WASHINGTON-NCUA Chairman Michael Fryzel expressed regret at the agency's $5-billion corporate credit union bailout during remarks at CUNA's Government Affairs Conference last week, but said there are no fast and easy solutions to the rescue of the corporate network.
"The NCUA Board acted swiftly to keep a troubled situation from getting worse," Fryzel told about 4,000 credit union executives and directors in his first major speech as NCUA chairman.
Noting the continued deterioration in the financials at many natural person and corporates credit unions, Fryzel warned that credit unions are not out of the woods. "We're going to have losses in this crisis, and the situation could get worse before it gets better," he said.
The one saving grace of the ongoing crisis is that credit unions continue to have a strong capital position-10.9% at year-end 2008. That's the highest capital of any of the federally regulated financial institutions, Fryzel pointed out. "In other ways, large and small, credit unions continue to show they are the solution, not the problem."
Fryzel said the solutions to the corporate problems are not easy to configure and he understands the anger expressed by credit union executives who will foot the bill for the corporate rescue. But, he said, NCUA had to act quickly after it was informed of the $1.1-billion loss at U.S. Central to stem a broader crisis in the credit union system.
Fryzel said NCUA is continuing to seek access to funding through the Treasury Department's Troubled Asset Relief Program, which could be used to boost both the corporates and natural person credit unions. He also floated a new idea that would create a deposit insurance fund separate from the National CU Share Insurance Fund that could be capitalized by voluntary investments form credit unions.
He urged executives and volunteers to participate in the process to reform the corporate system by submitting comments to the agency advanced notice of proposed rulemaking. "We want to hear from you," said Fryzel.
"There are no easy choices," Fryzel said. "We must stay calm, brace ourselves and take necessary action when called upon."
"Credit unions are always good at driving the charge. We must rise to the occasion, and the credit union industry has done that before," he stated.
