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WASHINGTON-As debate on credit union private deposit insurance heats up, making public remarks on the issue is not for the faint of heart. In a March 28 letter, Callahan & Associates President Chip Filson urged Colorado Financial Services Commissioner David Paul to dig deeper and continue consideration of allowing the state’s credit unions to use private deposit insurance. “What I hope is that your letter is the beginning of the review process and not the end. For as stated below, there is much data, indeed fact, that has been omitted from your response that should be part of any credit union’s or regulator’s review of this important issue,” Filson wrote. He was unavailable for comment as of press time. Filson pointed to three areas where he felt American Share Insurance was superior to the National Credit Union Share Insurance Fund: coverage levels, the structure which the NCUSIF was modeled after following the recapitalization, and consumer disclosure regarding uninsured shares by the federal government. “Although these facts would suggest a superior, not comparable, insurance coverage from ASI, there is one area in which the two funds are definitely comparable,” the letter read. “The resources available to cover the insurance losses in each fund are only from the insured institutions themselves.” In concluding his letter, Filson did write, “I believe the facts and history of both ASI and NCUSIF are equally compelling for Colorado’s citizens. But without choice, one is not guaranteed safety, only conformity. That was the circumstance that existed before deregulation. Without insurance choice, that is the inevitable direction in which an NCUSIF monopoly would lead.” In response, Paul told Credit Union Times, “I respect Mr. Filson’s experience and expertise in credit unions and appreciate his views. However, his letter does not make points that would cause me to change the conclusions of my study or reopen the matter at this time. It appears that we fundamentally do not agree on the value of the NCUSIF’s backing by the full faith and credit of the U.S. government.” He added that the letter he sent to the state’s credit unions was only intended to communicate the conclusions of the study and not detail every area studied. “I judged the three areas in which we found ASI not to be comparable to the NCUSIF to be of such great importance to Colorado citizens that further comparison was not necessary,” Paul explained. In his letter, Filson pointed out that there is no guarantee that Congress would act to bail the industry out in case of the failure of the NCUSIF. “If for any reason after spending credit union resources raised through additional deposits and premiums the NCUSIF were insolvent, the Congress would have to pass a law appropriating funds. No such appropriation exists today. When you state that you find `no restriction on the NCUA’s ability to go to Congress.and request that backing be activated,’ what assurance does anyone have that Congress would even be inclined to act?” he asked. Filson added that the bankers would expect a “major quid pro quo” in that case, also. “To assume Congress would appropriate funds at NCUA’s request is I think, debatable logic. NCUA as the regulator is supposed to prevent failure,” Filson pressed. “What creditability would the regulator have requesting to be rescued from its own potential oversight failures?” While NAFCU and NCUA chose not to comment on the letter, CUNA Senior Vice President of Government Affairs John McKechnie stated, “Mr. Filson paints a detailed picture of why, when it comes to share insurance, state-chartered credit unions should have a choice -something we strongly advocate.” [email protected]

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