ALEXANDRIA, Va.-NCUA appears to be unenthusiastic about a CUNA plan that would fund a bailout of troubled credit unions through the National CU Share Insurance Fund, but another proposal is being floated to finance the initiative.
Jim Blaine, president of North Carolina State Employees CU, said his and other large credit unions would be willing to invest in a program to buy troubled credit unions loans that would be guaranteed by NCUA, outside of the NCUSIF. Blaine, whose credit union recently invested $1.6 billion in the state-issued bonds to fund student loans, said he sees the credit union movement financing its own plan by the issuance of some kind of a bond by NCUA. "If the Fed gets 5% from its investment in Bank of America, NCUA could pay a reasonable return of 3% or 4%," Blaine said.
He said his $16-billion credit union could invest as much as $2 billion in such a plan.
The new proposal comes as the funds appropriated for the Treasury's Troubled Asset Relief Program are dwindling fast.
Treasury officials said last week only $15 billion of the $350 billion appropriated by Congress is still available, prompting Treasury to ask Congress for access to the other $350 billion it approved for the banking bailout.
That makes it increasingly unlikely that any TARP funds will be available for a credit union initiative, as NCUA had hoped.
CUNA has proposed having the NCUSIF finance the purchase of as much as $2 billion of underwater loans from credit unions in the hardest-hit states-California, Florida, Nevada and Arizona-at a discount. But the NCUA Board is reported to be unenthusiastic about the use of the NCUSIF to undertake the plan. In addition, NAFCU remains opposed to the use of the NCUSIF for such a large-scale operation.
But Blaine said he's raised the idea with the CEOs of other large credit unions and some have expressed interest in the idea. "This is a credit union-sponsored plan," he stated. In addition, it would help demonstrate the value of retaining NCUA as an independent agency, something that is under review, he added.
CUNA officials said they have not been given a response on their plans. But CUNA Chief Economist Bill Hampel, who is working to develop the initiative, said the trade association has discussed a credit union-financed plan but would prefer using the NCUSIF because it has all of the necessary structures in place, including financing and NCUA's Asset Management Assistance Center, which is expert in the purchase and sale of troubled loans from credit unions.
