WASHINGTON – Congressional credit union champion Paul Kanjorski questioned the fairness of the corporate credit union bailout that spares more than 200 privately insured credit unions from paying a share of the $6 billion bill.
That bill will be paid by 7,800 federally insured credit unions under legislation passed by Congress last month.
"We built in an unfairness where some credit unions are going to have to pay back billions of dollars, but privately insured credit unions are going to have a free ride," said the Pennsylvania Democrat yesterday during an NCUA symposium celebrating the 75th anniversary of the Federal CU Act.
Kanjorski, who championed the recently passed corporate bailout bill, is not a fan of private deposit insurance and suggested that public information about the credit unions in more than a dozen states that allow private deposit insurance is subpar. "The only people who know what’s going on in states where there is private insurance are the insurance regulator," he said.
"We shouldn’t even have private insurance," said Kanjorski, who chairs a powerful House Financial Services subcommittee. "We really need to get everybody into the (National CU Share Insurance Fund) system. The insurer for credit unions needs to be a federal instrumentality.
Private deposit insurance used to be big among credit unions, with a network of more than two dozen insurers covering thousands of credit unions. But the 1991 financial crisis in Rhode Island, when the failure of that state’s insurer, the Rhode Island Share and Indemnity Corp., forced a domino-effect failure of credit unions, prompted the remainder of insurers to close down, except one. That insurer, ASI Inc. now insures deposits for about 200 credit unions in more than a dozen states. Some of those credit unions are big ones. Like Clark County CU and Silverstate State Schools CU in Nevada.
