Bill Would Let Privately Insured CUs Join FHLB

A bill introduced in the House last month would make the nation's 225 privately insured credit unions eligible to join the Federal Home Loan bank System. Currently, only federally insured banks and credit unions, and insurance companies are eligible to join one of the 12 regional banks, which provide low-cost funding for mortgage-related purposes. There are more than 500 credit union members of the FHLB System.

"We're just asking them for a level playing field," said Dennis Adams, president of Dublin, Ohio- based American Share Insurance, the credit union insurer lobbying for the bill. Ohio-based ASI, which provides primary deposit for 220 state chartered credit unions, has been working on the initiative for the past five or six years, according to Adams. ASI's primary coverage goes up to $250,000 per account, more than twice the $100,000 per account covered by federal insurers and the National CU Share Insurance Fund. ASI also provides excess coverage, over the $250,000 per account cap, for more than 300 credit unions.

Adams said he has powerful support for the bill, including that of home state lawmakers Michael Oxley, the Republican chairman of the House Financial Services Committee, and Republican Bob Ney, of Ohio. ASI is the main survivor of the purge of private insurers following the 1991 collapse of the Rhode Island Share and Deposit Insurance Corp. after which a half-dozen credit union insurers folded their tent amidst a plunge in public confidence. Also surviving is the Maryland CU Insurance Corp., which only insures deposits at five state-chartered credit unions, and PROSAD, a private insurer for more than 130 credit unions in Puerto Rico.

The private insurance option continues to attract defenders among credit unions as an alternative to NCUA, which generally applies its rules and regulations to all credit unions, even state charters, covered by the NCUSIF. The recent move to convert to state charter by more than 150 federal credit unions over the past five years has rekindled interest in the private insurance option.