WASHINGTON – An outcry over the $5 billion cost of the corporate credit union rescue has prompted the credit union lobby to ask Congress to open up the emergency lending fund, the Central Liquidity Facility, to corporate credit unions in hopes of shifting some of the cost of the huge bailout from the National CU Share Insurance Fund.
Both CUNA and NAFCU are lobbying Congress to authorize the CLF–which cannot provide direct funding to corporate credit unions–to provide assistance to the corporates. However, while CUNA would allow the CLF to provide loans to the corporates, NAFCU’s plan would allow the CLF to provide direct capital infusions, such as the $1 billion note NCUA has agreed to provide U.S. Central FCU.
This would relieve the need for NCUA to fund the $5 billion bill for the plan through a special NCUSIF premium on all federally insured credit unions assessed later this year.
"We think this is the proper vehicle for the corporate stabilization plan," said Mary Dunn, director of regulatory affairs for CUNA, of the CLF initiative.
NAFCU President Fred Becker said Friday they hope to convince Congress to add a provision authorizing use of the CLF for the corporate rescue to a spending bill that would permanently expand the funding for the CLF to $40.5 billion. Otherwise, a temporary expansion of CLF funding from its previous $1.5 billion is scheduled to expire on March 30.
NCUA, whose support is critical to the plan, has yet to weigh in on it, but CUNA and NAFCU were optimistic about gaining the regulator’s endorsement. "We’re very hopeful from our discussions with the chairman (of the NCUA Board) that they might support it," Becker told The Credit Union Journal.
The lobby groups and NCUA will also continue to support legislation to extend a payment schedule for the $5 billion premium to as long as five years, instead of the single year required under current law. The House Financial Services Committee endorsed a bill last week that would allow the five-year repayment. The bill is expected to be voted by the full House in the next week or two.
Over the last few months the CLF has become the main focus of efforts by NCUA to assist troubled credit union, even by providing a back door to CLF funding for the corporates. Under that initiative, NCUA is providing low-cost loans to natural person credit unions on the condition they invest the funds in a corporate through so-called CU System Investment Program, or SIP notes.
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