Thursday, February 1, 2024

That SECU $5 Billion Bank Term Funding Loan: Bellying Up To The Public Trough - Whole Hawg? ... amid the snarl of comments, a couple of questions about that $5 billion SECU has borrowed from the Federal Reserve.

✅ "Can you clarify the borrowing over 4th quarter 2023? Was the $5b different than previous months? Has SECU borrowed like that in years past? Basically is my paycheck backed by loan proceeds? Thank you for explaining to a non accountant employee. "

"Other than trying to make the numbers look better, what would be the other reason they would take those loans from the Fed? I’m trying to play devils advocate and figure out the “excuse”. "

What Is the Bank Term Funding Program? (from Investopedia)

"The Bank Term Funding Program (BTFP) is an emergency lending program created by the Federal Reserve  in March 2023 to provide emergency liquidity to U.S. depository institutions. It was established in response to the sudden bank failures of Signature Bank and Silicon Valley Bank which were the largest such collapses since the 2008 financial crisis. [link to Fed for program details]" The BTFP was intended to help banks and credit unions which got into trouble due to rising interest rates - nothing wrong with trying to help out, to avoid a costly, potential bailout.

Think most of you know that deposits in banks and credit unions are generally insured up to $250,000 by the Federal government via the Federal Reserve, the FDIC, and NCUA (which is exclusively for credit unions). The standing, not-so-funny joke is that banks are insured - and periodically owned - by the Federal government (you and me.) The reason for bank failures is always greed, mismanagement, and greed - and also greed. The last major banking collapse was in 2008, but the Federal Reserve became concerned once again in March, 2023 and launched the BTFP, just in case.

The Fed set the emergency program up so that financial institutions could borrow at highly favorable, below market rates. Some institutions, like SECU, found that they could borrow at those low emergency rates and then turn right around and reinvest the unneeded loan at higher rates - profiteering off the Federal Reserve! Kinda warms your heart and makes you proud to be an American and an SECU member, doesn't it. 

The WSJ noted: "The Fed Launched a Bank Rescue Program Last Year. Now, Banks [and SECU] Are Gaming It

The generous terms helped drive use of the program, as usage ground steadily higher despite no real signs of market distress. Loans outstanding as of Jan. 17 stood at $161.5 billion, according to Fed data. Steven Kelly, associate director of research at the Yale School of Management's Program on Financial Stability said, he was certain the Federal Reserve "was not happy" with  the usage of the BTFP

There are very few " Thou Shall Not Commandments" in finance, but there is one for sure

"Don't Fight The Fed"... or do anything to make them "not happy"!

As with risk-based lending,  SECU is just "profiteering" by taking advantage of some folks


  1. If you want to check out something that will scare the bejesus out of you take a look at credit union guru Chip Filson’s blog ( to see how some credit union boards with the help of NCUA (the federal regulator!) have made members an afterthought (or no thought) and have changed their by-laws to retain power and make it impossible to be challenged.

    Much interesting to read but specifically “NCUA Suppression of Member Board Participation”. Scary stuff. I have little faith that SECU’s Legacy 8 will not do everything conceivable to keep their seats.

    “We know that no one ever seizes power with the intention of relinquishing it.” from 1984 by George Orwell

    Not sure who would be approving those by-law requests, both NCUA and the state, since SECU is dual chartered? Just the state? We already know that the NC Administrator, Kristina Ray is a “captured regulator” so little hope that she would do anything to stop the steal.

    Get ready for next October, looks to be a “take no prisoners” battle for the soul of the credit union.

  2. DATELINE - Get 'Em While You Can!

    BTFP lending program ending 3/11/24 and as of 1/24/24 rates adjusted up to more accurately reflect the current rate environment.

    Wonder when the payments are due on SECU's $5 billion? I'm sure smart minds are already working on the next way to juice the balance sheet because, well...dadgummit we've got highly overpaid executives to pay!

  3. Thank you for that explanation. Unbelievable.

    1. Should add that loans from the Fed through the BTF Program must be repaid within 1 year; so you can be certain that SECU assets will decline by $5 billion more before the end of this year
      (2024) when the loan must be repaid!

      That's why you must adjust those Legacy Board performance ratios [see prior 1/31/2024 post] by - $5 billion to get an accurate picture of SECU's expenses, (no) growth, and capital position.

    2. Guess you should also know this.

      When you're dealing with large sums of money - like $5 billion; things add up quickly! Not sure what rate SECU borrowed at, nor the rate at which they reinvested the money, but lets say they borrowed at @ 4.5% and immediately reinvested at 5%...earning a net "spread" of @ 1/2%. Do you know how much that 1/2% is?

      If you'l do the math, you'll find that SECU just picked the pocket of the Fed for @ $25 million over 1 year.

      If that were done to you would you be "not happy"?

    3. And lastly, remember you can only pick the pocket of the Fed one time...the Fed has cancelled the program.

      So SECU's "profits" this year (2024) will be overstated by this little +$25 million sleight of hand. Probably should be classified as Unearned income" at the Fed's expense.

      As they say, "when anything goes, everything goes" ...including your reputation.

  4. Ah, one of those Just cause you can, Don't mean you should choices. But those type choices is what Ayers and Board, Hayes and Brady have done best for SECU since 09/2021. Their new direction has led to chaos and losses.

  5. Kind of like taking pennies from the “need a penny” tray at the checkout when you just don’t want to break a bill (times 2,500,000,000). You can, but should you?

  6. It's one thing to squander SECU's reputation, but making the Fed look foolish is "________" (will let you fill in the blank)!