Congress should consider granting the NCUA the authority to guarantee the deposit insurance at Puerto Rico's cooperativas – credit unions chartered and insured by the Puerto Rico government – an attorney for a number of the cooperativas said.
"We were informed that [Congress] was discussing various scenarios," attorney Jose Sosa-Llorens told CU Times.
Sosa-Llorens, a former commissioner for Financial Institutions of the Commonwealth of Puerto Rico, is an attorney representing 25 of the largest cooperativas on the island. Cooperativas are financial institutions that are insured by a territory government agency, the Corporation for the Supervision and Insurance of Cooperatives. There are more than 100 cooperativas in Puerto Rico in addition to 11 credit unions that are insured by the NCUA.
The cooperativas currently have more than 966,000 members and total assets of $8.47 billion.
Sosa-Llorens said he and others have suggested that Congress provide federal backing, which should be included in any debt restructuring legislation that is considered on Capitol Hill. He cited the crisis that corporate credit unions faced several years ago as the type of intervention that the NCUA might provide.
He said the Treasury Department and the NCUA have been holding discussions in regard to potentially assisting the cooperativas.
An NCUA spokesman said the agency is not discussing federal intervention, however.
"That is an idea of a private sector lawyer and a matter for Congress to decide," NCUA Communications Specialist Ben Hardaway said. "[The] NCUA is not involved in conversations about insuring Puerto Rico's COSSEC-insured cooperativas."
The House Natural Resources Committee held a hearing Wednesday on legislation sponsored by panel Chairman Rob Bishop (R-Utah) and is expected to pass that bill out of the committee on Thursday. That legislation would place the cooperativas under a federal oversight board.
A memo written by Sosa-Llorens and Fernando Vinas-Miranda, who is serving as the cooperativas' financial adviser, stated the cooperativas constitute one of the main institutional investors in commonwealth bonds – investments that could be worth little as the island government teeters on the brink of insolvency.
The Puerto Rico government imposed a debt moratorium on bond payments this week.
"We do not foresee adverse effects immediately," Sosa-Llorens said.
"Most of the credit unions can take the hit," John Mudd, a second attorney who represents one small cooperativa and has written extensively about the crisis. "Some of the co-ops cannot take the hit."
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