WASHINGTON-The credit union lobby was working last week to gain consensus on a rescue plan for troubled credit unions.
The key will be finding some way to avoid calling the plan a rescue or a bailout. And not to admit credit unions need any government assistance.
And not to use any direct federal funds, in order to be able to continue to say credit unions have never required a taxpayer bailout (like the banks).
A tricky proposition, for sure.
In one of the plans being discussed, NCUA would use some of the billions of dollars of the Treasury's $700 billion bailout money to provide long-term loans to credit unions.
Some of the funds, maybe as much as $20 billion, would be used to infuse cash into credit unions, while some would be used by NCUA to buy poorly performing mortgage assets. The plan differs from the one approved and then ejected by Treasury, to buy mortgage-backed securities.
In this plan, NCUA would buy poorly performing whole loans at a discount and then manage them.
Call it a credit union Troubled Asset Relief Program, or CU TARP.
That's not to be confused with the CU HARP, or Homeowners Affordability Relief Program, the program unveiled last week to funnel as much as $4 billion in mortgage refinancing funds through the Central Liquidity Facility.
The would-be CU TARP has some holes. For one, most credit unions are not currently eligible to accept a cash infusion, which would be accounted for as supplementary capital. There are about 1,000 credit union designated by NCUA as "low-income" credit unions that could accept supplementary capital.
For another thing, CUNA sees NCUA operating the plan through the National CU Insurance Fund, but NAFCU is opposed to that idea. The Central Liquidity Facility, which has taken on a major role in the current financial crisis, is seen by NAFCU as a more viable vehicle for such an initiative.
But a major impediment for Treasury to recognize the need to assist credit unions is the credit union lobby's continued denial. Since most conversations start with insistence that credit unions do not need government assistance, Treasury officials are certain to focus their attention on the dozens of interest groups that are insistent they need help.
The situation among the corporate credit unions is the prime example. Though unrealized losses on the corporates' books continue to grow-to an estimated $14 billion at the end of October - no one in the credit union system has publicly acknowledged the need for any kind of assistance for the corporate network.
