Thursday, February 15, 2024

SECU Making The News -Telling the Truth? ... about that little $5 billion loan.

😎 Sorry, need to flog this dead horse one last time! [link to prior post]

As the article in BusinessNC explains [see here], the Federal Reserve created the Bank Term Lending Program in March, 2023 to provide short-term "liquidity" to financial institutions which were experiencing large withdrawals of deposits by their customers (called a "run") given the collapse of several large banks.  

The purpose of the program was to support "liquidity", not "profiteering" by banks and credit unions.  What does "liquidity" mean? What's the difference between "liquidity" and "profiteering"? Why do you suspect SECU was "profiteering"?   

In this case, a simple definition of "liquidity" means the ability of a financial institution to meet a withdrawal request. You go to a teller or an ATM and ask to withdraw $100, you expect to get it, no delay, no rigamarole.  That's called liquidity! If the teller says, sorry you'll have to wait a few days that's called "illiquidity"!  And, if told that by a teller; you, of course, change your request to "on second thought give me all my money - that's called "a run"!  The BTLP was intended to be sort of "a payday loan for the banks" (that's kinda ironic isn't it). Got it?

🐄 SECU started milking the Fed BTLP in August, 2023 for @ $1.5 billion. So, did SECU experience a member "deposit run" during the summer of 2023? Total deposits reported to the federal government at 6/30 were $45.3 billion, then total deposits by month...

August 31, 2023:  $ 45.0 billion ... borrowed $1.5 billion from Fed.

Sept. 30, 2023:     $ 44.9 billion

Oct. 31, 2023:      $ 44.7 billion

Nov. 30, 2023:     $ 45.0 billion

Dec. 31, 2023:     $ 44.9 billion  ... Fed borrowing increased to $5 billion.

Looks like deposits only changed by @ $100 million, not $ 5 billion. 

So, it doesn't appear that SECU experienced a "run" on member deposits, does it? Normal seasonal member X-mas shopping is probably a better explanation.

But, how do you know it was "profiteering"? Well, it might be risky, but I take SECU at its word. Here's the direct quote from SECU in Mr. Mildenberg's article. It's that very last line [here check it out]: 

"SECU says the Fed program enabled “additional income with which we can further benefit our members.” 

... Your honor, the defense rests.  BTW, most  SECU savings members haven't noticed any "further benefit" yet.

SECU Making The News - In Whose Best "Interest"? ...  about that little $5 billion loan.

😎 SECU in the News! BusinessNC editor, David Mildenburg, again spotlights SECU's federal trough - all you can eat - "buffeteering" [link to story here]

One last note on: The Bank Term Funding Program (BTFP), opens new tab

March 13, 2023 (Reuters) - The Federal Reserve on Sunday unveiled a new program to ensure banks can meet the needs of all their depositors amid escalating chances of bank runs following the abrupt collapse of two major banks in the space of 72 hours.
The loan commitments made by the Fed's 12 regional banks will be backstopped with $25 billion from the U.S. Treasury's Exchange Stabilization Fund. 

😎 Did the SECU Board really need to take a $5 billion handout from the Feds?
 , opens 


Historically, handling the "Cash" needs at SECU (for branches, ATMs, day-to-day transactions) is a pretty predictable business - much like your personal checking account. You're rich on payday, then start sinking back toward reality as the month advances and the bills come in. Next payday, you start the same cycle all over again! Same with SECU; the "flow" of funds is well understood, predictable, manageable.

According to the 12/31/2023 SECU financials (above), the Cash on Hand at 12/31/2023 was $458 million, about the same as the prior year end 2022 ($461m). And if you must know, $434m at 12/31/2021. 

The size of the credit union hasn't changed; so if, $5.3 billion in "Total Cash Reserves" (see above) was sufficient in December, 2022, why does SECU need $7.6 billion this year? Why is that additional loan interest cost being paid on the $5 billion Fed loan - rather than to members? Not to mention that at 12/31/2023, SECU was sitting on $12 billion in government securities which can easily and immediately be "cashed in" if funds are needed.

Is the SECU $5 billion loan "typical" for large credit unions?   

✅ All U.S. Credit Unions - $25+ billion in assets at 12/31/2023:

1) NavyFed (Va) ( Charter#: 5536)   Fed line of credit:  $32 billion   Amt. borrowed: $0

2) SECU (NC) (Charter#: 66310)     Fed line of credit: $6 billion   Amt. borrowed: $5 billion

3) PenFed (Va) (Charter#: 227)      Fed line of credit: $3.5 billion    Amt. borrowed: $0

4) BECU (Boeing) (WA) (Charter#: 62604) Fed line of credit: $728 million   Amt. borrowed: $0

5) SchoolsFirst (Ca) (Charter#: 24212)  Fed line of credit: $3 billion  Amt. borrowed:  $0

😎 If, as SECU claimed, "we needed the money".... then Whassup?**

** The cost of borrowing $5 billion for one year at @ 4.50% is $225 million!


... Sure it isn't a little game of "fleece and 'flate"? As in "Fed and assets"