the past two years, deposit insurance options have been
a growing topic for credit unions. Early in 2000 the Western
Roundtable appointed a study group. This group commissioned
a report on the NCUSIF by Callahan and Associates. There
was a presentation at the National Roundtable meeting in
May. The need for reform and options was directly addressed
at each Renaissance Commission hearing. At the end of the
year, NCUA continued their misappropriation of the earnings
of the fund by increasing the transfer rate to cover over
2/3 of the NCUA's total expenditures. This money should
have been kept in reserve for funding insurance losses.
biggest story may be that the FDIC is now actively proposing
(not yet in legislative form, however) to convert the FDIC
funds to mutual ownership. That is, the banks would own
''their'' fund. In a December 26 American Banker
article, the lead stated that this ''innovative idea
is catching on with bankers and regulators.''
article goes on to note: ''The FDIC's proposal mirrors
the current credit union model in which institutions put 1%
of their deposits into a fund but can still count the money
as theirs.'' How does the ABA feel about this? ''It
is a very attractive model,'' says James Chessen, chief
economist for the ABA. Remember when the bankers were attacking
the NCUSIF for ''double counting!
that the origins of the NCUSIF model were the cooperatively
insured funds at the state level. I believe that the NCUSIF
model is increasingly flawed and that the cooperative model
needs to be reinvented. It is doubtful that NCUA can reverse
course and give up the fleecing of ''their'' golden
adoption of reform at the federal level by the FDIC may open
the way for action to broaden private options for all credit
unions. The one multi-state fund operating and competing in
nine states is ASI currently in the midst of strategic change.
One of the broad objectives is to grow from the current $6.2
billion of insured shares to over $10 billion. This should
provide a large enough base to insure all but perhaps the
top three credit unions in the country.
are a number of other areas where ASI is changing but the
bottom line is that insurance options are a system-wide effort,
not something a single firm can accomplish by itself. The
exciting part about the effort to create true options to the
NCUSIF is that a whole new vision of the role of the insurer
is under development. Not only is expanded member coverage,
differential pricing and more effective oversight being discussed,
but also the principle that the insurer is a business partner
promoting the well being of all of its members, not merely
to rescue a troubled few, at the core of the efforts.
tuned in 2001. The stronger the options available for credit
unions the greater the probability that NCUA might change
its approach to the NCUSIF. If the FDIC moves, then credit
union insurance reform may ride on the legislative coattails.