ALEXANDRIA, Va. – NCUA Chairman Michael Fryzel, struggling for a way to pay for growing losses in the corporate credit union system, said today NCUA is preparing to submit a proposal asking Congress for creation of a new way to supplement the diminishing resources of the National CU Share Insurance Fund.
"Events continue to move swiftly, and I have directed NCUA staff to explore two new avenues to augment NCUA’s Corporate Stabilization efforts," said Fryzel this afternoon. "First, we have held preliminary discussions with Congress regarding the creation of a Corporate Stabilization mechanism, as an adjunct to the National Credit Union Share Insurance Fund. This new mechanism would replenish the NCUSIF through an arrangement with the Treasury Department, while providing additional flexibility for credit unions to make their required contributions over a period of time."
The NCUA Board is expected to vote on Thursday to pursue this initiative.
"Second, I am evaluating the latest Treasury initiative to deal with troubled assets. This new ‘Public-Private Investment Program’ appears to hold some promise for corporate credit union holdings," said Fryzel, referring to today’s announcement of a plan to buy up distressed mortgage securities.
Fryzel’s remarks come three days after NCUA took under conservatorship the nation’s two largest corporate credit unions, U.S. Central FCU and WesCorp FCU, amid surging losses on their mortgage securities holdings. The takeovers of the two corporate giants will cost credit unions at least $1.2 billion more, on top of the $4.7 billion corporate bailout cost. The cost will be paid by the NCUSIF, which will recoup those funds by a premium assessed all credit unions.
NCUA said the eventual losses to the corporate system could be as much as $10.8 billion.
