WASHINGTON - Congress was poised last week to pass the massive bailout of the mortgage markets to allow the U.S. Treasury to buy up to $700 billion in distressed mortgage securities from banks and credit unions, but only after sweetening the proposal with billions of dollars in tax breaks.
The Senate overwhelmingly approved the revised package three days after its predecessor was rejected by members of the House, who acknowledged being inundated by calls from angry constituents, just weeks before the elections. But the House's rejection of the bill, which caused a massive sell-off on Wall Street and a plunge in major stock indexes, was used by congressional leaders to prompt their colleagues to vote for the bill later in the week.
The credit union lobby, mindful of the unpopularity of the bailout, was careful not to endorse the plan-even while insisting that credit unions should be included in anything that was afforded for banks.
"Credit unions have widely differing views about this legislation," said CUNA President Dan Mica, in a prepared statement after the House voted against the measure. "Our major concern is that, whatever package ultimately comes forward, it should not in any way disadvantage credit unions."
"Further, while we are working to ensure that credit unions are eligible for what the package offers, we are also working just as hard to ensure credit unions never have to use the provisions of this legislation," he said.
The Senate vote, 74-to-25, came after leaders from both parties agreed to include billions of dollars of tax breaks to sway members. That includes an extension of the so-called Alternative Minimum Tax, which will cost the Treasury more than $100 billion a year in revenues; tax breaks for alternative energy projects and $8 billion in tax relief for people hit by natural disasters in the Midwest, Texas and Louisiana.
The bill would also increase the limit on federally insured credit union and bank deposits for one year to $250,000 per account, from the current $100,000. The move is aimed at shoring up confidence in federally insured depositories which were reporting widespread panic in recent weeks.
After the Senate vote, NAFCU President Fred Becker expressed satisfaction at the inclusion of credit unions alongside the banks. "We are very pleased to see that we have achieved parity for our industry in this historic legislation," said Becker. "While credit unions did not create the current economic crisis, we have been working tirelessly with members of Congress and the NCUA to ensure credit unions continue to be treated fairly and thank the administration and members of the Senate for listening to our concerns."
"It is important to America's credit unions that they have parity with banks in any increase in federal deposit insurance coverage," said CUNA's Mica. "Another goal of ours has been to ensure credit unions are not excluded from having access if necessary to the legislation's relief measures for troubled assets."
The bill would buy up distressed mortgage securities from banks and credit unions and manage them in order to recreate a market, which has all been obliterated during the past two months of financial turmoil.
The bill would also require the Treasury to take an equity stake in those institutions that sell into the plan in exchange for their participation and to limit executive compensation for participants.
The House, which defeated the bill on a bipartisan 228-to-205 vote earlier in the week, was expected to approve the amended version of the bill later last week.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
