WASHINGTON – The Senate is expected to vote today on a plan that would allow credit unions to stretch out the $5.9 billion payment for the corporate credit union bailout over seven years.
The proposal would allow NCUA to create a Corporate Stabilization Fund by borrowing $6 billion from the U.S. Treasury, which would be repaid by assessments on credit unions over seven years. It would allow credit unions to reverse much of the costs of the corporate bailout they accrued either in the fourth quarter last year or the first quarter this year.
The provision would reduce the cost of the corporate bailout on credit unions’ books from 1% of insured shares this year to 0.15% annually for the next seven years.
The Senate proposal would also allow NCUA to borrow as much as $30 billion to stem a systemic emergency, such as the one that has claimed the two largest corporates, U.S. Central FCU and WesCorp FCU, and is threatening as many as half dozen other corporates, as well as dozens of large natural person credit unions.
The bill, which is expected to pass easily, would also make permanent last year’s increase in federal deposit insurance coverage to $250,000 per account.
Stripped from the bill and expected to be voted separately is the controversial cramdown provision which would allow troubled homeowners to ask a bankruptcy court to amend the terms of their mortgage.
