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The unprecedented liquidity problem on approximately $18 billion of the corporates’ downgraded securities are unrealized losses, and, as you stated in Letter 09 CU 02, the exposure is difficult to define. The action the NCUA has undertaken, Temporary Corporate Credit Union Liquidity Guarantee Program, authorization of the CLF’s full statutory borrowing gap and the CU SIP and CU HARP have all been to reduce reliance on borrowings from outside the credit union system. However, we are not outside the financial system, we are an integral part of the system.The regulatory and functional structure of the corporate system has failed. The corporate credit union structure is outdated and during the 1980s the corporates underwent consolidation due to limited resources with institution failures.The three-tier system with 26 regionals is cumbersome and costly. Streamline with a two-tier system, one corporate for each region, with increased efficacy for the necessary oversight and transparency, and, hopefully, replace failed management. (We don’t need to replicate the arcane bank bailout).CUs have shown their ardent ability to maintain sufficient capital during this unprecedented financial situation. They should not be punished for the regulatory failure and management decisions that were partially responsible for the current financial condition of corporates.The NCUA has the option to go outside the CU system for the short-term assistance they require. The guarantee you are attempting to impose on the natural person credit unions has the potential of undermining the credit union movement, which has been and still is a vital cog in the financial survival of many citizens in this country.

Peter Westerman

Credit Union Times

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