ARLINGTON, Va. – Arguing that "credit unions continue to be punished for their success because they are restricted in their access to capital," and reiterating NASCUS' support for alternative capital reform beyond risk-based, net worth requirements, NASCUS Chairman Roger Little made clear the association's position that it disagrees with the findings of the Government Accounting Office's recently released study on alternative capital for credit unions, "Available Information Indicates No Compelling Need for Secondary Capital." That study in which the GAO concluded there is no evidence to support widespread net worth problems for federally insured credit unions since the implementation of prompt corrective action for credit unions, found there is no compelling reason for alternative capital for CUs. Emphasizing that NASCUS disagrees with the GAO's position, Little, who is deputy commissioner, Credit Union Division, Division of Financial Services of the Michigan Office of Financial & Insurance Services, stated that, "Alternative capital for many state-chartered credit unions is imperative if they are to continue to meet the financial needs of their members such as financing home ownership, providing financial education and credit counseling. The time has come for capital reform.The combination of PCA requirements established by Congress for credit unions in 1998 and significant deposit growth has created a financial and regulatory dilemma for many state-chartered credit unions." Little told Credit Union Times he considers the GAO to be "a highly respected agency, and we value their opinion," however "we don't agree with every aspect of their conclusions." He cited, for example, that the GAO "talks about the lack of unity in the credit union community for a need for secondary capital." But Little pointed out that before credit unions were allowed to offer share drafts there was a diversity of need for that at the time as well. "If the test for being allowed to do something means an incredibly diverse credit union community has to be unified on the issue before the GAO determines there's a compelling need, that's never going to happen. The current need for secondary capital outweighs the need for a unity of opinion," said Little. He added that secondary capital "is something every credit union needs. Some have a pressing need for it now, and other don't but can need it in the future. That seems perfectly acceptable. For the GAO to reach the conclusion it did by tying a lack of consensus to a lack of need, well those two things don't go together. "We're hearing from credit unions now that they need alternative capital. As much as we value the GAO's opinion, natural person credit unions should be making the determination just as the corporate credit union system determined for itself that it needed it," said Little. NASCUS President/CEO Mary Martha Fortney reiterated NASCUS' disappointment with the study's conclusions. "We will not waiver in our position that credit unions need access to alternative capital," she said, adding that NASCUS intends to continue to work with Congress, the Treasury, NCUA, CUNA "and others in the credit union community to accomplish meaningful capital reform. Except for low income and corporate credit unions, natural person credit unions are the only financial institutions that don't have access to alternative capital. Instead of asking why they should have this access, we would ask `why not?'" As to how much weight NASCUS thinks Congress will give the GAO report, Little noted that it was members of Congress who initially asked for the report. "It all depends if you're a proponent of alternative capital for credit unions or not," he said, pointing out that the GAO stated in its findings that there is no compelling need for alternative capital for credit unions now, "so they're not closing the door on it totally," said Little. NASCUS President/CEO Fortney added that "Congressman (Brad) Sherman (D-Calif.) is only one voice of many on the issue." In July, Little testified before the House Subcommittee on Financial Institutions and Consumer Credit on H.R. 3579 – the Credit Union Regulatory Improvements Act – that NASCUS supports the risk-based capital reform proposal outlined in the measure. Speaking at the hearing, Little told the subcommittee, "NASCUS strongly supports alternative capital for credit unions. We believe it is complementary to a risk-based capital regime and in no way conflicts with the proposals outlined in H.R. 3579. The combination of PCA requirements established by Congress for credit unions in 1998 and significant deposit growth has created a financial and regulatory dilemma for many state-chartered credit unions." He further stated, urging the Subcommittee to consider and approve the revision of the definition of net worth for credit unions, that, "Many state-chartered credit unions will not be able to rely solely on retained earnings to meet the capital base required by PCA standards. As a regulator, it makes no business sense to deny credit unions the use of other forms of capital that improve their safety and soundness. We should take every financially feasible step to strengthen the capital base of this nation's credit union system." [email protected]