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National Credit Union Administration chairman Michael E. Fryzel Thursday called upon Treasury secretary Henry Paulson to reconsider the reversal of the asset purchase function of the Troubled Asset Relief Program (TARP), proposed by the Treasury Wednesday.
Wednesday’s proposal would shift TARP’s main focus to injecting capital into banks and insurers, practically eliminating credit unions from the $700 billion rescue plan.
“Although I can understand the initial actions the Treasury has taken to help the large banks, insurance companies, and other major financial institutions that have faltered or failed,” Fryzel wrote in a letter to Paulson. “I am concerned about the second-place status into which credit unions and other smaller financial institutions have been placed.”
Fryzel said TARP’s asset purchase utility is important to credit unions and others who may need to rid of toxic assets as the credit markets continue to worsen. While the majority of credit unions are not in dire need of such relief, there are some which may require its use to “remain safe, solvent and secure,” he said.
The National Association of Federal Credit Unions joined the NCUA late Thursday in asking the Treasury to remain faithful to TARP’s original purpose.
“NAFCU strongly opposes this drastic shift in policy,” said NAFCU president Fred Becker, in a separate letter to Paulson. “Use of TARP funds for anything other than intended by congress would be an egregious abuse of American taxpayer funds.” Becker said he believed Congress intended taxpayer dollars to purchase troubled assets from any financial institution.
The Treasury took additional heat from lawmakers who “sharply criticized the Treasury” for shifting it’s rescue plan, according to a report by the Wall Street Journal Friday.
Sen. Robert Casey Jr. (D-PA), who sits on the banking committee, told the Wall Street Journal that lawmakers were frustrated “on a number of levels,” because the Treasury wasn’t clear about it’s intentions. Although, other members of Congress — Republicans, particularly — have argued behind closed doors that the $700 billion program granted broad authority to promote financial stability as Treasury sees most needed.
Despite the proposed plan Wednesday, U.S. Federal Reserve chairman Ben Bernanke said Friday officials will “take additional steps” if needed to aid the distressed financial markets, suggesting liquidity measures and interest rate cuts remain on the table.
Write to Kelly Curran at kelly.curran@housingwire.com.
