WASHINGTON – The military lobby is fighting a proposal by Congress that would charge the nation’s largest institutions – including two of the three largest credit unions – to wind down failed financial giants.
"While large banks can simply push added costs to their investors, every additional operating cost or systemic tax on credit unions translates to lower returns on savings and higher loan interest rates for military customers," said retired Vice Admiral Norbert Ryan, head of the Military Officers Association of America, of the proposal to charge institutions more than $10 billion – including Navy FCU ($40 billion) and Pentagon FCU ($14 billion) – to fund a new systemic risk regulator. A third credit union, $18 billion North Carolina Employees’ CU, also would be charged.
The proposed new regulator would monitor all financial giants – those that pose a systemic risk, such as banks, insurers, mortgage companies and investment firms – and would be charged with unwinding their business after a failure. Fees would be assessed on all financial giants, those over $10 billion, to pay the costs of a failure.
Mary Scott, chairman of the board of governors of the National Military Family Association, said in a letter sent Monday that military personnel and their families would have to bear the brunt of the additional costs. "Military credit unions and their members should not be penalized for poor financial management of other financial institutions," Scott wrote in the letter to House lawmakers.
NAFCU and CUNA are lobbying for a carve-out of some sort for credit unions. Dan Berger, chief lobbyist for NAFCU, said credit unions didn't cause the financial crisis and don't pose a systemic risk. "With that in mind, we strongly oppose any credit unions having to pay into an FDIC-managed fund to bail out future AIGs," Berger said, referring to American International Group Inc.
