VIENNA, Va. – In light of the growing costs of the corporate credit union bailout, the nation’s largest credit union call for the elimination of the corporate system.
"Our view is the natural person credit union industry no longer needs the corporates in their current form and that any corporate credit union structure that survives should be funded and insured separately only by those who use them," said Cutler Dawson, president of the $37 billion credit union, in a comment letter on NCUA proposed reforms to the corporate system. "NCUA must commit not to use the NCUSIF to support any future corporate credit union structure.
Navy Fed is expected to accrue more than $330 million in costs as its share of the $5.9 billion corporate bailout, both as a write-down of its 1% NCUSIF deposit and the forthcoming premium to fund the bailout.
"Already," wrote Dawson, "most of the larger credit unions, including Navy Federal, do not need or use the services of the corporates. Additionally, there are many competitively priced alternatives for investments, payments and liquidity management readily available to smaller credit union. We believe the industry would be better served by eliminating the corporate credit union system."
If smaller credit unions require a credit union-owned entity to provide certain functions now provided by the corporates, such as payments services or investment management, they could obtain that from a CUSO, suggested Dawson.
The Navy Fed CEO noted that corporates have provided diminishing liquidity functions in recent years. "Since the corporate credit union system did not provide material amounts of borrowing capacity to smaller credit unions, we suggest NCUA explore other business models for liquidity management to provide loans to the industry," he wrote. "Additionally, NCUA should grant natural person credit unions greater latitude to accept non-member deposits thereby increasing the liquidity within the natural person credit union system."
