CINCINNATI-NCUA's proposal to assess privately insured credit unions for a portion of the costs in preserving the corporate credit union system has generated mixed reaction.
In Ohio, where privately-insured CUs operate and where the largest private insurer of deposits, American Share Insurance, operates, Art Kremer, CEO of Sharefax CU in Cincinnati said the issue is "probably more of a fairness question. Those CUs have benefited just as much from the corporate system as federally insured credit unions."
"However, the reality is that most privately insured credit unions will in all likelihood not participate in a corporate credit union if they are subject to the size of assessments experienced by federally insured credit unions over the past two years," Kremer said. "This will have the effect of reducing the number of participating CUs, which will further deteriorate the corporate system at a very critical juncture. Although these amendments are being proposed as a means to strengthen the system, I believe that they will have the opposite impact and only hasten the closure of more corporate credit unions."
In California, which also permits private insurance, Stuart Perlitsh, CEO of Glendale Area Schools FCU, believes privately insured CUs should pay the same assessments as any NCUSIF-insured CU, and cited as an example San Francisco Firemen's Credit Union, whose former CEO, Diana Dykstra, has just become CEO of the California and Nevada leagues. In fact, Dykstra served a term on the WesCorp board, noted Perlitsh.
"She got all the features and benefits of WesCorp, and yet San Francisco Fire CU did not pay for the WesCorp bailout or subsequent assessments," said Perlitsh." Something is inherently unfair and unethical when a decision maker on the WesCorp board of directors and her credit union can escape any financial responsibility."
Donna Bland, CEO of The Golden 1 Credit Union in Sacramento, Calif., believes assessing privately-insured CUs for costs related to the corporates "makes sense." "We do not want credit unions coming out of the federal insurance fund and moving to private insurance to avoid a known cost," said Bland. "That is a concern I have heard expressed. All credit unions have benefited from the corporates all of these years, and because of that benefit they need to pay these assessments."
Ken Burns, president of Patelco Credit Union in Pleasanton, Calif., which for many years was privately insured before moving to federal insurance, said he does "not see the merits" of assessing privately insured CUs for a portion of NCUA's corporate bailout assessments. "They are not federally insured, and should not be required to bear that burden," Burns said.
