NCUA: “The Empirical’s New Clothes”
Derivatives: Part II – Increasing Risks To The NCUSIF
Well, according to the NCUA Board Action Bulletin dated May 16, 2013, the NCUA Board wasalmost breathless with excitement in its unanimous approval (… in this case a “democracy of two”) of a derivatives proposal which appears to substantially increase the financial risks to the National Credit Union Share Insurance Fund (NCUSIF).
You should recall, although the NCUA continually forgets, that the NCUSIF belongs to credit unions and is funded by credit unions. That’s why its called the National Credit UnionShare Insurance Fund, not Pooh Bear’s “Honey Pot”.
The new risks added to your credit union come as a result of the Board’s decision to permit large credit unions to trade in derivatives – a reversal of the current, long-held prohibition. What does permitting such an increase in the overall risks to the NCUSIF mean? It simply means that as the principal funder of the deposit insurance pool your risks and those of your members have just increased, also.
How so?….
