WASHINGTON – NAFCU told CUNA last night it could not support CUNA’s latest proposal on alternative capital because, among other things, CUNA wants to allow credit unions to subscribe to alternative capital in other credit unions.
In a letter to CUNA President Dan Mica last night, NAFCU President Fred Becker NAFCU’s Board insists that alternative capital should only be provided by a credit union’s members, in order to preserve the mutual structure of credit unions.
NCUA, worried about a possible chain reaction in troubled credit unions, is also opposed to credit unions being allowed to invest in alternative capital in other credit unions.
Becker said NAFCU will agree to support the inclusion of NCUA emergency section 208 as net worth under an alternative capital proposal, but not other non-specified forms of government assistance. "From a policy standpoint, NAFCU cannot support a general provision of government assistance being counted towards retained earnings, credit union-to-credit union capital infusions or alternative capital being provided from non-members in exigent circumstances," said Becker in his letter.
CUNA had proposed an alternative capital rule that would include government assistance such as the Troubled Asset Relief Program, or TARP, to count as net worth, as well as investments from other credit unions and select employee groups, or SEGs. In addition, CUNA said the proposal should allow credit unions to accept alternative capital from non-members in "exigent circumstances," such as those credit unions in financial difficulty.
NAFCU said it could agree on allowing alternative capital from NCUA assistance under section 208 (of the Federal CU Act) or even from TARP, but not a general government provision.
It also said it would agree to allow alternative capital from a SEG, because a SEG is qualified to become a non-natural person member of a credit union.
The two trade groups are negotiating on a mutually agreeable proposal on alternative capital that they may bring to Congress for legislation.
