NCUA: “The Empirical’s New Clothes”… Derivatives
Part I – Ignoring A Scandal
by Jim Blaine
A reasonable person can – and should – have several concerns about the latest round of proposed rule-making on derivatives from the NCUA. But, three concerns should cause great alarm for all federally-insured credit unions:
1) NCUA’s “explanation and reasoning” as to the need for derivatives is facile, light-weight, and does not holdup to even the most superficial scrutiny or analysis – which will probably cause you and your members a financial loss in the future;
2) NCUA, in promoting the use of derivatives, appears to be defaulting on its fiduciary duty as the administrator of the NCUSIF – which will probably cause you and your members a financial loss in the future; and
3) Your “trade association”, which ever one that might be, will, if recent history is instructive, once again fail the “backbone test” when asked to honestly and openly discuss and advocate on the derivatives issue – which will probably cause you and your members a financial loss in the future.
As we all eagerly await the actual publication of the proposed rule, it’s hard to know where to wade in (just way too many “opportunities”!), but…
One place to start is to glance back at “the history” of NCUA’s past stance on derivatives in general and the history of this rule in particular…
