A Washington State corporation that provides deposit insurance for 74 credit unions is going to disappear.

The board of Washington Credit Union Share Guaranty Association, facing of a dwindling membership base voted Jan. 4 to dissolve the insurance fund within three years. The number of members had fallen from 156 in 1983.

"That's been a concern of the membership," said Joel Edwards, president of the 21-year-old corporation. "It dilutes the ability to spread out the liability and costs."

John L. Bley, director of the state Department of Financial Institutions, said that credit unions must submit applications for federal deposit insurance by the end of the year. The conversion should be complete by Dec. 31, 1998.

"I'm confident that the huge majority of the 74 credit unions will qualify for federal insurance," Mr. Bley said.

Bob Loftus, director of the National Credit Union Administration, said the agency - which oversees the federal fund - is ready.

"We've been having discussions with the state regulator up there for some time," Mr. Loftus said. "We estimate that it would take six months to examine them."

The agency has had plenty of experience in converting credit unions from private insurance. In 1993 it provided insurance for Tennessee credit unions that were insured by Mutual Guaranty Corp., and prior to that it took on credit unions in Florida, Georgia, Texas, and Wisconsin.

Although virtually all credit unions are expected to obtain federal coverage, for some it might not be permanent, said Ray Lundeen, chairman of Washington Share Guaranty.

Mr. Lundeen and some other credit union executives are actively lobbying allow another private insurer to enter the state.

"At the present time all of us will go federal," said Mr. Lundeen, who also is marketing director of $323.7 million-asset Washington School Employees Credit Union in Seattle. "But at some point there may be another provider."

Currently the only viable private insurance supplier is American Share Insurance - which Mr. Lundeen called "a good shop." Washington isn't one of the eight states where the Dublin, Ohio, corporation can offer primary coverage, but that could change.

"We would like to serve those credit unions that want the private insurance option," said Dennis Adams, president of American Share Insurance.

Under state law, Washington Share Guaranty is the only corporation that can offer private deposit insurance for the state's credit unions. But bills before both houses of the state legislature make room for other private insurers under certain conditions.

Such laws would be a setback for Mr. Bley, who for two years has advocated outlawing private insurance in Washington. He argued that it cannot provide the same protection to depositors as federal insurance.

He was unhappy with Washington Share Guaranty, and he is similarly unimpressed with American Share Insurance.

"I am unaware of any comprehensive and coordinated supervisory framework among state-chartering authorities where American Share Insurance is acting as a primary insurer," he said. "That's simply irresponsible on the part of those state authorities."

If American Share were ever unable to meet its obligations, depositors who took a haircut could lay the blame on the U.S. Congress, he said.

Mr. Bley, who is fond of making Civil War allusions that pit him as the Union and private-insurance advocates as the Confederacy, added, "They played 'Dixie' at Appomattox Court House."

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