WCUSGA – credit union share insurance history – Part I

This headline isn’t guaranteed to get maximum clicks, but we spent all night last night recalling the sad history of WCUSGA (pronounced Washoogah). We decided that its destruction holds investing lessons for us today.

Washington Credit Union Share Guarantee Association was a private share (deposit) insurance program. “Share” is credit union lingo for what banks call “deposits.” As a private association, unlike the federally-insured shares (NCUSIF) or deposits (FDIC),  it received all the premiums paid by the member credit unions. This means the premiums essentially stayed with the credit unions, who were the members of the association.

In 1996, the state legislature decided to shut WCUSGA down. Here are some of the issues the member credit unions had to deal with:

Chapter 31.12A RCW (the Act) was amended in 1996 to provide for the phase out of WCUSGA coverage, by year-end 1998. Chapter 5, Laws of 1996. During Legislative discussions, it was apparent that legislators were concerned that WCUSGA credit unions might wait until later in the transition period to apply to convert [IFO’s clarification: the member credit unions strongly resisted this takeover].

The legislators believed that it is in the best interests of WCUSGA credit unions, and their members, for the credit unions to convert to NCUSIF early on in the period. Among other provisions in Chapter 5, WCUSGA credit unions were required to file an application for conversion by September 1 or December 1, 1996, depending on their CAMEL [IFO clarification: financial health] rating. In general, the 1996 amendments took effect on March 6, 1996.

IFO was covering Washington credit unions at the time and went to WCUSGA offices to get a comment from the association president. She had no idea about the power grab, so didn’t understand the great emotional stress the CEO and board members were undergoing.

The CEO was making no sense – almost gibbering. His board members and loyal staff looked stunned. This was the first time IFO had ever seen raw government power applied against American citizens without ever firing a shot or even being noticed. A perfectly viable, valuable enterprise was killed.

We’ll continue this sad saga in our next post.

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About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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