WASHINGTON – Banking and credit union leaders implored lawmakers yesterday to give regulators vast new financial resources to help stabilize the nation’s depository system.
Representatives from NCUA and the credit union industry asked the Senate Banking Committee for access to billions of dollars in new resources for both the National CU Share Insurance Fund and the industry itself, and even to lean on the Financial Accounting Standards Board to ease mark-to-market accounting rules.
"You asked about a sense of urgency, we think it’s here," said Terry West, president of $4 billion VyStar CU, who told senators the $5 billion corporate credit union bailout will devastate the industry unless Congress acts.
NCUA’s Executive Director David Marquis specifically asked the senators to raise the borrowing limit for the NCUSIF by 60 times to $6 billion; to stretch out the assessment to pay for the corporate bailout to as long as five years; to give troubled corporate credit unions direct access to the $41 billion Central Liquidity Facility; and to give the agency broad new "systemic risk" powers to deal with extraordinary failures.
NCUA, according to Marquis, was forced by the deteriorating condition of the corporate credit unions to undertake what he called makeshift and burdensome emergency moves, such as the temporary guarantee of corporate debt, because it lacks the authority to undertake broader systemic actions. "In order to quickly, effectively respond, NCUA needs authority that enables it to take action in response to systemic risk," he stated.
The NCUA Director told the panel the credit union agency supports the effort to make permanent the new limits on federal deposit insurance coverage of $250,000 per account, which he said would boost depositor confidence and help spread out the risks of NCUSIF.
Marquis was joined by his opposite number at the FDIC, who asked the senators to triple the banking agency’s borrowing ability to $100 billion and to stretch out a recapitalization of its troubled deposit insurance fund.
VyStar’s West, who was testifying on behalf of CUNA, went further than NCUA and asked the senators to stretch out the corporate assessment to as long as eight years and for access to assistance under the Treasury Department’s Troubled Relief Asset Program and to allow the CLF to make capital infusions into troubled corporates and natural person credit unions.
David Wright, president of Services CU, predicted 70% of all credit unions will fall into the red this year as a result of the $5 billion assessment for the corporate bailout and even force healthy credit unions to increase fees, raise loan rates, cut dividends and even reduce lending, at a time when consumers all around the country are in need of additional sources of funds.
The CEO of the $35 million South Dakota credit union, who was appearing on behalf of NAFCU, said as many as 210 credit unions will be pushed below NCUA’s minimum capital limits, requiring supervisory agreements.
