On-Site Coverage: Cram-Down Could Be Combined With Deposit Insurance Hike
WASHINGTON - Congress may make credit unions swallow some bitter medicine to go along with the sugar.
The House of Representatives has scheduled a vote on Thursday on a measure to keep the level that deposits are insured at $250,000 but would also allow judges to rewrite the terms of mortgages during bankruptcy proceedings.
CUNA and NAFCU both oppose this so-called "cram-down" provision and said inclusion of the share insurance provision and other measures that benefit credit unions don't negate the adverse effects of cram-down.
"They shouldn't combine the two because the share insurance and related provisions are not controversial but the cram-down provision is problematic," CUNA Vice President of Legislative Affairs Ryan Donovan said today in an interview at CUNA's Governmental Affairs Conference.
In addition to the insurance provision-which makes permanent a provision passed by Congress last year that is set to expire in December--the bill gives the NCUSIF eight years to restore itself to the proper equity ratio if it falls below the congressionally mandated level of between 1.2% and 1.5%. It also increases NCUSIF's borrowing authority from $500 million to $6 billion.
Donovan said they will urge that the measure be defeated because "the good parts don't negate the parts that are troubling."
He said while the measure is expected to pass the House there is more concern in the Senate about the cram-down provision and there are likely to be changes there.