WASHINGTON – NCUA Chairman Michael Fryzel called on the Treasury Department yesterday to adhere to the original intent of the $700 billion bailout plan, the purchase of distressed mortgage assets from banks and credit unions, and not abandon the assets purchase plan altogether, as Treasury proposed on Wednesday.
Fryzel said the initiative, known as the Troubled Asset Relief Program, or TARP, is important to credit unions and others who may need to offload underwater assets as the credit markets continue worsen.
"Although I can understand the initial actions that Treasury has taken to help the large banks, insurance companies, and other major financial institutions that have faltered or failed, I am concerned about the second-place status into which credit unions and other smaller financial institutions have been placed," Fryzel said in a letter yesterday to Treasury Secretary Henry Paulson.
Later yesterday, NAFCU joined the NCUA Chairman in asking Treasury to stick to the original purpose of the TARP.
"NAFCU strongly opposes this drastic shift in policy," said NAFCU President Fred Becker, in a separate letter to Paulson. "There can be no question that Congress intended for these taxpayer dollars to "purchase, and to make and fund commitments to purchase, troubled assets from any financial institution." Use of TARP funds for anything other than intended by Congress would be an egregious abuse of American taxpayer funds."
To date no credit unions have come forward to say they will participate in TARP. Corporate credit unions, which are holding more than $10 billion of unrealized losses on mortgage securities, have been reluctant to participate for fear those losses would be realized, but all welcome the relief the government program would bring to the failed mortgage securities market.
This week’s action by Treasury effectively cuts credit unions completely out of the $700 billion bailout, which they supported, because the main facet of the program now is the infusion of capital into banks and insurers, for which credit unions are not eligible.
