A "troubled asset relief program" (TARP) for credit unions -- using only credit union funds -- should be established by the National Credit Union Administration, the CUNA witness before the agency's 2009 budget briefing said today.

Tom Gaines, chairman of the CUNA Examination and Supervision Subcommittee (and president/CEO of the Tennessee Credit Union League), told the three-member NCUA Board at the briefing that CUNA believes any potential capital deficiency among credit unions due to the financial meltdown is likely modest (given that overall credit union net worth is about 10.5 percent). He added, however, that a small number of credit unions have become "collateral damage" to the collapse of housing prices in some markets.

A TARP for credit unions, Gaines said, would allow any federally insured credit union to sell troubled assets, apply for additional capital or obtain asset guarantees.

Such a program, Gaines said, would allow for a "credit union-funded solution first without having to call upon taxpayer dollars for help.

However, Gaines also recommended that credit unions be eligible for the Treasury's TARP. "We understand that the Treasury Department is working on a capital program for mutual financial institutions and we encourage the Department to work with NCUA to allow credit uinons to apply for capital assistance, should they need it," he said.

In other comments, Gaines told the board at the briefing:

• CUNA supports full insurance coverage for non-interest bearing transaction accounts;
• Credit unions are concerned about an insurance premium and the NCUA Board should closely monitor and provide CUs with as much advanced notice as possible if a premium is in the offing;
• NCUA has done a better job of handling the overhead transfer rate issue but it is still unclear how insurance related costs are distinguished from supervisory ones;

The complete text of Gaines' comments to the board is
attached.