Conversions Liquidation Option DeridedFor Potential Domino Effect
WASHINGTON - (06/16/05) -- A proposal by NCUA to require creditunions to liquidate and distribute their capital during theconversion to mutual savings banks is being ridiculed as nonsenseby one expert because of unforeseen consequences it could have onthe credit union movement. "I just think it's nonsense," RobertFreedman, a Washington lawyer who has worked on almost every creditunion conversion and is representing both Community CU andOmniAmerican CU in their ongoing conversion campaigns, told TheCredit Union Journal. Freedman, who has helped convert dozens ofmutual savings banks to stock form, said Congress considered theliquidation requirement when they first allowed the conversion ofmutuals in the 1970's but rejected it. Among the reasons, he said,is the havoc it could cause by allowing, in the case of creditunions, some ambitious credit union members to go from credit unionto credit union, propose the conversion, then force a payout of thecapital in each one. This is a fear that has been expressed by somein the credit union lobby. NCUA earlier this week urged Congress toconsider the liquidation option as it continues to debate the issueof credit union conversions.