Lawmakers Are Still Discussing Next Step for Stabilization Plan
The House Subcommittee on Financial Institutions is scheduled to meet on Wednesday to discuss a measure introduced by Rep. Paul Kanjorski (D-Pa.) to create the Temporary Corporate Credit Union Stabilization Fund anda make some additional changes to the rules governing the NCUSIF.
On May 7, the Senate approved a broad housing bill that included provisions for the Stabilization Fund and increases in the NCUA's borrowing authority.
The House hearing will include testimony from regulators and credit unions. The regulators are scheduled to be represented by NCUA Chairman Michael E. Fryzel and NASCUS Chairman George Reynolds. Jim Bedinger, the chief operations officer of the Chicago Patrolmen's Federal Credit Union. is slated to testify on behalf of NAFCU. Bill Lavage, president/CEO of Service First Federal Credit Union of Danville, Pa., is scheduled to appear on behalf of CUNA.
The testimony will address Kanjorski's bill and the overall health of credit unions, according to several sources.
"The focus will be on the fund, but if Congress is holding a hearing, they may well ask questions about why the fund is necessary," said CUNA Vice President of Legislative Affairs Ryan Donovan.
Donovan, NAFCU Director of Legislative Affairs Brad Thaler and NCUA Director of Public and Congressional Affairs John McKechnie all said there is bipartisan support for the fund in the House, as there was in the Senate.
Under Kanjorski's bill, which contains identical language to the Senate-passed measure with regard to credit unions, the Stabilization Fund would be financed by a line of credit from the Treasury Department, would pay back the Treasury Department over seven years and natural person credit unions would pay the additional premium to the NCUSIF over that time period.
The measure also increases the NCUA's borrowing authority from the Treasury Department from $100 million to $6 billion and provides $30 billion of emergency borrowing authority through the end of the year. It also would allow the NCUA eight years to replenish the NCUSIF if its equity ratio falls below 1.2%.
"The swift enactment of my bipartisan legislation will allow credit union managers to focus on their most important mission-providing credit to their members-rather than worrying about how they will pay for an excessive one-time charge and paring back lending during these difficult economic times," Kanjorski said in a statement.
CUNA President/CEO Dan Mica praised the bill and said the provisions allowing the repayment to be spread out over eight years "will give all federally insured credit unions more resources in hand to lend back into their communities and help foster economic growth."
NAFCU President/CEO Fred Becker said the bill "represents a major accomplishment for consumers and credit unions alike, ensuring the continued viability and stability of credit unions, which represent a critical lifeline of financial services at reasonable rates for many individuals and small businesses during this challenging economic climate."
The NCUA proposed creating the stabilization fund in March, less than a week after placing U.S. Central Federal Credit Union and Western Corporate Federal Credit Union into conservatorship. The agency said the fund is needed to spread out the costs of the conservatorship and for the cost of guaranteeing the deposits of natural person credit unions in corporate credit unions and of the $1.1 billion the agency injected in U.S. Central in January after it reported $1.2 billion in losses for last year.
The agency has estimated those actions could cost the NCUSIF $5.9 billion.