By Ed Roberts, Washington Bureau Chief
WASHINGTON–New NCUA Chairman Michael Fryzel promised last week to monitor credit unions closely during the ongoing financial crisis, that is pushing many institutions, including credit unions, to the brink.
“Now is not the time for a ‘business as usual,’ passive approach…Where I see a balance sheet problem, I will move decisively to resolve it. Where I see adverse trends, I will take steps to correct them,” Fryzel told about 350 attendees to NAFCU’s annual Congressional Caucus, as financial markets were collapsing.
Fryzel also called on the industry to step forward and assist in dealing with the market turbulence that is affecting the entire financial services industry. “I expect every trade organization, every volunteer and every credit union professional to render their full support to our efforts to keep the entire credit union system vibrant and stable,” he stated.
“And where activities carry unacceptably high levels of risk and expose consumers to potential loss, I will intervene decisively,” he said.
Fryzel unveiled what he called a comprehensive stress test of the National CU Share Insurance Fund, aimed at determining the Fund’s “capacity to withstand the stresses that could develop as a result of the credit and mortgage dislocations.”
The share insurance fund has come under increasing stress as it makes payouts to depositors of failed credit unions and finances work-outs for several troubled institutions.
NCUA reported that losses for the fund continued to grow in July, as the credit union deposit insurance fund reported its biggest single month loss ever of more than $225 million.
The July losses include more than $200 million accrued for two of the biggest credit union failure ever, of Cal State 9 CU, a one-time $460-million credit union in Concord, Calif., and Sterlent CU, a one-time $150-million credit union nearby in Pleasanton, Calif. The remnants of the two California failures were purchased by San Francisco-based Patelco CU, while NCUA assumed the failed assets, mostly real estate loans.
“My goals are clear and my mission strong,” said Fryzel, “My willingness to work alongside credit unions is part of my regulatory duty and philosophy. I pledge to you a strong and sensible approach to the regulation of credit unions.”
Lesson Learned On Capitol Hill: Prioritize Reg Reform
WASHINGTON–Members of Congress from both parties agreed on one main lesson they learned from the ongoing financial crisis–the need for regulatory reform as a main priority for the next Congress.
New York Rep. Carolyn Maloney, a leading Democrat on the House Financial Services Committee, told credit union representatives at NAFCU’s Congressional Caucus last week the need for regulatory reform and for an additional economic stimulus bill are the two main issues facing Congress in the closing days of the current Congress.
Maloney said she believes one of the main causes of the spreading mortgage crisis is the lack of regulation of large sectors of the market, especially mortgage brokers, and she also feels investment banks should come under more regulation.
Maloney’s Democratic colleague Paul Kanjorski also endorsed regulatory reform and said he will continue his efforts to bring a national regulatory structure to the insurance industry, which is currently regulated by the states.
Later the same day, Republican Patrick McHenry agreed with his counterparts on the Financial Services Committee. “What we need is major regulatory reform,” said the North Carolina lawmaker. “That’s what we’re going to get in the next Congress.”
But McHenry, a one-time credit union foe who has become an industry supporter, said the Treasury Department’s “blueprint” for regulatory reform, which would have phased out NCUA, has no chance of being enacted.
