Washington Watch

Register now

ASI CALLS NCUA'S CORPORATE BAILOUT PLAN 'EXTORTION'

ALEXANDRIA, Va.-ASI, the lone surviving private deposit insurer for CUs, told NCUA its proposal to assess a mandatory "voluntary" corporate bailout charge to its 150 credit unions in nine states and all non-federally insured CU corporate members is outside of the federal agency's legal authority and probably illegal under extortion statutes.

"First and foremost," wrote Steven Tigge, the Dublin, Ohio insurer's outside legal counsel in a comment letter submitted to NCUA, "there is nothing 'voluntary' about the requirement that non-FICUs make premium payments to the (corporate bailout fund)." He noted the proposals would compel non-federally insured credit unions to make such "voluntary" payments or face expulsion from their corporate. "Compelling payment on threat of expulsion is hardly "voluntary," wrote the ASI lawyer.

The ASI position was echoed by dozens of privately insured credit unions and federally insured credit unions, as well as CUSOs and the state leagues, all of whom would be subject to such voluntary assessments under the NCUA proposal. Most commenters noted that assessing CUSOs and leagues for the corporate bailout would effectively be charging federally insured credit unions, which make up those entities, a second time.

But the most heat is coming from ASI members, all of which are paying their own special assessments to recapitalize the private insurer after its big losses the past two years.

Other privately insured CUs expressing their opposition are: $500-million Clark County (Nevada) CU; $650-million Credit Union 1, Rantoul, Ill.; $675-million San Francisco Fire CU; $500-million Boulder Dam CU, in Nevada; $520-million Christian Community CU in California, $200- million MCT CU of Texas and $860-million Los Angeles Firemen's CU.

"In addition to the legal foundation of this proposal being in question, we are also concerned that this proposal will divide an industry already under challenge and will result in non-federally insured credit unions dropping their corporate membership and moving their business outside to other providers of those services," wrote Michael Mastro, president of Los Angeles Firemen's. "This is clearly not in the interest of the credit union system and its affiliates."

Most of the commenters insisted the 2009 legislation creating the Temporary Corporate CU Stabilization Fund did so as an extension of the National CU Share Insurance Fund, which has no legal authority over state chartered privately insured CUs. "Federal law," wrote Mastro, "clearly instructs the NCUA to charge only federally insured credit unions for any assessment due to the TCCUSF."

Officials with Christian Community CU of San Dimas, Calif., noted that privately insured credit unions like them also lost capital in failed corporate credit unions, so are already absorbing the costs of the corporate meltdown. Christian Community, a member of WesCorp, said it lost more than $2 million of its own capital.

ASI's lawyer, Tigge suggested the NCUA proposal may also violate federal extortion laws. "In practical effect," he wrote, "NCUA is attempting to force non-FICUs to contribute premium payments to the TCCUSF in order to avoid expulsion from their corporate credit unions, even though it is clear...that NCUA does not have the authority to assess these premiums... There is nothing 'voluntary' about a payment that is conditioned on a threat," asserted the ASI attorney.

2010 WAS WORST YEAR IN 3 DECADES FOR CU LENDING

MADISON, Wis.-Credit union lending declined another 0.2% in December, after a similar drop in November, pushing lending to a negative 1.43% for 2010, the worst in more than 30 years, according to CUNA.

That figure is the worst since at least 1980, when the national recession combined with Carter administration policy to dampen loan demand and push it into the negative.

Home equity loans, ARMs and new auto loans continued to fall last month, as they did for much of the year. The decline in lending had a positive effect on the delinquency ratio because of the smaller base, so the ratio fell to 1.7% at year-end. Loan growth was 1.20% for 2009.

There was some growth in credit card loans, fixed-rate mortgages, and used car loans, according to CUNA.

Savings grew slightly in December, by 0.6%, to come in at 4.49% growth for the year, less than half the 10.33% growth in 2009 and the lowest since 2006.

POST ELECTION SEASON, CUNA PAC RELOADS WAR CHEST

WASHINGTON-CUNA, one of the most active in Congress, rebuilt its cash reserves last month, which had been drained from more than $1.1 million just before the mid-term elections, all the way down to $184,000.

The PAC raised $173,000 last month and spent $39,000, rebuilding its campaign war chest to $320,000. The weeks following the elections were spent helping congressional candidates pay off campaign debt and start building their own cash for the next elections.

Among the recipients of CUNA contributions last month were freshman House members: Austin Scott (R-GA), Renee Ellmers (R-NC) and Cedric Richmond (D-LA) each received $5,000; Sandy Adams (R-FL), Tom Marino (R-PA), Kristi Noem (R-ND), Scott Tipton (R-CO) and Bill Huzienga (R-MI) received $1,000 each.

CUNA's PAC both raised and disbursed less for the mid-term elections than it did for the presidential elections of 2007-2008, raising $3.8 million and spending about the same, just over $3.8 million. In comparison, the credit union PAC raised $4.3 million and spent about the same in the 2007-2008 elections.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER