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February 2, 2009 - As the 111th Congress continues to debate stimulus bills and other reforms to shore up the economy, the issue of credit unions and access to the Troubled Asset Relief Program (TARP) remains unresolved.
The Emergency Economic Stabilization Act of 2008, which established the TARP, includes credit unions in its definition of an insured depository institution. However, the Bush administration did not address how cooperatives would access TARP funds. Credit unions’ capital standards prohibit the acceptance of outside funds, like TARP.
H.R. 384, a bill to amend and reform TARP, includes an amendment that could allow credit unions to access TARP funds by revising the definition of net worth to include a limited form of capital from the government. The bill passed in the House on January 21, but there is no similar bill in the Senate at this time.
National Credit Union Administration (NCUA) Chairman Michael Fryzel has written both the House Financial Services leadership and new U.S. Treasury Secretary Timothy Geithner urging them to provide access to TARP for credit unions. “Guidelines have yet to be established for the participation of member-owned cooperative institutions in the Capital Purchase Program, forestalling another possible option for credit unions in need of assistance as the nation’s economic downturn persists,” wrote Fryzel on January 27. “I am deeply concerned about the second-place status into which credit unions and smaller financial institutions seem to have been placed.”
The Senate voted last week to release the remaining $350 billion in TARP funds to the Obama administration. President Obama committed $100 billion of the funds to assist in foreclosure mitigation. Treasury Secretary Geithner has promised more transparency and accountability for the TARP program and its beneficiaries.
As news develops, NASCUS will keep you posted on its website and publications.
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