Eastern Corporate Federal Credit Union's decision to not participate in the NCUA's original Temporary Corporate Credit Union Share Guarantee Program was "extremely difficult," said Jane Melchionda, president/CEO of the $1.27 billion corporate.
"We received calls from members saying 'we want it' before we even got a copy of the agreement," she said.
After receiving the Letter of Understanding and Agreement from the NCUA, EasCorp volunteers ultimately decided not to sign it, because doing so would not be in member's best interest. Though EasCorp moved quickly to inform members before the decision leaked to the press, the explanation was made difficult by a non-disclosure clause that forced the corporate to speak "cryptically", Melchionda said.
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Three weeks later, U.S. Central's conservatorship complicated matters further when corporates realized losses cut deeper than the NCUA's $1.2 billion capital injection, and could potentially impact their own member-contributed capital.
Though EasCorp signed the revised agreement, Melchionda said deposit guarantees aren't a long-term solution.
"Our business is based on trust, so what will we do when we don't have the guarantee? Credit unions need to hold whomever they do business with accountable, and if the guarantee is used as a crutch, it can have a negative side," she said.
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