Will the TARP cover CUs? Should it?

by Ron Daly

I could sit and write a long, winding blog post about this, but sometimes it's better to give people bricks and let them build the house. 

Let's sum up what we know: 

1) Rep. Joe Baca (D - California) is actively seeking a means for CUs to seek coverage under the TARP plan. (From the CU Journal online). 

2)  Reps. Donald Manzullo (R - Illinois), and Brad Sherman (D - California) pointed out in congressional talks with the House Financial Services Committee that CUs are fairly strong and "have money to lend". Chairman Barney Frank (D - Massachusetts) put forth the measure HR 384. What it would do: 

"The measure, introduced by Committee Chairman Barney Frank, D-Mass., would clarify Treasury’s authority in the program and require that between $40 and $100 billion of the funds go toward foreclosure mitigation. In addition, the measure would make permanent last year’s temporary increase in federal deposit and share insurance increase to $250,000."

   (from NAFCU.org).

3) The Federal Credit Union Act (FCUA) - written in 1934 by Roy Bergengren, Pierre Jay, and most notably Edward Filene (from Wikipedia)-  stipulates that credit unions cannot count money from outside sources as capital. CUNA President/CEO Dan Mica argued for the measure in a letter to Chariman Frank, saying that CUs needed better considerations and should be allowed to accept government money and list it as a portion of their net worth (from CUNA release). 

4) The Associated Press/American people are growing suspicious of where, exactly, TARP money is going. Many big banks aren't saying (from Finance.Yahoo.com).

...so what do we think, folks? 

Would adding transparency on the part of the CU industry make a difference? Can we show we'd be better with the money (or more forthcoming with where it's going) than the banks?

All eyes on February, when the committee will be discussing oversight of the Treasury. 

Talk to me, people.

Comments

[Denise Wymore]

Ron,

I wrote about this on my blog today - specifically to CUNA's lobbyist.

http://denisewymore.wordpress.com

I also sent an email to Mr. Donovan. I've heard nothing.

Taking TARP money will be the end of credit unions as we've known them (for 100 years).

You CANNOT be tax-exempt and take taxpayer money.

You CANNOT be a financial cooperative and take taxpayer money.

If credit unions are not outraged by this - they are NOT paying attention.

Thanks for the post. Love the Box.

[Credit Union Warrior]

Not only am I sickened that credit unions would even consider accepting TARP funds, I'm disgusted that the public isn't outraged about the release of the second half of the $700 billion TARP program.

It's clear at this point that CUNA and NAFCU are willing to mortgage the entire movement's future because of a few bad apples. It's also clear that they care little about the reputation cost associated with accepting taxpayer money. I'm further convinced that no matter how much small to medium sized credit unions complain about our trade associations' actions, our voices will continue to be muted by big, poorly managed credit unions that deserve to live with the consequences of their actions.

The problem runs deeper than Mica, Donovan, etc. The problem also rests on the shoulders of those who are responsible for electing league and trade association boards. Too many misguided people have decided that pursuing TARP is a good idea...and too many of them are in the wrong positions. There is absolutely no way that someone who is charged with serving and protecting the movement could in good conscience lobby for inclusion in a program that will destroy public goodwill and the justification for our tax exemption forever.

Anyone who cares about the movement needs to consider: a) Pleading with current trade association leadership to reconsider their stance on TARP; b) Contacting your legislators to let them know that you and your credit union do not support TARP, let alone credit union participation in TARP; and 3) Working to have any TARP supporting elected credit union or trade association official removed from office. Better yet, why not do all three?