WASHINGTON-While CUs continue to debate access to secondary capital (see related story above), NCUA Chairman Michael Fryzel called on new Treasury Secretary Timothy Geithner last week to reconsider coverage under the Treasury's Troubled Asset Relief Program to help the growing number of troubled credit unions.
Geithner, who was president of the Federal Reserve Bank of New York, was sworn in as the new Treasury Secretary last week.
The chief credit union regulator urged the Treasury Secretary to develop standards to allow credit unions to accept cash infusions under the TARP and to reconsider a program, since abandoned, to buy distressed assets from credit unions and banks.
"While I appreciate the actions that the Treasury Department has taken to help large banks and other major financial institutions which have faltered or failed, I am deeply concerned about the second-place status into which credit unions and other smaller financial institutions seem to have been placed," said Fryzel, in a letter to Geithner.
Credit union executives are lobbying Congress to facilitate access to TARP funds, but Congress is not expected to do so any time soon, meaning little, if any of the $700 billion approved for TARP will got to help troubled credit unions.
In addition, Fryzel made similar request to the previous Treasury Secretary, Henry Paulson, who neglected to act on the credit union bid, as he was weighed down with concerns about the solvency of the mega-banks.
"While credit unions thus far largely have avoided the high-profile failures seen in other sectors, I can assure you that the system is not immune from the stresses resulting from the deepening credit crisis," said Fryzel. "Indeed, they are real and tangible, and NCUA has taken and will continue to take proactive steps in the face of growing economic adversity."
The NCUA chairman also urged the new Treasury Secretary to allow NCUA to establish a guarantee program for non-interest bearing accounts, business checking accounts, held by credit unions, something the FDIC is doing for banks.
Fryzel told the new Treasury Secretary that NCUA does not have the authority to provide such a guarantee on its own and does not expect Congress to provide it in the near future.
"Based on the belief that the policies of the (NCUSIF) should be generally consistent with those of the FDIC, I believe it is imperative that there be full share insurance coverage for non-interest-bearing business share draft accounts through 2009," wrote Fryzel.
