The old adage of "if it ain't broke, don't fix it," doesn't hold much weight on Capital Hill these days.
Case in point, the latest legislative tinkering with the financially sound credit-union industry. Congress wants to lump credit unions (CUs) in with the S&L crisis and troubled banks - possibly to get at the secure credit union deposit insurance fund.A new House banking bill, the Deposit Insurance and Regulatory Reform Act of 1991 (HR6) sponsored by Congressman Henry Gonzalez (D-Texas), could effectively destroy or severely damage America's 14,648 credit unions and the 63.3 million families who are members by placing them at the mercy of the FDIC.
The bill's highlights include:
ELIMINATION of the National Credit Union Share Insurance Fund, the insurance safety net backing CU deposits. HR6 would place all fund assets under the jurisdiction of the financially troubled FDIC. The threat is that the FDIC would then have the option to tap the CU's insurance fund to shore up troubled banks and S&Ls. Currently, the CU insurance fund is totally solvent, separate and untouchable by the cash-strapped FDIC.
REMOVAL of the National Credit Union Administration (NCUA), the body that regulates credit unions, and the NCUA Board. Despite the fact neither has any problems, their powers would be transferred to the FDIC, thus making the FDIC a "super-regulator," monitoring the nation's CUs, along with banks and S&Ls.
WEAKEN the CU deposit insurance fund. Currently all federally insured CUs must put 1 percent of their assets into the insurance fund and pledge the balance of their assets to the fund should it need additional cash. As a result, the American taxpayer has never shelled out a dime for a failed CU. HR6 would replace this sound business practice with a premium type of funding, similar to that used by banks and S&Ls.
The question is, why the meddling? CUs aren't in trouble, so why shouldn't they be left alone to continue prospering as they've done since 1934 when the Credit Union National Association (CUNA) was founded? HR6 would have a disastrous effect on credit unions and their members, said Dan Plauda, CUNA director.
There is some CU support in Congress. Frank Annunzio (D-Ill.), chairman of the House subcommittee on financial institutions, prefers the National Credit Union Share Insurance Fund the way it is. "The fund is the only federal insurance fund that is on sound footing and in no danger of needing taxpayer help," said Annunzio. "Only a mother's arms are safer."
There is good reason to praise the insurance fund as it now stands. At the end of 1990, it had an equity ratio of $1.28 per $100 on deposit. The banks insured by the FDIC had a ratio of only $0.70 per $100. Losses incurred when credit unions failed in the past were covered by the interest earned on the deposits in the insurance fund.
The fund's principal has never even been touched. The same cannot be said of the S&L and bank deposit insurance funds. On Feb.28 more than 15,000 CU members rallied in Washington, D.C. They presented a petition to Congress - the largest ever - with more than 5 million signatures that said, "Leave the CU system alone."
Credit unions are not part of the financial industry's current problems, said Jerry Karbon spokesman for CUNA. "We don't think we should be incorporated into a solution for the banks and S&Ls."