WASHINGTON (9/24/08)--Now that credit unions appear assured equal access to the proposed Treasury Department economic rescue package if approved, the Credit Union National Association (CUNA) is closely monitoring associated accounting and bankruptcy issues. CUNA Deputy General Counsel Mary Dunn yesterday said the association was encouraging policymakers to investigate how the Financial Accounting Standards Board’s (FASB) fair value accounting rules have contributed to the current financial turmoil. Dunn echoed Sept. 23 Washington Post
reports that banking and other financial lobbyists have been seeking temporary relief from the accounting measure, which they say establishes bargain-basement prices for assets that would be valued far higher during more normal trading conditions. In many cases, the price tags fell to artificially low levels, forcing some financial institutions to take large write-downs, even when they did not intend to sell the assets anytime soon. “Most often these assets are performing as expected,” said Dunn. Although there is not yet consensus in Washington about what the rescue should look like, credit unions are specifically included in the many draft plans currently circulating in Washington, D.C. Credit unions likely may need only limited use of an overall government support plan because few participated in the lending practices that are in part to blame for the devastating upheaval in the mortgage markets--and now the general economy. However, as Bill Hampel, CUNA chief economist, noted Tuesday, credit unions in some areas of the country are like “collateral damage” caught in the crossfire of their regions’ housing disasters. For instance, Hampel said, despite responsible lending practices, in states like California, Nevada, Arizona and Florida where housing prices have plummeted as much as 40%, credit unions could find it necessary to access a government rescue plan. “Such a plan could put the floor to their market higher than it otherwise would be,” Hampel said. Now that access appears assured, CUNA is taking on some related issues that will be critical to credit unions, as well as other financial institutions, that avail themselves of a government rescue. CUNA’s actions include:
* Advising both legislative and executive branch plan designers of the dangers of unwarranted cram-downs, a practice that could allow bankruptcy courts to reduce homeowners’ mortgage debt; * Working to ensure credit union interests are acknowledged in any proposal to limit executive compensation; * Working to ensure credit unions, as member-owned financial cooperatives, do not lose their standing to participate in a rescue package if the final plan requires stock warrants or excess stock run-offs to the Treasury.
Ryan Donovan, CUNA’s vice president of legislative affairs, advised credit unions to expect Congress to act on a rescue plan soon. “Something is going to happen,” he said on a CUNA press call, “But it is up in the air what it will look like. The Treasury is asking for considerable authority in an extraordinary timeframe.”