The fate of the stabilization fund for corporate credit unionscould be decided in the House this week as a congressional paneldirects its attention to the health of the corporate creditunions.
The House Subcommittee on Financial Institutions is scheduled tomeet on Wednesday to discuss a measure introduced by Rep. PaulKanjorski (D-Pa.) to create the Temporary Corporate Credit UnionStabilization Fund anda make some additional changes to the rulesgoverning the NCUSIF.
On May 7, the Senate approved a broad housing bill that includedprovisions for the Stabilization Fund and increases in the NCUA'sborrowing authority.
The House hearing will include testimony from regulators and creditunions. The regulators are scheduled to be represented by NCUAChairman Michael E. Fryzel and NASCUS Chairman George Reynolds. JimBedinger, the chief operations officer of the Chicago Patrolmen'sFederal Credit Union. is slated to testify on behalf of NAFCU. BillLavage, president/CEO of Service First Federal Credit Union ofDanville, Pa., is scheduled to appear on behalf of CUNA.
The testimony will address Kanjorski's bill and the overall healthof credit unions, according to several sources.
“The focus will be on the fund, but if Congress is holding ahearing, they may well ask questions about why the fund isnecessary,” said CUNA Vice President of Legislative Affairs RyanDonovan.
Donovan, NAFCU Director of Legislative Affairs Brad Thaler and NCUADirector of Public and Congressional Affairs John McKechnie allsaid there is bipartisan support for the fund in the House, asthere was in the Senate.
Under Kanjorski's bill, which contains identical language to theSenate-passed measure with regard to credit unions, theStabilization Fund would be financed by a line of credit from theTreasury Department, would pay back the Treasury Department overseven years and natural person credit unions would pay theadditional premium to the NCUSIF over that time period.
The measure also increases the NCUA's borrowing authority from theTreasury Department from $100 million to $6 billion and provides$30 billion of emergency borrowing authority through the end of theyear. It also would allow the NCUA eight years to replenish theNCUSIF if its equity ratio falls below 1.2%.
“The swift enactment of my bipartisan legislation will allow creditunion managers to focus on their most important mission-providingcredit to their members-rather than worrying about how they willpay for an excessive one-time charge and paring back lending duringthese difficult economic times,” Kanjorski said in astatement.
CUNA President/CEO Dan Mica praised the bill and said theprovisions allowing the repayment to be spread out over eight years“will give all federally insured credit unions more resources inhand to lend back into their communities and help foster economicgrowth.”
NAFCU President/CEO Fred Becker said the bill “represents a majoraccomplishment for consumers and credit unions alike, ensuring thecontinued viability and stability of credit unions, which representa critical lifeline of financial services at reasonable rates formany individuals and small businesses during this challengingeconomic climate.”
The NCUA proposed creating the stabilization fund in March, lessthan a week after placing U.S. Central Federal Credit Union andWestern Corporate Federal Credit Union into conservatorship. Theagency said the fund is needed to spread out the costs of theconservatorship and for the cost of guaranteeing the deposits ofnatural person credit unions in corporate credit unions and of the$1.1 billion the agency injected in U.S. Central in January afterit reported $1.2 billion in losses for last year.
The agency has estimated those actions could cost the NCUSIF $5.9billion.
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