Lawmakers Focus on Systemic Risk Issues
At issue is what is the asset threshold at which financial institutions will be required to contribute to the proposed Stabilization Resolution Fund.
The bill as currently written makes financial institutions with more than $10 billion in assets liable for paying into the fund, which would be administered by the FDIC. Three credit unions would be subject to these payments: Navy Federal Credit Union, Pentagon Federal Credit Union and State Employees Credit Union.
Rep. Brad Sherman (D-Calif.) plans to introduce an amendment to raise the threshold, but it wasn't determined if it would propose raising it $50 billion or $75 billion.
NCUA Chairman Debbie Matz wrote that mandating credit unions to pay into the system isn't equitable and would hurt credit union members.
"As relatively small institutions whose assets are miniscule compared to large, interrelated companies, credit unions are highly unlikely ever to be the subject of such a resolution. Any credit union failure would be managed internally by NCUA through the National Credit Union Share Insurance Fund (NCUSIF) and, therefore, would pose no risk to the FDIC-run resolution fund," Matz wrote.
Matz also expressed concern about having another agency besides the NCUA take supervisory action against credit unions.
House Financial Services Committee Chairman Barney Frank (D-Mass.) favors the existing language.
"A financial crisis rains on everybody and if you are a big institution you are interested in systemic stability,'' he said in response to a question from Credit Union Times. "The bill will exempt all but a handful of credit unions."
CUNA and NAFCU weighed in strongly in support of the exemption.
"It is unacceptable that the members of any credit union would be asked to fund a resolution fund for failed for-profit companies," CUNA President/CEO Dan Mica wrote committee members.
NAFCU President/CEO Fred Becker wrote that it would "essentially amount to a new tax on members of these institutions, while entities covered by the fund could simply cover the cost of the assessments through their shareholders."
The legislation is part of a broader package of proposals to revamp the way financial services are regulated.
Frank has said he hopes the bills will be considered on the House floor during the second week of December.
The Senate Banking Committee is scheduled to begin marking up legislation on the same subject, sponsored by Chairman Christopher Dodd (D-Conn.), after Thanksgiving.