"The Credit Union Stabilization Fund is a promising legislative proposal to recapitalize the deposit insurance fund for credit unions in a reasonable way that addresses regulatory concerns, accounting rules and the long-term interests of average credit unions. I am committed to leading the effort in the Congress to move this legislation forward and to fix this problem,'' said Rep. Paul Kanjorski (D-Pa.), the No. 2 member of the House Financial Services Committee.
Staff members on the Senate Banking Committee and House Financial Services Committee said they are interested in helping credit unions deal with the added expenses incurred by the NCUA's decision to place U.S. Central and WesCorp into conservatorship, though no timetable has been decided on.
The NCUA wants Congress to create a stabilization fund financed by a larger line of credit from the Treasury Department so credit unions can spread out the premiums to cover the cost of the losses resulting from the conservatorship of U.S. Central and Wescorp.
The agency currently has $100 million in borrowing authority and the full House and Senate Banking Committee have approved an amendment increasing that to $6 billion. The fund would supplement the NCUSIF. The NCUA is asking for seven years to pay back the Treasury Department; natural person credit unions would pay the additional premium to the NCUSIF over that time period.
The NCUSIF must be replenished if its equity ratio falls below 1.20%. It was 1.28% at the end of February.
The NCUA wants to create a separate entity for the Treasury funds because, if the NCUSIF borrowed the money directly, the loan would become a liability on the books of all federally insured credit unions.
To ease the burden on credit unions, the agency was scheduled to announce that it won't "take exception" if a credit union gets a written opinion from its accountant allowing it to delay the recording of expenses for additional premiums.
In an Accounting Bulletin release at press time, the agency advised credit unions to expense premiums when they are assessed but gives them additional leeway if their accountant provides advice that is GAAP-compliant.
The increased funds that the premium will generate are necessary because, when NCUA took over U.S. Central and WesCorp, it revised the costs of the corporate credit unions' problems to the NCUSIF upward to $5.9 billion from the original estimate of $4.7 billion.
Lobbyists for CUNA and NAFCU say they like the NCUA's proposal but wish the agency asked for more money in case the final amount of the loss to the NCUSIF is higher than the agency's estimate. They would also like the measure to allow payments to be spread out over eight years.
NCUA Director of Public and Congressional Affairs John McKechnie said they have no plans to revise the proposal at this time, and "we look forward to working with members and staff to move the proposal through. We are pleased with the initial response."
CUNA and NAFCU continue to have questions about how the NCUA reached its decision to place U.S. Central and WesCorp into conservatorship. Both have filed requests under the Freedom of Information Act to learn about the results from and methodology of the report by PIMCO on the corporates' investments that the agency used as part of the basis for its decision.
"We want more information. It will explain the decision more clearly," said NAFCU President/CEO Fred Becker.
But McKechnie said the agency won't release additional information because the results and methodology are confidential.
Both associations decided not to file suit challenging the NCUA's decision, but didn't rule out additional legal actions in the future.
"You don't want to sue your regulator. We hope things can be worked out cordially," said CUNA General Counsel Eric Richard.