WASHINGTON - Credit union lobbyists are blasting bank proposals to use the industry's money to help bail out the thrift insurance fund.
The industry is arguing that its insurance fund has never needed a taxpayer bailout, so it shouldn't have to help beef up the Savings Association Insurance Fund.
"This sort of proposal would be unfair to credit unions, who had nothing to do with the S&L crisis," said Charles O. Zuver, director of governmental affairs for the Credit Union National Association. "The real solution to the SAIF problem is to have thrifts and banks, like credit unions, pay in 1% of their deposits to recapitalize their own insurance funds. And leave us out of it."
Credit unions plow a sum equal to 1% of their insured deposits into the National Credit Union Share Insurance Fund. That insurance deposit is kept on credit unions' books as an earning asset, a practice bankers have denounced as phony accounting.
The credit union lobby has yet to unleash its famous grass-roots power, choosing for now to fight the proposal - advanced by the Independent Bankers Association of America - in closed-door meetings on Capitol Hill.
"Our approach is going to be low key," said Mark Wolff, CUNA's vice president of public affairs. "At this point we don't see any need to bring out the heavy artillery. The IBAA has made these noises before, with zero impact."
Facing an insurance premium much higher than banks', thrifts have been urging the government to pump up their fund to a 1.25% reserves-to-deposits ratio. Once SAIF reaches that target, thrift rates could be lowered.
The government is eyeing banks for some of the cost. In response, banking trade groups have been scrambling for ways to soften the blow or keep banks out of the equation entirely.
The Florida Bankers Association first floated the idea of using credit union money to bail out the fund earlier this month. The Kansas Bankers Association, too, has been arguing that credit unions ought to be brought into the mix.
IBAA executive vice president Kenneth A. Guenther on May 8 sent a letter to Senate Budget Committee Chairman Pete Domenici arguing that if banks have to help, so should credit unions. In an interview, he said the IBAA will send a similar letter to Deputy Treasury Secretary Frank Newman.
"We believe the institutions that benefit from the infrastructure of trust and confidence engendered by the deposit system should also contribute to maintaining this system," Mr. Guenther's letter reads.
If credit unions had to pay a 10-cent fee on the industry's $290 billion in deposits, the government could raise $290 million a year, the IBAA said. That revenue could be used to pay 38% of the interest payments due annually on the bonds issued to begin the thrift bailout.
The IBAA letter also argued that credit unions should be stripped of their tax exemption.
