NCUA ghost of Christmas past: Taxi medallions
Last week’s release out of the NCUA that taxi medallion losses might result in a smaller corporate stabilization refund than anticipated was ironic, because it reminded me of the way the agency handled the corporate credit union meltdown.
You can’t help but wonder if this news was deliberately downplayed. It was released on a Friday in a speech by minority party board member Rick Metsger at a state regulator roundtable during the Holiday season. That’s a basic lesson in Government Publicity 101: deliver bad news when nobody is paying attention.
Taxi medallion loans failed because of market disruption. Nobody saw Uber, Lyft and other app-based ride services coming. Taxi medallion loans were mandated and regulated by city governments, which made them very attractive assets.
It’s hard to believe the NCUA’s claim that the MBL cap exception prevented the regulator from controlling taxi medallion concentration risk. Like mortgage securities, which at one time were described to me “as good as gold,” taxi medallion loans were a similarly favorable asset for credit unions and approved without objection by their examiners. The NCUA also has plenty of other tools at its disposal to control credit union balance sheet decisions. No one has ever accused the NCUA of being soft on examinations. Except, ironically, onsite at corporate credit unions during the years leading up to the corporate crisis.
In true Washington form, the NCUA threw taxi medallion lenders under the bus in Metsger’s speech, calling them gamblers that (in my words) pooped in the corporate refund punch bowl for everyone else, due to recent auctions that have lowered taxi medallion values.
Does that mean the NCUA is admitting it underestimated taxi medallion loans losses? Just two months ago, New York House Democrats accused the NCUA of driving down the values of taxi medallion loans by forcing borrowers to repay the loans in full and refusing to allow third party valuations or attempts to refinance.
That finger pointing came less than a month after the NCUA Board merged the corporate stabilization fund into the share insurance fund and raised the Normal Operating Level. The NOL increase was necessary, the board said at the time, to account for potential risks still remaining from corporate assets and the possibility of a recession. Nothing in NCUA releases following the merged funds vote mentioned taxi medallion losses.
Now, after several years of taxi medallion concern and two conservatorships, suddenly the $1 billion retained from the corporate windfall just a little more than two months ago may not be enough.
Only time will tell if credit unions receive the $600 million to $800 million offered by the NCUA to gain approval from the credit union community to merge the funds. Let’s hope the NCUA makes good on these visions of sugarplums dancing in credit unions’ heads, and they don’t turn into yet another regulatory nightmare.
