Time Is Short; We Must Act Now

The financial issues surrounding the corporate credit union system have reached watershed proportions. While the NCUA’s recent actions ensured the immediate stability of corporate credit unions and our industry, the proposed solution is damaging to our industry and to our nation’s economy.The NCUA’s proposed solution will cause two-thirds of our industry to record negative income for 2009. Furthermore, it will drive a number of credit unions, particularly those in the “sand states,” to Prompt Corrective Action. Additionally, according to the National Federation of Community Development Credit Unions, the NCUA’s proposal could lead to “the outright demise of many low-income credit unions.”Today, credit spreads are tightening, and our economy continues to deteriorate. The outlook for the economy grows dimmer each day. Yet, our industry has been the single ray of hope in financial services. Our lending, shares, membership and assets have continued to rise as the economic crisis-the worst in decades-unfolds.However, if an alternative to the NCUA’s proposal is not adopted, we will all suffer. Credit unions will curtail lending. Industry confidence, hard earned since the Great Depression, will deteriorate. Estimates are that credit unions will lose 5.25% of their net worth in 2009. Making matters worse, NAFCU estimates that for every dollar of lost net worth, lending will be affected more than six-fold. Who thinks that with a $4.7 billion hit to credit unions, our nation can afford another $29.4 billion hit in lending at this critical juncture, exacerbating our free-falling economy?Several weeks ago, NAFCU outlined a legislative course of action that we believe represents a creative and viable solution-using the Central Liquidity Facility to recapitalize corporate credit unions. We have also called for easing the burden placed on natural person credit unions by spreading the recapitalization of the NCUSIF over five to eight years.This legislative course of action requires strong and immediate support from our industry and, most critically, the NCUA. Congress passed a continuing resolution last September that must be extended by March 5. Continued full funding of the CLF must be included; and, in our view, the legislation must also include language authorizing all credit unions to use the CLF for capital and liquidity purposes.Time is short and we must act now-with the support of the NCUA-to continue to build the momentum for action by Congress by March 5.