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Update on ASI, Velocity Credit Union and Private Deposit Insurance


In September I posted on a Texas Credit Union, Velocity, which was trying to convert its NCUA federal deposit insurance to private insurance provided by American Share Insurance (ASI). Before the credit union can make this change, they must allow its members to vote on it. One of the reasons Velocity gave for this switch was the premium that NCUA was charging all credit unions to bail out the corporate credit unions. That's no longer an advantage. This CUNA article just reported that ASI "will charge its client credit unions a special premium assessment of 15 basis points, citing some losses at a few member credit unions."

There's a lot of concern about ASI in Nevada which has several major credit unions that depend on ASI for its deposit insurance. One of these credit unions, Silver State Schools Credit Union, has been hit hard by the Nevada real estate bust. It's the largest credit union in Nevada. The Las Vegas Review-Journal has reported on several developments with Silver State Schools and ASI this month. The CEO of Silver State Schools resigned from his job in December. He then returned to his job in less than a week after his resignation was disclosed. On the issue of ASI, the chairwoman of the NCUA, Deborah Matz, said the following at a conference earlier this month:
"If ASI, if one of their large credit unions fails, and they don't have the capital to pay out, those (credit union) members will not have their funds protected," Matz said in response to a question at the Credit Union Executive Society meeting in Palm Desert, Calif., on Dec. 9. "They will lose all their funds."

As you might expect the ASI CEO is trying to downplay these concerns, and as reported by Credit Union Times, Silver State Schools CEO also spoke up on this issue, and claimed "that NCUA Chairman Deborah Matz was unduly engaging in "scare" maneuvers to get rid of private insurance."

I wonder how many Velocity Credit Union members were aware of these developments in Nevada. It's too late now. The members vote at Velocity Credit Union is over. I just called Velocity, and I was told by the CSR that the results won't be known until the end of January.

For more information on ASI and the process credit unions must go through to drop federal insurance, please refer to my ASI review in September.

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Anonymous   |     |   Comment #1
Banking Guy or Others,

I belong to the San Francisco Fire Credit Union, they have ASI insurance. My question is if the Nevada Silver State Credit Union, are the people in danger of losing deposits are the customers at Nevada Silver State, would other credit unions that have ASI insurance be in danger of losing their deposits, SF Fire is a pretty health credit union.

Thank you
Anonymous   |     |   Comment #2
If ASI goes under, any credit union which has only ASI insurance (for example, SF Fire) would become un-insured.

If a credit union is financially healthy, insurance doesn't really matter, since insurance only pays out if the credit union fails. However, if the credit union becomes uninsured, the perception of danger among the depositors could be such that the actual financial health of the credit union might not matter. If the depositors all got scared and started a "run" on the credit union, it might fail and there would be no one to cover the losses.

In my personal opinion there is no way I would have 5 cents of my own money in a credit union right now if it lacked federal insurance. When there are so many good, sound, AND federally insured credit unions around (e.g. Alliant, Northwest FCU, Pentagon Federal, Patelco) that are open to basically anyone, why risk it?
Anonymous   |     |   Comment #3
I'm aware of what's happening at Velocity due to your posts (thanks). I voted against the change and I've spread the word.

I'm hoping they don't switch because I like them.
Michael Burek
Michael Burek   |     |   Comment #4
I have an account at Velocity CU. Because of your postings about it earlier in the year, I knew what ASI was and was able to vote against it based on some knowledge.

While ASI may have a price advantage and they get to be more selective about their clients, their whole purpose in being is that banks fail.

Velocity CU is the only lending institution that I've seen advertise for loans to get plastic/elective surgery, take a vacation, or do home remodeling. I don't know how to read anything into this, if it actually means something.

There is no need to make a run on the bank for my $50 if they switch to ASI. A bank failure in my area, even without my money, is still not a good thing. If I ever come into the money, there are many NCUA places to put tens of thousands of dollars.
Anonymous   |     |   Comment #5
I have no concerns about ASI since its credit unions are historically more healthy than the others. Yes, they have been through tough times and have always emerged strong. This too shall pass. Most Americans are fed up with federal bailouts and relying on Washington to rescue us. They will not write me a check if my spouse dies -- my private life insurer will!
Anonymous   |     |   Comment #6
As the CEO of SF Fire Credit Union I thought I would weigh in on this dicussion.

If Silver State CU fails (which is highly unlikely at this time) all of their depositors will be paid and it has no impact on depositors of other privately insured credit unions.

Secondly, if American Share Insurance should cease to exist the National Credit Union Association would be required to take the 162+ credit unions into the Federal insurance program.

I think all depositors need to understand the health of the institution they do business with it isn't insurance that poses the risk but the business practices of bank/credit union.

In the 100 year history no credit union member has lost a dime nor received federal funds to bail them out It wasn't until the 70's when we actually became insured - credit unions didn't cause this problem and we continue to do what we have always done....serve our members best interest.

Thank you for the opportunity to chime in on this interesting and important discussion.

Diana Dykstra
Anonymous   |     |   Comment #7
I just cashed out of Velocity. When an ASI rep has a table setup at each branch to encourge voting and tellers are telling the sheep to "take one of those, check the top box, then drop it off in that box over there" that tells me alot. ASI reps are quick to say the fed cant be trusted but unless ASI is paying out in gold then they are no better than the government with their cheap USD. The savings that Velocity may realize (until ASI increase their rates) in no way will benefit its members.

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