent, the NCUA Board has filed more than two dozen complaints in federal courts in New York, Kansas, and California against more than 30 defendants. In all, the NCUA has recovered more than $5.1 billion from Wall Street firms. The agency has used the net proceeds from these recoveries to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.

As we work to wind down the remaining NCUA Guaranteed Notes and wrap up the outstanding lawsuits, we must continue to minimize costs and maximize returns. Doing so will allow us to return more money to federally insured credit unions holding capital notes in the asset management estates of the failed corporate credit unions. In turn, those credit unions can use those net proceeds to make needed loans to their members, including the millions of credit union members who have experienced declines in income and economic hardship because of the coronavirus pandemic.