The most remarkable thing about the current crop of deposit insurance reform proposals being considered in Congress is what they don't contain-so far, no one has suggested laying a hand on our insurance fund, and that's good news for credit unions and their members.
Not even a whisper was heard during the recent House subcommittee mark-up about changing the current structure, independence and accounting method of the National Credit Union Share Insurance Fund (NCUSIF), nor do either of the current bills (H.R. 3717 and S. 1945) contain any mention of the fund in that respect.
The fact that fiddling with NCUSIF has not entered into this round of the deposit insurance debate is a tremendous accomplishment for the CU community. NAFCU and its members have always taken the lead in deflecting challenges to NCUSIF. During the debate on the s&l bailout bill in the late 80s, for example, NAFCU was initially the only credit union group to oppose a write-down of the 1% deposit federally insured credit unions have at NCUSIF. Winning that battle was a huge achievement, but to arrive at a point where NCUSIF preservation is now a "given" on Capitol Hill is truly something we can be proud of.
The reason NAFCU argued so adamantly then-and continues to do so now-that NCUSIF must remain independent and intact boils down to a simple premise: the existence of the credit union community as we now know it is dependent on the current independent structure of NCUA and NCUSIF.
If Congress were ever to split NCUSIF from NCUA, the eventual outcome would likely be a federal banking agency insuring or perhaps even regulating credit unions-a situation not exactly conducive to preserving the unique status of credit unions in our country. There have been legislative proposals in the past to create a super federal regulatory agency that would subsume NCUSIF; but following the credit union community's intensive lobbying, they never saw the light of day.
There is no doubt in my mind that had the 1% deposit been written down-and with a 12-year write-down period, as originally suggested by Treasury, it would be nearing completion now-we would currently be fighting off staunch calls for the merger of the NCUSIF with the Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF). The driving force to do so, from the federal government's perspective, is that as a result of the write-down, the resulting fund would ostensibly be stronger and better diversified than any of the three by themselves. That is about as basic a safety and soundness argument as you get, and it would presumably work-"stronger and better diversified"-if you merged in a (premium-based) NCUSIF.
In fact, given the lower risk of credit unions' balance sheets and the stellar performance of NCUSIF, bringing in credit unions would likely have strong Treasury Department support. The only way to even approach a discussion of merging NCUSIF with BIF and SAIF is if the 1% deposit has been written down. In other words, you can't get there from here unless NCUSIF looks like the other two insurance funds. Proposals to do exactly that have been soundly defeated twice, first time, as mentioned above, in consideration of the s&l bailout bill (P.L. 101-73), and two years later (1991), when legislation was enacted to bolster BIF (P.L. 102-242). Now that we have won that race twice, we work continuously to keep the idea completely off the legislative track.
The reason the preservation of the independence of NCUSIF is such a bedrock issue for NAFCU is that our trade association was formed specifically to lobby Congress for federal share insurance. We overcame strong opposition to federal share insurance for credit unions and have not wavered since in supporting its independence. Some people asked me why NAFCU had responded so quickly and strongly in opposing the suggestion to split NCUSIF from NCUA as part of some of the "options" discussed last year for reforming the way the Overhead Transfer Rate is calculated. The simple reason is that NAFCU members expect nothing less from their trade association on a vital issue where we have always been the leader.
Fred Becker is president and CEO of NAFCU. Mr. Backer can be reached at 3138 N. 10th. Street, Arlington, VA 22201.