The chairman and ranking member of the House Financial Services Committee have been alerted to the concern of credit unions raised by last week’s Treasury Department announcement that it was abandoning troubled asset purchases in favor of capital infusions.

In a letter to committee Chairman Barney Frank (D-Mass.), and Ranking Member Spencer Bachus (R-Ala.), CUNA President and CEO Dan Mica noted that the Emergency Economic Stabilization Act explicitly includes America’s credit unions among the institutions eligible to participate under the plan, but the implementation program thus far has not included credit unions and remains unclear how credit unions would be included.

“Credit unions could have been covered under a troubled asset purchase plan; however, because of the credit union capital structure, credit unions may not be eligible for the capital infusion under current law. In addition, an asset purchase program would have helped to establish values for some of these troubled assets in today’s dysfunctional markets,” Mica wrote.

Mica pointed out that credit unions hope to be able to solve their own problems – while few —within the credit union movement itself, notably under the auspices of the National Credit Union Administration (NCUA). (He also pointed out that CUNA has urged the agency NCUA to implement a program for credit unions – by credit unions – that accomplishes the intent of the Emergency Economic Stabilization Act for the movement.)

Nevertheless, the CUNA leader stated: :”It is critical that the mechanisms Congress has put in place through the enactment of the Emergency Economic Stabilization Act work for credit unions as well as banks and other entities.”

The complete text of CUNA’s letter follows:

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November 17, 2008



Dear Chairmen Frank and Ranking Member Bachus,



On behalf of the Credit Union National Association (CUNA), I applaud you for calling tomorrow’s hearing on “Oversight of Implementation of Emergency Economic Stabilization Act of 2008 and Government Lending and Insurance Facilities: Impact on Economy and Credit Availability.” CUNA represents approximately 90% of America’s 8,200 state and federally chartered credit unions and their 90 million members.

The Department of Treasury announcement last week to abandon the purchase of troubled assets from financial institutions in favor of greater emphasis on capital infusions into financial institutions causes us concern. Although the Emergency Economic Stabilization Act explicitly includes America’s credit unions among the institutions eligible to participate under the plan, the implementation of the program thus far has not included credit unions, and the Treasury’s announcement makes it unclear how credit unions will be included. Credit unions could have been covered under a troubled asset purchase plan; however, because of the credit union capital structure, credit unions may not be eligible for the capital infusion under current law. In addition, an asset purchase program would have helped to establish values for some of these troubled assets in today’s dysfunctional markets.

As the attached letter indicates, we have urged Treasury to consider a set aside of funds to be used by Main Street financial institutions including credit unions.
(Click here for attachment, or go to:
http://tinyurl.com/6p6fmy.) However, given the cooperative nature of our movement, we believe that credit unions should be able to turn to the National Credit Union Administration (NCUA) for assistance, so that credit union funds can help credit unions solve their own problems, with backup funding from Treasury if necessary. With that in mind, we have also urged NCUA to implement a program for credit unions – by credit unions – that accomplishes the intent of the Emergency Economic Stabilization Act for the movement. We believe that NCUA has sufficient authority under the Federal Credit Union Act to do so.

We hope that no credit union will need to turn to Treasury or NCUA for assistance. However, should the need arise, it is critical that the mechanisms Congress has put in place through the enactment of the Emergency Economic Stabilization Act work for credit unions as well as banks and other entities. We applaud your leadership on this issue and look forward to working with you going forward.

Sincerely,

Daniel A. Mica

President & CEO

Credit Union Natl. Assn.

Washington, DC