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Johnson testifies to CU strength
WASHINGTON (6/6/08)—At a state of banking hearing Thursday at which the Federal Deposit Insurance Corp. noted preparations for expected bank failures while the federal credit union regulator depicted credit unions as systemically robust, the contrast between banks’ and thrifts’ current experience and that of credit unions was apparent. At a Senate Banking Committee hearing, the second this year on the state of the industry, National Credit Union Administration (NCUA) Chairman JoAnn Johnson said her agency, its National Credit Union Share Insurance Fund (NCUSIF), and the credit union movement have an overall strength, with a few, isolated problems. Johnson testified that as of the first quarter of the year, aggregate assets of federally insured credit unions increased $39 billion, or an annualized 20.57%, reaching a new high of $792.16 billion. She noted that loans comprised 67% of assets, down slightly since December 2007 due to asset growth strongly outpacing loan growth. However, also down—slightly—is the loan delinquency rate which Johnson reported at 2.4%, or down 0.2%, although delinquent real estate loans increased 0.3% from January through March of this year. Johnson attributed the general strength of credit unions, in part, to their having “effectively implemented” guidance by the NCUA related to real estate lending positioning them to withstand the current economic downturn. Also testifying before the panel were FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan, Director John Reich of the Office of Thrift Supervision, Vice Chairman Donald Kohn of the Federal Reserve Board, and Timothy Karsky, Commissioner/Chairman, North Dakota Department of Financial Institutions/ Conference of State Bank Supervisors. As part of her formal testimony and during questioning, FDIC’s Bair noted her agency’s careful preparations for any bank failures that may result in the coming year and beyond. Bair said she anticipated that there would be such failures and that they would not be confined to only the smallest institutions. However, she also said she would be greatly surprised by the failure of any large institution. Bair took and opportunity to state her support of the U.S. Treasury Department’s blueprint for financial regulatory reform, which she said would consolidate all the financial regulators. NCUA’s Johnson later returned to that point and told the panel of lawmakers that separate regulation for credit unions as distinct institutions is necessary and justified, as the current health of the credit union system demonstrates, despite problems elsewhere in the financial sector. The Credit Union National Association strongly opposes any Treasury plan that would consolidate financial institution regulation and oversight.
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