Mica: Treasury's perilous plan has long road

WASHINGTON (4/1/08)--After reviewing details of the U.S. Treasury's long-term plan to overhaul the nation's financial institution regulatory structure, Credit Union National Association (CUNA) President/CEO Dan Mica remained convinced the plan is perilous for credit unions and consumers.

During yesterday's briefing on the Treasury's regulatory proposal, U.S. Treasury Secretary Henry Paulson listens to CUNA President/CEO Dan Mica, who asserted the proposal could put credit unions out of business. Paulson rejected that notion and said such an outcome was not Treasury's intent. (Photo source: Bloomberg.com)

Mica attended Treasury Secretary Henry Paulson's briefing Monday on the agency's regulatory restructuring blueprint. Paulson explained details in the 212-page report and the thinking behind its development. A summary of the report was leaked to the media during the weekend.

During Monday's briefing in Washington, Mica explained to Paulson that the Treasury proposal would result in the demise of credit unions as they function today.

Paulson rejected that assertion and said "If you read the executive summary, you'll see it is not our intent and that would not be the effect."

Mica said the report's language indicates otherwise:

• All institutions desiring federal deposit insurance--whether banks, thrifts, or credit unions; including state-chartered institutions--would be required to obtain the new "federal insured depository institution" (FIDI) charter (report p. 160);

• The recommendation would combine the five federal regulatory bodies into three--the National Credit Union Administration would cease to exist;

• Cooperative institutions could operate under the FIDI charter. However, to qualify for the tax-exemption, these institutions would be required to elect "community status" and meet a series of apparently stringent tests in terms of asset size, field of membership, and service to the underserved. It appears small banks also could meet such tests and claim the tax-exemption (report p. 161);

• A Presidential Executive Order may be issued to all federal regulators expanding an existing interagency working group and directing them to more closely coordinate during the current financial crisis. After the expansion, NCUA will still not be included;

• Finally, there is insufficient information about the new federal regulatory body that would oversee all payment systems.

Mica emphasized that the provisions of greatest concern to credit unions are long-term recommendations, which Paulson dubbed an "aspirational plan" that "requires thoughtful discussion"--as well as congressional action.

Lawmakers on Capitol Hill would not address them anytime in the foreseeable future and certainly not in this Congress, according to Mica.

Despite the lengthy timetable, the CUNA leader remained especially bothered by one aspect of the report.

"What may be most disturbing about the Treasury plan is its assumption that financial institutions can be compared solely on the basis of the services they offer, without regard to structural and cultural differences between different types of institutions," said Mica. "As a result, Treasury does not acknowledge any unique contribution from credit unions based on their not-for-profit, cooperative structure."

Use the resource link below to review Treasury's complete 212-page blueprint.

Resource Links

The Treasury’s Blueprint for a Modernized Financial Regulatory Structure (pdf download)

RELATED STORIES: Treasury's Regulatory Blueprint