The nation’s regulator of credit unions is going after banks it claims misled the member-owned financial institutions — some of which failed — in the years leading up to the recession.
“We feel that the decisions they made (the banks) and the actions that they took in 2008 — and before — caused enormous losses to the credit union industry and they should be responsible for compensating the industry for those losses,” said Debbie Matz, chairwoman of the federal National Credit Union Administration, during a trip to Denver on Tuesday.
NCUA is the equivalent of the bank regulating Federal Deposit Insurance Corp. for credit unions.
“We don’t believe the losses were accidental. They were premeditated actions they (the banks) took and they should be held accountable because all credit unions have to pay because of the cooperative nature of the credit union system,” Matz said.
Matz said credit unions were “misled by the banks on the quality of the securities the credit unions purchased. They thought they were buying Triple AAA securities but in fact the composition of the securities was subprime,” she said.
That elicited a fiery response from Don Childears, president and chief executive of the Colorado Bankers Association.
“Where was the due diligence?” by the credit unions, Childears said. “These are basically securities and come with buyer beware. You really have to know what you are doing. I’m shocked that they’d admit they didn’t know what they were doing and now it is somebody else’s fault.”
A number of banks have settled with NCUA without admitting fault — all in connection with the failure of five wholesale credit unions. HSBC paid $5.25 million; Citigroup, $20.5 million; and Deutsche Bank Securities, $145 million.
The impact on the nation’s 7,000 credit unions has been painful, Matz said. Since 2009, NCUA has assessed credit unions $3.3 billion to pay for the losses associated with the credit union failures, and more assessments are coming.
NCUA has sued Wachovia, J.P. Morgan Securities, RBS Securities and Goldman Sachs.
There were 28 credit union failures each year in 2009 and 2010, followed by 16 last year, and 13 so far this year.
Despite all this, Matz said the credit union industry “as a whole is recovering quite well.”
Since 2008, there has been a surge in credit union membership. In Colorado, for instance, there were 1.45 million credit union members as of the first quarter of 2012, and membership was up 1.5 percent over the past four quarters.
Total lending by credit unions in Colorado was $9.3 billion in the first quarter of 2012, up 1.2 percent over the year.
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or
