August 08, 2017

McWatters to Wagner: ICBA has it wrong on those legal fees

NCUA Chairman J. Mark McWatters wrote a key lawmaker Tuesday to correct a banking trade's mischaracterization of the $1.1 billion in legal fees the agency has paid in connection with its more than $5 billion in recoveries from banking institutions for losses to corporate credit unions.

The Independent Community Bankers of America has asserted that these fees came from taxpayer dollars. Like NAFCU President and CEO Dan Berger noted in his own letter Friday, McWatters told House Financial Institutions Subcommittee on Oversight Chairman Ann Wagner, R-Mo., that the ICBA is incorrect in its assertion.

McWatters noted that he regards the fees as excessive but made clear they did not affect taxpayers. Instead, they were paid out of the proceeds of the settlements the NCUA reached with firms that sold faulty mortgage securities to several now-defunct corporate credit unions.

"While the fees paid under these contracts may be subject to debate, their source is not," McWatters wrote. "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."

McWatters noted that neither he nor Board Member Rick Metsger were involved in vetting counsel or negotiating the legal services contracts. Efforts to renegotiate so far have been unsuccessful, but they are ongoing. Still, the lawsuits by the NCUA, the first federal financial institution regulator to pursue this type of litigation, have been "very successful," he noted.

"In addition to helping mitigate further assessments on credit unions, these legal recoveries contributed to the Board's action in July to propose closing the [Temporary Corporate Credit Union] Stabilization Fund in 2017," McWatters wrote. "Closing the Stabilization Fund this year could result in a distribution made to insured credit unions in 2018 projected to range from $600 to $800 million."

NAFCU has continually encouraged the NCUA to do all it can to mitigate the cost to credit unions of the stabilization effort. To date, credit unions have paid $4.8 billion in stabilization assessments. The association is urging NCUA to pay a maximum rebate to credit unions as soon as is practicable.

NCUA will discuss the proposed stabilization fund closure in a free webinar today that NAFCU will monitor. NAFCU is encouraging credit unions to send the agency their views on the proposal, which would merge the TCCUSF into the National Credit Union Share Insurance Fund.