Restrictive capital requirements combined with the inability to raise secondary capital has left even well-managed CUs completely defenseless to the first-lien the system has on their capital. (Restrictions include asset-risk weighting and the minimum requirement that is 40% higher than banks). The NCUA has the statutory authority via the deposit insurance fund to use every credit union's entire net worth to pay for problems in the system. While the trade association proposal to allow for secondary capital is an attempt at a solution, the practical reality is that in current form, the risks outweigh any remote benefit. Meanwhile, risk to current capital is looming.

Central to the competitive disadvantage of CUs compared to banks is the fact that banks don't have a corporate credit union bail out, the cost of which appears significant considering that the $21 billion in unrealized losses represents approximately 300% of the NCUSIF.

Competitive considerations also include that the well-managed bank, unlike the well-managed CU, has layers of protection for its capital, such as risk-based FDIC premiums; access to the capital markets and TARP; greater earnings due to more flexible regulations; allowing private equity firms to invest capital in banks; encouraging foreign banks to acquire troubled U.S. banks; the first joint transaction with an outside firm to remove troubled assets from a bank. The FDIC defends both its fund and the capital of well-managed banks while also dealing with troubled banks.