Matz also asked lawmakers to give the agency additional enforcement tools, such as the ability to examine third-party vendors.

Johnson said he had heard from credit unions in South Dakota about the heavy assessments on natural person credit unions to fund the rescue of corporate credit unions.

Sen. Richard Shelby, the panel's top Republican, asked Matz if she thought credit unions would be able to remain financially viable in light of the increased assessments.

She said credit unions would be able to handle the impact, though it will negatively affect their ROA.

Shelby also asked if the agency has enough staff members to evaluate the reliability of potential outside investments made by credit unions since the new financial overhaul bill limits the extent to which they can rely on credit rating agencies.

Matz replied that the agency "might have to enhance our Office of Capital Markets."

Shelby followed up by asking, "What does 'might' mean?" He asked the agency to get back to him with additional information about its capabilities in this area.

Shelby read portions of the inspector general's report into the hearing record and said he was concerned about the well being of credit unions because they would play an important part in the nation's economic recovery.

In her opening statement, Sen. Kay Bailey Hutchison (R-Texas) praised the agency for not burdening the taxpayer when rescuing corporate credit unions.

In her testimony, Matz said the agency was forced to take a series of strong administrative actions-including conserving five corporate credit unions-to rescue corporate credit unions because the industry "faced unprecedented threats to its stability." And she noted that losses are being paid for "entirely by credit unions."

She contended that, despite the industry's difficulties, "credit unions remain strong overall."

She also asked lawmakers to pass several pieces of legislation that she said would help the agency do its job more effectively. These included extending the statute of limitations for the agency to take legal action against managers of credit unions it conserves or liquidates; changing the definition of net worth to allow certain loans and accounts established by the NCUA board to count as net worth; and clarifying that the equity ratio of the NCUSIF is based on the NCUSIF's unconsolidated financial statements. Rounding out her wish list, Matz asked Congress to give the agency authority to examine third-party vendors; change the law to allow financially healthy, well-capitalized credit unions to accept supplemental capital; and raise the cap on member business loans.

The hearing lasted 50 minutes and was attended by five of the committee's 23 members.

Johnson asked Matz about the extent of the losses to the credit union system caused by the investment losses at the corporate credit unions. He also asked about what steps the agency was taking to limit further concentration risks at all credit unions.

Matz said that over 10 years, natural person credit unions would have to repay between $7 billion and $9 billion. She noted that the recently implemented corporate credit union rule placed strict concentration limits, and the agency is developing a rule that would regulate the investments of natural person credit unions.

Sen. Jack Reed (D-R.I.) asked whether the agency was concerned that many of the credit union failures cited in the inspector general report were caused in part by problems in member business lending programs.

Matz replied that she was "concerned," but that it involved a relatively small number of credit unions. She said that of the 2,200 credit unions that make business loans, 270 are rated CAMEL 3 or 4.

"We don't like to have credit unions in that category, but it's a manageable number," she said.

Reed asked how the agency's enforcement efforts would be helped if Congress gave it the power to examine third-party vendors.

"We'd do a better job of protecting safety and soundness," she said. "Now there are sometimes problems in these areas, and we can't deal with them until the credit union is conserved."

Sen. Mike Johanns (R-Neb.) said small businesses in his state were complaining about the shortage of capital and asked the agency for additional data on recent credit union business lending trends.