WASHINGTON – A key House panel endorsed a bill yesterday that would stretch out the $5 billion deposit insurance premium credit unions will be charged to pay for the rescue of the corporate credit union network to as long as five years.
Under current law, NCUA must charge the premium all at once, which industry officials worry could threaten the solvency of many credit unions. "Such an extension would lessen the impact of premium charges on credit unions during difficult economic periods," said NCUA Chairman Michael Fryzel, after the vote by the House Financial Services Committee.
The measure, which now goes to the floor of the House for a vote, was proposed by congressional credit union champion Paul Kanjorski, the Pennsylvania Democrat who sponsored HR 1151, the landmark 1998 CU Membership Access Act, and more recently, the CU Regulatory Improvements Act, or CURIA. "While credit unions are generally healthy, corporate credit unions have been particularly hard hit by the ongoing economic crisis," Kanjorski said in introducing the measure. "There may be other insurance costs that credit unions will have to bear as the economic crisis continues to unfold."
The action comes as credit union executives around the country are worrying about the effects of the $5 billion premium, which will pay for a $1 billion infusion of cash into U.S. Central FCU and to guarantee all uninsured deposits in corporate credit unions through 2010.
The bill endorsed by the committee would also increase the borrowing capacity for the National CU Share Insurance Fund to as much as $10 billion, from the current $100 million.
The bill would also make permanent last fall’s temporary increase in federal deposit insurance coverage to $250,000 per account, including accounts insured by the NCUSIF.
NAFCU President Fred Becker, whose group worked to get the credit union measure into the deposit insurance bill, said after the vote they will be lobbying the Senate to get the upper chamber to act too.
