WASHINGTON (3/20/09)—Credit unions and other institutions that continue to do the right thing for the nation during its current tough economic times, should not be disadvantaged in the political process, the Credit Union National Association (CUNA) told federal lawmakers Thursday.
Caption: VyStar CU President/CEO Terry West (second from left) testifies on CUNA’s behalf before a Senate Banking subcommittee. West urges action to give the National Credit Union Share Insurance Fund greater authority both to facilitate its operations and to help credit unions handle their expenses. Also pictured are ICBA Senior Vice President Steve Verdier (left), William Grant for the American Bankers Association, and NAFCU’s David Wright. (CUNA Photo)
Representing CUNA before the Senate Banking subcommittee on financial institutions, Terry West said that it is imperative that the U.S. Congress enact legislation to give the National Credit Union Share Insurance Fund (NCUSIF) additional authority. West, president/CEO of VyStar CU in Jacksonville, Fla., said in formal testimony that the insurance fund needs authority to address insurance issues and manage insurance costs, both to facilitate its operations and to help credit unions handle their expenses. West, who is chairman of CUNA’s Corporate Credit Union Task Force, was testifying at the subcommittee hearing titled, "Current Issues in Deposit Insurance.” West testified that the current financial crisis, and the federal regulator's corporate credit union stabilization plan that the crisis has necessitated, make the following legislative actions particularly important for credit unions:
* Continue share and deposit insurance coverage to accounts up to $250,000, as was authorized on a temporary basis under the Emergency Economic Stabilization Act of 2008; * Increase authority for the NCUSIF to borrow up to $6 billion for the U.S. Treasury Department to facilitate its ability to spread out insurance costs to credit unions. The authority is critically important, CUNA said, in light of the costs credit unions face to support the National Credit Union Administration’s (NCUA) corporate liquidity plan; * Give NCUSIF power to allow credit unions to spread out premium expenses for a period of eight years. CUNA also urged the subcommittee to encourage NCUA to use existing authority to spread out costs; * Broaden the NCUA’s Central Liquidity Facility’s (CLF) authority to provide liquidity to the credit union system to include corporate credit unions, as well as natural person credit unions; and * Include specific statutory language clarifying that NCUA has the same systemic risk authority as does the Federal Deposit Insurance Corp.
West highlighted in his testimony that credit unions need the requested legislative support to continue to help the country out of its economic freeze. He said his credit union, and state and federal credit unions in communities across the nation, are working to address the country’s credit crunch. As banks cut back on lending, credit union loans rose by 7% in 2008 to over $575 billion, up $35 billion from the previous year, as noted by a recent Wall Street Journal
article. That article also noted that bank loans in the country decline about $31 billion during that time period. In spoken remarks to the subcommittee, West stressed the urgency of addressing NCUSIF assessments on credit unions. “I told the senators that credit unions must be afforded a way to either spread out or reduce the assessments, as the impact on their bottom lines--and ultimately service to members--could be very significant,” West said following the hearing. “However, I was very appreciative that a number of the senators grasped the urgency of the situation. I think we may have gotten their attention.” The subcommittee also heard testimony from NCUA Executive Director David Marquis. During the session, Sen. Christopher Dodd (D-Conn.), who is chairman of the subcommittee’s parent Senate Banking Committee, brought up the idea of expansion of powers by the CLF. Both CUNA and the National Association of Federal Credit Unions (NAFCU) support legislation to allow the CLF to make loans to corporate credit unions and make capital available to natural person credit unions. Dodd asked Marquis about the plan, and he responded that NCUA supports the concept but there remain some issues to be ironed out. However, Marquis also told Dodd that NCUA staff will have a proposal on these issues to NCUA Chairman Michael Fryzel by Tuesday. He added that the chairman would have to “vet it with (NCUA) Board members.” Also testifying were:
* Art Murton, director of the division of insurance and research, FDIC; * David Wright, CEO, Services CU, Yankton, S.D., on behalf of NAFCU; * William Grant, chairman/CEO, First United Bank and Trust, Oakland, Md., on behalf of the American Bankers Association; and * Steve Verdier, senior vice president, Independent Community Bankers of America.
In a related story, NCUA Chairman Michael Fryzel testified Thursday morning before the full Senate Banking Committee, which is currently considering modernizations to the country’s financial institutions regulatory structure. (See story: Fryzel tells Senate Banking: Preserve NCUA independence.) Use the resource link below to access complete CUNA testimony.