CUs Continue Quest to Be Included in TARP and Toxic Asset Program
The Treasury Department has said it plans to issue a term sheet allowing mutual banks and savings associations to participate in TARP. Although there are some similarities between the structure of those institutions and credit unions, CUNA General Counsel Eric Richard said there are rules that could prevent credit unions from participating.
"Under existing law and regulations, mutual savings banks have an ability to issue subordinated debt and count it as capital, which credit unions can't. Under TARP, the Treasury Department wants an ownership interest which they can't get with a credit union because of their structure."
Under the Troubled Asset Relief Program, the government buys stakes in financial institutions. The Public-Private Investment Program is aimed at buying illiquid assets; private investors and the government would work together to buy bad assets to help financial institutions get back on their feet. The government would offer initially offer $500 billion in loans but eventually might offer up to $1 trillion.
The delay in a decision is the result of the absence of senior personnel in the Treasury Department and the Obama administration's focus on the other parts of the economic recovery, according to lobbyists for CUNA and NAFCU.
NCUA Director of Public and Congressional Affairs John McKechnie said his agency has had "continuing dialogue" with officials of the Treasury Department. but he declined to characterize the nature or tone of the discussions.
NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt said NAFCU is still in the "talking phase."