8 State Trade Groups, Insurer Discuss Alternative to U.S. Deposit

Representatives of eight state trade groups are talking with the country's largest private insurer about creating a nationwide alternative to federal deposit insurance for credit unions.

Private insurance would give state credit unions an alternative to the increasingly intrusive National Credit Union Administration, according to trade group officials who met March 29 in Chicago. The NCUA oversees the National Credit Union Share Insurance Fund.

"I think it's an indicator of the growing mood in the credit union community that the NCUA is no longer responsive to the industry," said Douglas Duerr, president of the National Association of Credit Union Supervisors. Mr. Duerr didn't attend the meeting but said his trade group probably would support such a move.

Currently, about 600 credit unions in the country are privately insured, nearly half of them by Ohio-based American Share Insurance.

But adding more institutions to that roster would be an uphill fight. The failures of some private credit union insurers - most notably a Rhode Island corporation in 1991 - soured many states on the concept. About half the states ban private insurance.

The idea also would split the industry.

"We don't support that," said Pat Keefe, spokesman for the National Association of Federal Credit Unions.

NCUA also is unlikely to support it.

"I don't have any hostility toward the idea of private insurance," said Norman E. D'Amours, NCUA chairman. "On the other hand, whenever there's been a real crisis, usually it hasn't been sufficient to meet the bill."

Nevertheless, some believe a revamped private insurance system is worth fighting for.

"Unless we get some commitment and support from the leagues, we'll eventually have only one insurance system," said Daniel Plauda, president of the Illinois Credit Union League and organizer of the meeting.

Mr. Plauda described the meeting as a brainstorming session. In a few months, he said, a group representing broader interests will meet, and firm proposals could be made within 12 months.

The Credit Union National Association, to which the state leagues belong, hasn't yet taken a position on whether it would back a move toward a stronger private insurance system, according to its president, Ralph Swoboda. But he added that the trade group supports alternatives to federal insurance.

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