Congress was working last week on a slew of bills that would aid victims of Hurricane Katrina and the institutions, including credit unions and banks, that were carrying a heavy load in the relief effort.
Lawmakers were expected to introduce legislation last week that would set up the Federal Reserve's surplus funds as an insurer to indemnify bad checks cashed by credit unions and banks in the wake of the enormous disaster. The bill would cover all Katrina-related checks that were bounced or counterfeit up to $2,000 each.
"This is legislation that is badly needed," Rep. Spencer Bachus, the chairman of the House Financial Services Subcommittee on Financial Institutions, told The Credit Union Journal.
Bachus also said he expects a number of other bills to be introduced that would protect and help the credit unions and banks to provide emergency services over the coming weeks. One measure, he said, will be protect those institutions that relaxed their lending rules to help Katrina victims, by extending late payments, forbearing on loans, or eliminating fees. "The regulators have asked the financial institutions to relax their rules, so we need to have some kind of 'hold-harmless' provision so when the examiners come in down the road they (credit unions and banks) are not penalized," said the Alabama Republican.
"At some point, the (bank) examiner is going to come in and ask, 'Why you did this,' or 'Why you did that,'" said Bachus. "We're going to have to indemnify you for what you did."
He suggested that Congress will approve some kind of extended tax treatment for banks and other taxable financial institutions to allow them to write-off or write-down the forgiven or postponed loan payments.
Earlier in the week, Congress approved a doubling in funding for the National Flood Insurance Program operated by the Federal Emergency Management Agency, the only program that insures the nation's homeowners against floods. Even with the doubling of funding to $3.5 billion, the program is expected to fall far short of the money needed to cover the estimated 170,000 claims for Hurricane Katrina, more than twice the previous high for flood claims following Hurricane Ivan.
An even bigger problem in the weeks to come will be the tens of thousands of properties-some estimates go as high as 200,000-that are not insured against floods because the vast majority of the flooded areas of New Orleans and elsewhere in the Gulf States were not located on a floodplain. The lack of flood insurance on those properties leaves credit unions, banks and other lenders open to a huge financial liability.
Other Proposals Examined
Rep. Michael Oxley, chairman of the Financial Services Committee, told The Credit Union Journal Congress is going to have to address this in some way, maybe by appropriating funds to cover the flood losses.
Congress is also looking at several other proposals to help financial services providers in the wake of the massive storm, according to Bachus. One would waive Federal Reserve fees on money transfers and cash deliveries in the hurricane-stricken areas. Another would allow lenders to make so-called fresh-start loans to homeowners and other borrowers in which the interest may be accrued after suspension of payments, something that is currently barred by federal law.
Congress was also poised last week to approve legislation that would reduce the need to file Currency Transaction Reports in the wake of the huge cash economy developing around the Gulf States. Under the proposal, credit unions and banks would no longer need to file CTRs for seasoned customers, those with whom they have had a relationship for more than a year. They would also not need to file CTRs for someone who has already qualified as a seasoned customer for another financial institution.
