NCUA PLANS BIG CASH INFUSION INTO CORPORATES
ALEXANDRIA, Va.-NCUA plans to borrow as much as $800 million at preferable rates from the U.S. Treasury which it will infuse into the corporate credit unions, as capital in the system continues to dwindle to dangerous levels.
But before NCUA can borrow the new funds it must repay a $1-billion loan it borrowed to assist U.S. Central FCU that has now been eliminated because of the growing losses at U.S. Central. That's why NCUA assessed a $1-billion charge on credit unions last week.
The funds will be used to provide low-cost liquidity to the corporates as the annual period of low liquidity for the system approaches, according to Larry Fazio, deputy executive director for NCUA said last week.
The new initiative is the latest in a series of efforts engineered by NCUA to keep the corporates afloat amid growing losses and the drying up of capital-at least four corporates have extinguished all of their capital and several others are teetering. The corporate bailout program so far has included the federal guarantee of all corporate-issued debt, the guarantee of all corporate deposits and massive liquidity loans.
The liquidity loans will be made through the Temporary Corporate CU Stabilization Fund, and will come from one of two sources, either the National CU Share Insurance Fund, which is on the line for $10 billion in emergency loans to U.S. Central FCU and WesCorp FCU, or the U.S. Treasury, which provides a $6 billion line of credit to the corporate fund, according to NCUA. The NCUSIF, in turn, may borrow the funds from the Central Liquidity Facility, as it did for the U.S. Central and WesCorp emergency loans.
"The NCUSIF has borrowed $10B thru the CLF and deposited $5B each into WesCorp and USC to continue to stabilize liquidity needs," said NCUA Spokesman John McKechnie. "NCUA is particularly aware of seasonal needs," he said of the lower liquidity in the CU system during the summer.
The move came as NCUA was approving a $1.06-billion assessment to be paid by all federally insured CUs to finance the corporate bailout, the second charge for the corporate bailout so far, following last year's $337.5 million charge. The new borrowings will raise the liabilities for the corporate bailout fund, originally set at $6 billion, to $7.1 billion.
NCUA is preparing a massive consolidation of corporate assets that would facilitate the securitization and sale of some $50 billion of troubled securities held by the corporates. A plan for the so-called legacy assets is expected to be announced next month.
PAC FUNDING AIMED AT CONGRESSIONAL LEADERSHIP
WASHINGTON-As campaign season heats up and the bank reform bill is pending before Congress, credit unions and other interest groups are targeting more of their campaign contributions towards congressional leaders.
CUNA, for example, has been raising its contributions in recent months to so-called leadership PACs, political action committees that allow key congressional leaders, say House Majority Leader Steny Hoyer or Speaker Nancy Pelosi. Last month CUNA made a total of $21,000 in contributions to six different leadership PACs last month, including a $5,000 National Republican Senate Committee Chairman John Cornyn's Alamo PAC; or $5,000 to Citizens For Act, credit union champion Paul Kanjorski's leadership PAC.
The leadership PACs allow interest groups like CUNA to help congressional allies in addition to the $10,000 the groups are allowed to contribute to the candidates own campaign organization, according to Trey Hawkins, campaign director for CUNA.
CUNA, which runs one of the biggest PACs in the country, has put this to good use, helping build relationships with the key congressional leaders, like House Majority Leader Steny Hoyer and his AmeriPAC; House Speaker Nancy Pelosi and her PAC to the Future; and Senate Majority Leader Harry Reid and his Searchlight Leadership Fund or House Minority Leader John Boehner's Freedom Project PAC or Senate Minority Leader Mitch McConnell's Bluegrass Committee.
If being allowed to double the legal campaign contribution to a single candidate can be seen as stretching a campaign dollar, then CUNA has made good use of leadership PAC contributions, having contributed more than $1 million to leadership PACs the past two elections. Through the end of May CUNA and its state league affiliates (the Michigan league is also very active in giving to leadership PACs), have contributed more than $300,000 to leadership PACs, according to monthly PAC reports filed with the Federal Election Commission.
Hawkins said there is no plan as to when CUNA contributes to a particular lawmaker, and the timing is more determined by requests. "We get over 100 invitations (to fundraisers) a week," said Hawkins, who oversees the CUNA campaign contributions, which will exceed $4 million this election season.
Still, some of last month's contributions can be seen as having strategic motives. A $2,500 contribution to Colorado Democrat Ed Perlmutter's EDPAC came around the time Perlmutter was arguing for an exemption for CUs from the consumer financial protection agency. Republican Jeb Hensarling, who is fighting against the current interchange amendment to the bank bill on the same side as credit unions, received $1,000 for his Jobs Economy & Budget Fund.
Not Showing Their Hands
Even Kanjorski, a stalwart credit union supporter who has been rewarded with the most campaign contributions from CUNA and credit unions, has yet to show his hand on the critical interchange amendment.
The Independent Community Bankers Association, for example, made contribution's to House Minority Leader Boehner ($5,000); House Majority Whip Eric Cantor's ERICPAC ($2,500); Hoyer's AmeriPac ($2,500); Hensarling ($2,000); and House Financial Service's ranking Republican Spencer Bachus's Growth and Prosperity PAC ($2,500), who are all being counted on to defeat the interchange amendment.
The ABA contributed to Hoyer ($2,500); to Perlmutter's EDPAC ($4,000); and Sen. Blanche Lincoln, the Arkansas Democrat fighting a close race for reelection who is the key player in the bill's amendment on banks' trading of financial derivatives ($2,500).
NAFCU has also made donations to leadership PACs, including $1,000 to McConnel's Bluegrass PAC; $4,000 to Bachus's Growth and Prosperity PAC; $5,000 to the liberal Blue Dog PAC and $2,500 to the House Conservatives Fund and $1,911 to Perlmutter's EDPAC.