WASHINGTON – Lawmakers agreed yesterday to broaden an exemption from the systemic risk bill enough to include all credit unions.
Under the carve-out voted by the House Financial Services Committee, only financial institutions with more than $50 million in assets would pay into a fund that would unwind any huge financial institutions – those considered too big to fail by regulators.
An early version of the bill set the exemption at $10 billion, meaning at least three natural person credit unions – Navy FCU, Pentagon FCU and North Carolina State Employees’ CU, and two corporates, U.S. Central FCU and WesCorp FCU – would have had to pay into the fund.
The credit union lobby and NCUA told lawmakers credit unions should be exempt from the systemic risk scheme because they do not believe any credit union would pose a risk to the entire financial system, such as an AIG, Fannie Mae or Citicorp, the type of institution the scheme is aimed at.
"As relatively small institutions whose assets are miniscule compared to large, interrelated companies, credit unions are highly unlikely ever to be the subject of such a resolution," NCUA Chairman Deborah Matz told Rep. Barney Frank, chairman of the House panel, in a letter this week. "Any credit union failure would be managed internally by NCUA through the (NCUSIF) and, therefore, would pose no risk to the FDIC-run (systemic) resolution fund."
The Financial Services Committee has been debating the bill, being pushed by the committee’s Democratic leaders, all week. The Republican members of the committee are trying to defeat the bill, which they see as another new government agency, as would be the Consumer Financial Products Agency and a new regulator to supervise all banks.
The Republicans also criticized the bill as an attempt to make permanent the idea of a government bailout in time of financial crisis. "I think it’s time we put to bed this idea of too big to fail," said Rep. Spencer Bachus, a Republican from Alabama. "I think we are creating just another avenue to bail out entities."
