NCUA Media Advisory

Fryzel Testifies on Corporate Stabilization Efforts, Legislation

May 20, 2009, Alexandria, Va. --  National Credit Union Administration Chairman Michael E. Fryzel told the House Financial Services Subcommittee on Financial Institutions and Consumer Credit today he supports H.R. 2351, The Credit Union Share Insurance Stabilization Act, noting it “represents a real solution to the problem.”

Fryzel’s statement outlined events surrounding the difficulties in the corporate credit union network.  He described liquidity strains throughout the credit union industry that resulted from unrealized losses from investments in mortgage-backed securities, and discussed stabilizing actions taken by NCUA that included full $41.5 billion Central Liquidity Facility (CLF) borrowing authority, the infusion of capital into U.S. Central Corporate Federal Credit Union by the National Credit Union Share Insurance Fund (NCUSIF), and ultimately the March 2009 conservatorship of the two largest corporates, US Central and WesCorp.  

“I could not permit the corporate system to cease functioning. The impact on retail credit unions and consumers would have been devastating,” Chairman Fryzel told the Subcommittee.

In an effort to further stabilize the system, NCUA developed a plan to replenish the National Credit Union Share Insurance Fund over 7 years. The plan is incorporated into H.R. 2351, The Credit Union Share Insurance Stabilization Act.

Speaking in support of the legislation, Chairman Fryzel noted that the bill

1. “Preserves the strong, well-capitalized Insurance Fund that Congress, NCUA and the public demand;
2. Enables credit unions to bear the costs in a more manageable way; and
3. Complies with GAAP accounting, which is mandated by the Federal Credit Union Act and which must be adhered to, if we are to maintain public confidence in the industry.

“I welcome and appreciate your support for this Plan,” Fryzel said. “Congress has been a very responsive partner to NCUA during this time of financial difficulty, and I am grateful that the House has approved the Plan.”

Chairman Fryzel also described a broad set of corporate reforms initiated by NCUA that will address investment authority, risk concentration, corporate governance and other aspects of corporate credit union operation.  “This new rule will yield a stronger, more durable corporate network that will better serve the needs of credit union members.” 

“My commitment…is to make certain that NCUA puts the hard lessons we have learned to good use. I will look to the industry and to Congress for input. I will incorporate the best ideas we have at our disposal. And above all I will keep a clear focus on the central mission of protecting credit union members.” 

Chairman Fryzel’s testimony is available online at http://www.ncua.gov/NewsPublications/News/Testimony.aspx.

The National Credit Union Administration is the independent federal agency that regulates charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, also operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of nearly 90 million account holders in all federal credit unions and the majority of state-chartered credit unions.

 

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