WASHINGTON – The credit union lobby was enthusiastic about NCUA’s new proposal for a separate fund to finance the corporate credit union buyout, but some lobbyists were wondering if the proposal will be large enough to complete the job.
NCUA said yesterday it will seek legislative approval to create a separate Corporate Stabilization Fund which will shift the burden of the corporate bailout from the National CU Share Insurance Fund. The new fund would be authorized to borrow up to $6 billion from the Treasury, which would be paid back from premiums assessed regular, or natural person credit unions, in the same way the NCUSIF is capitalized.
"Our concern is they’ve set a $6 billion ceiling and a seven-year ceiling," said Fred Becker, president of NAFCU. "They said the most conservative estimate of losses is $10.8 billion, where is the other $4.8 billion going to come from."
He was referring to the recently completed Pimco report commissioned by NCUA, which suggested that losses in the corporate system could be as high as $16 billion or as low as $7 billion, but will probably be somewhere in the middle, around $10.8 billion.
"We would hope as we move forward on this there will be additional flexibility added," Becker told The Credit Union Journal yesterday.
CUNA was guarded in its support. "Generally, we think the agency has made some great strides over the last several days in developing this legislative proposal," said CUNA President Dan Mica, in a prepared statement. "We support the proposal’s objectives, but we have some important questions to bring up with the agency. Ultimately, we hope to work with NCUA to present to Congress and pass legislation that will give credit unions the resources and flexibility they need to replenish the share insurance fund."
NCUA, which has already set the cost of the corporate bailout at $5.9 billion, said it believes the $6 billion will be enough. "The Board feels that $6 billion will be adequate," said John McKechnie, chief spokesman for the agency.
He said NCUA will also continue to pursue an extension in the pay-back of the NCUSIF of as long as seven years, to provide additional flexibility.
The proposal is expected to be added to a deposit insurance reform bill that is being crafted in the Senate.
