WASHINGTON-Treasury Assistant Secretary for Financial Institutions Wayne Abernathy backed NCUA on the issue of whether it was the appropriate agency to oversee privately insured credit unions under provisions in H.R. 1375, the Financial Services Regulatory Relief Act. The regulatory relief legislation would allow privately insured credit unions to become members of the Federal Home Loan Bank System and appoints NCUA to review their annual audit reports. "We are concerned that the provisions related to the NCUA could give the false impression that the NCUA has oversight authority over the private deposit insurers of credit unions and that the Federal Government somehow stands behind the private insurers," Abernathy stated during a hearing in the Financial Institutions Subcommittee of the Senate Banking Committee entitled Oversight of the Federal Home Loan Bank System last week. "Not only would that be a terribly false impression potentially harmful to depositors, but it would also remove some of the market discipline that is so essential to the successful functioning of any private insurance program." Abernathy's statement supports NCUA's own analysis, NCUA Chairman Dennis Dollar pointed out. "We recognize the rights of individual states to authorize private insurance as an option for their state-chartered credit unions but that the line should not be blurred by bringing NCUA into any oversight role which is appropriately state rather than federal or by creating any impression that the federal regulator has any oversight responsibility over credit unions that are neither federally chartered or federally insured," he said. "We continue to have no official position on whether Congress should allow privately insured credit unions to join the FHLBs, but we will continue to work to remove the provision referenced by Mr. Abernathy which would place NCUA in an improper and inappropriate role under the dual chartering system." NAFCU supports allowing privately insured credit unions to join the FHLB System as long the private insurance option exists. "However, NAFCU fully agrees with NCUA and now the Treasury Department's concerns with potentially creating a false impression with the public that the federal government stands behind deposits at privately insured credit unions should NCUA have any perceived oversight function in relation to privately insured credit unions joining the FHLB. We believe the recent GAO report only buttresses this concern," NAFCU Communications Manager John Zimmerman explained. [email protected]