WASHINGTON – Lawmakers are expected to grill NCUA Chairman Michael Fryzel during hearings on Capitol Hill this afternoon about the failure of the nation’s two largest credit unions and what the federal regulator might have done to prevent them.
The hearings will be held even after Congress passed legislation yesterday providing billions of dollars in new funds to NCUA to pay for a bailout of the corporate system. The legislation, expected to be signed by President Obama as soon as this week, will also allow credit unions to spread out their charges to pay for the corporate bailout for as long as eight years.
This will allow credit unions that took the full charge for their share of the corporate bailout in the first quarter to reverse out the charges in subsequent quarters and spread them out over the next eight years.
Fryzel is expected to discuss NCUA’s response to the failures at U.S. Central FCU and WesCorp FCU, stopgap efforts to prop up troubled corporates, and how NCUA is planning to reshape the corporate network.
Fryzel will tell members of the House Financial Services Committee that without the corporate bailout bill, as many as three-fourths of all credit unions will be pushed into the red for this year, and dozens of them critically so.
The bill pass yesterday by the House will create a $6 billion Corporate Stabilization Fund, allow credit unions to stretch out payments to pay for the corporate bailout, and provide NCUA with up to $30 billion in emergency funds to deal with a systemic crisis.
