WASHINGTON-The credit union lobby was still waiting last week for word from the Treasury Department on whether it would help out in the rescue of corporate credit unions.
Both CUNA and NAFCU were hoping to convince Treasury to provide some cash from its Troubled Asset Relief Program to help boost the National CU Share Insurance Fund, where the focus of the corporate rescue now lies. Among the possibilities being discussed was an infusion of TARP cash into the NCUSIF to help pay some or even all of the costs of the corporate rescue, now estimated to cost $5 billion.
NCUA has yet to join the two lobby groups in requesting TARP money for the insurance fund.
However, NCUA Chairman Michael Fryzel pressed his case with new Treasury Secretary Timothy Geithner to undertake the purchase of troubled assets from institutions like the corporates and some natural person credit unions. Lawmakers and the Obama administration were reported last week to be crafting a new plan that would aggregate some of the toxic investments, possibly in a new entity similar to the Resolution Trust Corp., which acquired troubled real estate assets from failing S&Ls in the 1980s and early 1990s.
Several problems remain for such a plan. Among them are that under generally accepted accounting principles, or GAAP, corporates and other entities would have to account for the troubled assets they sell at their current fire-sale prices, thereby realizing billions of dollars in previously unrealized losses. This could have the opposite effect of the intent to save those institutions.
