WASHINGTON-The House has delayed until this week a vote on a bill to set aside billions of dollars for distressed homeowners and give access to cash infusions under the Troubled Asset Relief Program to CUs.
But the prospects of the bill are doubtful because of a lack of enthusiasm by the Senate. Instead, the Senate was expected last week to vote to release the second half of the $700-billion bailout funds approved last fall under the TARP, without providing access to the funds to CUs.
The House bill would allow credit unions to accept outside forms of assistance, such as that provided under TARP, and count it as net worth, or capital, something currently prohibited for most credit unions. "This would allow credit unions to get capital through the TARP program," said Fred Becker, president of NAFCU, which crafted the language with the California CU League and CUNA.
The bill comes as regulators are citing a growing need for emergency funding for banks. NCUA and credit union lobbyists are also citing an expanding need for CU aid.
But credit unions, who were listed as part of the original TARP, have yet to receive any funding even as dozens of CUs are poised to report major losses for 2008 and losses are growing within the corporate credit union network. "The credit unions are telling me they can't access TARP funds," said U.S. Rep. Joe Baca, the California Democrat who drafted the language to enable credit union participation. "Congress intended for credit unions to accept TARP funding."
Baca was responding to lobbying by California credit union executives and the California CU League, which has long championed credit union access to secondary capital sources. Large credit unions in California, the epicenter of the current real estate earthquake, have been particularly hard hit by the economic crisis and many are in need of government support.
The Baca provision would allow credit unions to accept and count secondary capital but only from a government entity, such as the Treasury's TARP, a Small Business Administration guarantee or emergency funding from NCUA. It would also allow credit unions to count cash obtained from the sale of illiquid assets, such as that originally planned under the TARP, as capital.
It would not allow credit unions to count outside sources, such as non-member deposits, as net worth, or capital. Under current law, only low-income-designated CUs may count non-member deposits as net worth.
"Basically, this would allow credit unions to count any form of government assistance as net worth," Ryan Donovan, senior lobbyist for CUNA, said of the Baca amendment.
NCUA, which supports credit union access to TARP funding, declined to endorse the Baca amendment, mostly because of the doubtful prospects for the bill, and plans to lobby for a future measure with better prospects, according to an agency source.
The bill voted last week would also provide as much as $100 billion of the remaining $350 billion in TARP funds to provide assistance for the growing number of at-risk homeowners.
It would also make permanent last fall's increase in federal deposit insurance under the National CU Insurance Fund and FDIC to $250,000.
