WASHINGTON — The Senate was expected last week to pass a bill that would allow credit unions to stretch out the $5.9 billion payment for the corporate credit union bailout over seven years.
The bill was passed without the controversial cramdown measure that had been attached in the House. The cramdown amendment would have allowed troubled homeowners to ask a bankruptcy court to amend the terms of the mortgages. That measure, which was vehemently opposed by credit unions, was voted down separately.
The bailout bill 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 would also make permanent last year's increase in federal deposit insurance coverage to $250,000 per account.
The Senate bill must now be reconciled with a Bill that passed the House in March and includes the cramdown provision. The House could either vote to pass the Senate bill, without the cramdown provision, or move to have the two bills reconciled in a so-called conference committee, which could decide to put the cramdown provision in and have the bill voted again by both the House and Senate.
