DUBLIN, Ohio-There is a small group of credit unions that won't take a direct hit from NCUA's proposed Corporate Stabilization Plan: privately insured credit unions.
"First and foremost, the cost and charges [related to the proposed bailout] have nothing to do with ASI-insured credit unions," said Dennis Adams, CEO of private share insurer American Share Insurance. "Some of our clients do work with corporate credit unions, but NCUA's plan has nothing to do with them."
While it may not seem fair to some that privately insured credit unions can reap the rewards of doing business with the corporates but will not be expected to step up to the plate to help bail them out, Adams maintained this is, in fact, how it should be.
"There are two separate issues here," he explained. "One is an issue of a loss to the insurance fund. Privately insured credit unions do not participate in that fund, so they do not take part when that fund has a loss."
The second issue, Adams offered, is that privately insured credit unions are customers of the corporates, and that is separate from, and has nothing to do with. the losses to the National CU Insurance Fund.
"To those who would suggest that privately insured credit unions should have to help fund the losses to an insurance fund of which they are not a part, I say, 'would you expect those who had accounts at Washington Mutual should have to pay the FDIC for its losses?' We wouldn't go to the NCUSIF to bail us out."
That said, Adams said he recognizes there is a real danger to all credit unions if any of the corporates fail. "Credit unions stand to be at risk if any of the corporates fail," he said. "Corporate credit unions have written off their Paid In Capital (PIC) in U.S. Central, they're losing all that capital. That's the risk. If you have capital invested at a corporate, you could lose it if that corporate fails."
