GAO Says Competitive Environment May Stress Corporate CUs
For the second time in 30 days the GAO issued an alarming report which will have a far reaching and chilling impact on credit union growth. The September 2004 report warned of the concentration of credit union investment dollars at corporate credit unions and NCUA’s lapses in oversight of these growing and increasingly complex institutions which hold some $55 billion of credit union deposits. A previous GAO report killed the prospects for secondary capital and raised doubts about the wisdom of PCA tinkering proposed by speculative credit union legislation.
The corporate credit union report is likely to cause a whiplash affect as NCUA tries to save face by reining in corporate credit unions. In addition to supervisory costs, corporates are likely to face adjustments which will further affect their usefulness as an asset management and earnings tool for credit unions.
Combined the GAO reports are causing larger credit unions to reevaluate their corporate credit union investments and to investigate the mutual savings bank option as a way to access capital and avoid public relations fallout related to the corporate credit union system and parallel weakening trends at the NCUSIF.