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                                                       Calendar No. 177
   104th Congress 1st            SENATE                 Report
         Session
                                                       104-133
_______________________________________________________________________



 
                CREDIT UNION REFORM AND ENHANCEMENT ACT

                               __________

                              R E P O R T

                                 of the

                     COMMITTEE ON BANKING, HOUSING,
                           AND URBAN AFFAIRS
                          UNITED STATES SENATE

                              to accompany

                                 S. 883




   August 9 (legislative day, July 10), 1995.--Ordered to be printed
            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

  ALFONSE M. D'AMATO, New York, 
             Chairman
PAUL S. SARBANES, Maryland           PHIL GRAMM, Texas
CHRISTOPHER J. DODD, Connecticut     RICHARD C. SHELBY, Alabama
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
RICHARD H. BRYAN, Nevada             CONNIE MACK, Florida
BARBARA BOXER, California            LAUCH FAIRCLOTH, North Carolina
CAROL MOSELEY-BRAUN, Illinois        ROBERT F. BENNETT, Utah
PATTY MURRAY, Washington             ROD GRAMS, Minnesota
                                     BILL FRIST, Tennessee
 Howard A. Menell, Staff Director
  Robert J. Giuffra, Jr., Chief 
              Counsel
 Philip E. Bechtel, Deputy Staff 
             Director
Steven B. Harris, Democratic Staff 
    Director and Chief Counsel
   Joseph A. Jiampietro, Counsel
 Martin J. Gruenberg, Democratic 
          Senior Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     1
Purpose and Summary..............................................     1
History of the Legislation.......................................     4
Background.......................................................     5
    History of the Credit Union System...........................     5
    Structure of the Credit Union System.........................     5
    The National Credit Union Administration.....................     6
The Need for Legislation.........................................     9
Purpose and Scope................................................     9
    Insured Credit Union Investments in Other Credit Unions......     9
    Activities of Insured State-Chartered Credit Unions..........    10
    Limits on Loans to a Single Obligor and Minimum Capital 
      Requirements for Corporate Credit Unions...................    12
    NCUA Liquidation and Conservatorship Authority for Federally 
      Insured State-Chartered Credit Unions......................    13
Section-by-Section Analysis of S. 883............................    14
    Section 1. Short title.......................................    14
    Section 2. Insured Credit Union Investments in Other Credit 
      Unions.....................................................    14
    Section 3. Activities of Insured State-Chartered Credit 
      Unions.....................................................    14
    Section 4. Corporate Credit Unions...........................    15
    Section 5. Authority of the NCUA Board to Place Federally 
      Insured, State-Chartered Credit Unions into Liquidation....    15
    Section 6. Consultation for Conservatorships of Federally 
      Insured, State-Chartered Credit Unions.....................    15
Regulatory Impact Statement......................................    15
Changes in Existing Law..........................................    18
Cost of the Legislation..........................................    16
      
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-133
_______________________________________________________________________



                CREDIT UNION REFORM AND ENHANCEMENT ACT

                                _______


   August 9 (legislative day, July 10), 1995.--Ordered to be printed

Mr. D'Amato, from the Committee on Banking, Housing, and Urban Affairs, 
                        submitted the following

_______________________________________________________________________


                              R E P O R T

                         [To accompany S. 883]
                              introduction

    On June 28, 1995, the Senate Committee on Banking, Housing, 
and Urban Affairs (the ``Committee'') marked up and ordered to 
be reported S. 883, the Credit Union Reform and Enhancement Act 
(``CURE''), a bill to strengthen the safety and soundness of 
federally insured credit unions and to protect the National 
Credit Union Share Insurance Fund (``NCUSIF'') from losses due 
to high risk activities.
    The Committee vote was unanimous to adopt S. 883 without 
amendment and to report it to the Senate for consideration. 
Nine Republicans and seven Democrats voted in favor of adopting 
and reporting the bill. Voting to report the bill were Chairman 
D'Amato and Senators Gramm, Shelby, Bond, Mack, Faircloth, 
Bennett, Grams, Frist, Sarbanes, Dodd, Kerry, Bryan, Boxer, 
Moseley-Braun and Murray. No senators opposed the bill.
                          purpose and summary

    Over the last two decades, the credit union industry in the 
United States has undergone rapid change. In the early 1970s, 
almost 24,000 credit unions were operating in the United 
States.\1\ These credit unions had $18 billion in total assets, 
23 million members, no federal deposit insurance, asset powers 
limited to short-term small consumer loans, and restricted 
membership requirements.\2\ Today, 11,991 credit unions have 
federal deposit insurance, total assets of $289.5 billion, more 
than 65 million members, the authority to offer a wide range of 
consumer and business loans and investment services, and 
relaxed membership requirements.\3\
    \1\ General Accounting Office, ``Credit Unions: Reforms for 
Ensuring Future Soundness,'' July 1991, p. 2 (hereinafter, GAO Report).
    \2\ Id.
    \3\ See, National Credit Union Administration, 1994 Annual Report 
(hereinafter, 1994 NCUA Annual Report).
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    As federally insured credit unions grow and evolve into 
more diversified financial institutions, it is important that 
the systems intended to ensure their safety and soundness and 
minimize risk to the NCUSIF change as well. In some cases, the 
National Credit Union Administration (``NCUA'') has been able 
to modernize and improve these systems by regulation. In other 
cases, however, legislation is necessary.
    The purpose of S. 883 is to strengthen the safety and 
soundness of the credit union system and to protect the 
taxpayer-backed NCUSIF from losses due to the increasingly 
risky activities of credit unions. Specifically, S. 883 
intends: (1) to limit certain high risk investments by 
federally insured credit unions; (2) to ensure the prompt 
detection of unsafe and unsound practices; and (3) to ensure 
the prompt resolution of problem and failing credit unions. To 
achieve this purpose, S. 883 would:
         Prohibit federally insured credit unions from 
        investing in non-federally insured credit unions. Such 
        investments currently place federally insured credit 
        union deposits outside the scope of federal supervision 
        and regulation.
         Prohibit federally insured, state-chartered 
        credit unions from engaging in high risk activities--
        such as direct equity investments and investments in 
        foreign country bonds--that are not permitted under 
        federal law, unless the NCUA determines that the 
        activity does not pose a significant risk to the 
        federal insurance fund or unless the activity was 
        authorized pursuant to the laws of the chartering state 
        and utilized by at least one credit union in that state 
        on May 1, 1995.
         Require the NCUA to set limits on loans and 
        investments by a corporate credit union to a single 
        obligor and establish minimum capital requirements for 
        corporate credit unions.
         Allow the NCUA to appoint itself as 
        liquidating agent for a federally insured, state-
        chartered credit union that is insolvent or bankrupt, 
        after prior consultation with the state regulator.
         Allow the NCUA to implement a timely 
        conservatorship for a federally insured, state-
        chartered credit union by eliminating the 30-day 
        waiting period that can be imposed upon the NCUA under 
        current law. Prior consultation with the state 
        regulator would, however, continue to be required.
    S. 883 is the result of a bipartisan effort by the 
Committee to respond to discrete weaknesses in the regulation 
and federal insurance systems for credit unions. It is based on 
many months of study, public hearings, extensive meetings with 
the GAO, federal regulators and the affected industries, new 
research and a thorough review of the existing body of work in 
this area. S. 883 was carefully drafted to achieve a balance 
between strengthening the safety and soundness of the credit 
union system, minimizing risk to the taxpayer-backed federal 
insurance fund (the NCUSIF), and preserving the benefits of the 
current dual chartering system. S. 883 would achieve this 
balance in the following ways:
    First, S. 883 would grant the NCUA limited powers to 
minimize risk to the NCUSIF. It must be recognized that the 
NCUSIF is backed by the full faith and credit of the United 
States government and is not a self-financing industry program. 
The NCUA, not the state credit union supervisors, bears 
ultimate responsibility for protecting the NCUSIF and the 
nation's taxpayers from losses due to high risk activities. S. 
883 would grant the NCUA the powers necessary to protect the 
NCUSIF from such losses. As is described more fully below, 
failing to give the federal regulator adequate authority over 
federally insured state savings associations was one of the 
causes of the savings and loan debacle.
    Second, the limited powers granted to the NCUA are 
comparable to but less broad than the powers already granted to 
the Federal Deposit Insurance Corporation (``FDIC'') over 
federally insured, state-chartered savings associations and 
banks. Under current law, for example, the FDIC can prohibit 
federally insured, state-chartered savings associations and 
banks from ``engaging in any activity'' that is not permitted 
for their federally chartered counterparts, a broader authority 
than is granted to the NCUA by S. 883.\4\ In addition, the FDIC 
can place federally insured, state-chartered savings 
associations and banks into liquidation even prior to 
insolvency or bankruptcy, an authority not provided to the NCUA 
in this bill.\5\
    \4\ See, 12 U.S.C. 1831a and e.
    \5\ See, 12 U.S.C. 1831o(h)(3). See also, Fax from Neil D. Levin, 
Superintendent of Banks, State of New York, to the Committee, May 19, 
1995 (Based on its analysis of S. 883, the New York State Banking 
Department concluded that granting the NCUA the authority to initiate 
credit union liquidation or conservatorship ``would be consistent with 
authority of [the Office of Thrift Supervision] under 12 USC 1464 and 
FDIC under 12 USC 1821'' over federally insured, state chartered 
thrifts and banks and, therefore, found ``no reason to object to these 
provisions in the proposed legislation.'').
    Third, S. 883 would only apply to federally insured credit 
unions. It would not apply to state-chartered credit unions 
that are privately insured or uninsured. State-chartered credit 
unions are only subject to S. 883 if they voluntarily choose--
or are required by their state legislatures--to have federal 
insurance. If a state credit union benefits from federal 
deposit insurance, it should be required to comply with the 
safety and soundness regulations put in place to protect the 
federal insurance fund and the nation's taxpayers from losses.
    Fourth, S. 883 would not prohibit state-chartered credit 
unions from exercising any asset powers that are currently 
being utilized. S. 883 contains a ``grandfather'' clause that 
exempts all asset powers currently authorized pursuant to a 
state's laws and utilized by a credit union in that state on 
May 1, 1995. This ``grandfather'' clause was included in S. 
883, because most federally insured, state-chartered credit 
unions currently are not utilizing asset powers that pose a 
significant risk to the NCUSIF.
    Fifth, S. 883 would not prohibit state legislatures and 
regulators from granting state chartered credit unions new 
asset powers that are broader than those granted to federally 
chartered credit unions. Rather, it would prohibit federally 
insured, state-chartered credit unions from engaging in such 
asset powers, only if the NCUA Board of Directors (the ``NCUA 
Board'') determines that such powers pose ``a significant 
risk'' to the taxpayer-backed insurance fund. Thus, S. 883 
would allow federally insured, state chartered credit unions to 
experiment with new powers and other innovation consistent with 
maintaining safety and soundness and minimizing risk to the 
NCUSIF.
    S. 883 has received the support of the NCUA, the General 
Accounting Office (``GAO''), and the Treasury Department. The 
Chairman of the NCUA, Norman E. D'Amours, stated that S. 883 
``will greatly strengthen NCUA's ability to preserve the safety 
and soundness of federally-insured credit unions. You have my 
full support for its speedy enactment.'' \6\ The Director of 
the Financial Institutions and Market Issues Division of the 
GAO, James L. Bothwell, noted that S. 883 ``would enhance the 
safety and soundness of federally insured credit unions and 
further the protection of the National Credit Union Share 
Insurance Fund.'' \7\ The Assistant Secretary of the Treasury, 
Richard S. Carnell, expressed the Clinton Administration's 
strong support for the reforms contained in S. 883:

    \6\ Letter from Norman E. D'Amours, Chairman of the NCUA, to 
Senator Alfonse M. D'Amato, May 24, 1995.
    \7\ Letter from James L. Bothwell, Director, Financial Institutions 
and Market Issues, GAO, to Senator Alfonse M. D'Amato, May 24, 1995.
---------------------------------------------------------------------------
        These reforms, previously approved by the Senate in 
        1991, respond to potential weaknesses in the credit 
        union system documented in the General Accounting 
        Office's 1991 report, ``Credit Unions: Reforms for 
        Ensuring Future Safety and Soundness.'' The reforms 
        would strengthen the credit union system, protect the 
        National Credit Union Share Insurance Fund, and help 
        credit unions continue their record of meeting 
        Americans' financial needs safely and soundly. We urge 
        prompt enactment of S. 883.\8\
    \8\ Letter from Richard S. Carnell, Assistant Secretary of the 
Treasury, to Senator Alfonse M. D'Amato, June 26, 1995.
---------------------------------------------------------------------------

                       history of the legislation

    On June 6, 1995, the Chairman of the Committee, Senator 
Alfonse M. D'Amato, and the Committee's Ranking Member, Senator 
Paul S. Sarbanes, introduced S. 883.
    On February 28 and March 8, 1995, the Committee held 
hearings to examine the condition of the credit union industry 
and the failure of Capital Corporate Federal Credit Union, the 
largest failure by a credit union in American history. 
Witnesses testifying on February 28 included Norman E. 
D'Amours, Chairman, NCUA; Charles A. Bowsher, Comptroller 
General of the United States, GAO; James R. Bell, President, 
U.S. Central Credit Union; Harold A. Black, Professor, 
University of Tennessee, Knoxville; Edward J. Fox, President 
and Chief Executive Officer, Mid-Atlantic Corporate Federal 
Credit Union; and Richard M. Johnson, President and Chief 
Executive Officer, WesCorp Federal Credit Union. Witnesses 
testifying on March 8 included Norman E. D'Amours, Chairman, 
NCUA; James L. Bothwell, Director, Financial Institutions and 
Market Issues, General Government Division, GAO; James R. Bell, 
President, U.S. Central Credit Union; Albert E. DePrince, 
Professor, Middle Tennessee State University, Nashville; Edward 
J. Fox, President and Chief Executive Officer, Mid-Atlantic 
Corporate Federal Credit Union; and Richard M. Johnson, 
President and Chief Executive Officer, WesCorp Federal Credit 
Union.
    On June 28, 1995, the Committee marked up and ordered to be 
reported S. 883. The Committee vote was unanimous to adopt S. 
883 without amendment and to report it to the Senate for 
consideration. Nine Republicans and seven Democrats voted in 
favor of adopting and reporting the bill. Voting to report the 
bill were Chairman D'Amato and Senators Gramm, Shelby, Bond, 
Mack, Faircloth, Bennett, Grams, Frist, Sarbanes, Dodd, Kerry, 
Bryan, Boxer, Moseley-Braun and Murray. No senators opposed the 
bill.

                               background

The Credit Union System

    Credit unions are cooperative not-for-profit associations 
in which members, who are the owners, deposit funds and obtain 
credit. Credit union members must have a ``common bond,'' such 
as working for the same employer, which is specifically defined 
in the credit union's charter. As of June 30, 1994, there were 
12,446 credit unions, with total assets of $295.8 billion and 
with more than 65 million members.\9\ While the credit union 
industry is quite large in the aggregate, a majority of the 
credit unions are relatively small and many are managed 
primarily by volunteers.
    \9\ Callahan and Associates, 1995 Credit Union Directory, October 
1, 1994, p. 1.
---------------------------------------------------------------------------

History of the Credit Union System

    From their introduction into the United States in the early 
20th century, credit unions have played a special role in the 
U.S. financial system, promoting thrift among their members and 
providing services to those members that were denied to them by 
larger depository institutions. One of the stated purposes of 
the Federal Credit Union Act, passed in 1934 to provide federal 
charters for credit unions, was ``to make more available to 
people of small means credit for provident purposes.'' \10\
    \10\ Federal Credit Union Act, 48 Stat. 1216 (codified as 12 U.S.C. 
1751 et seq).
---------------------------------------------------------------------------

Structure of the Credit Union System

    The credit union industry can best be visualized as a 
triangle. 12,446 natural person credit unions form the base of 
the industry structure. Natural person credit unions primarily 
serve individuals, who are their member-owners. These natural 
person credit unions are in turn the member-owners of 44 
corporate credit unions. These corporate credit unions provide 
liquidity and investment services to other credit unions. The 
corporate credit unions, in turn, are the members-owners of a 
single, very large corporate credit union--U.S. Central Credit 
Union--into which they can invest all or a portion of their 
assets and from which they can borrow to meet liquidity needs.
    Credit unions, like banks and thrifts, are chartered by 
both the federal government and by state governments. As of 
December 31, 1994, 7,497 credit unions were federally chartered 
and federally insured, and 4,494 credit unions were state 
chartered and federally insured.\11\ As of that date, only 617 
state-chartered credit unions were not federally insured but 
were, instead, insured by private, cooperative entities.\12\ 
Thus, more than 95% of all credit unions (11,991 of 12,608) are 
federally insured.
    \11\ 1994 NCUA Annual Report, pp. 40-41.
    \12\ Data compiled by the NCUA from various sources.
---------------------------------------------------------------------------

The National Credit Union Administration

    All federally insured credit unions--whether federally 
chartered or state charted--are regulated and supervised by the 
NCUA. The NCUA is an independent federal agency administered by 
a three-member board. Board members are appointed to 6-year 
terms with the advice and consent of the United States Senate. 
The NCUA administers the NCUSIF, which was established in 1970 
to provide federal share (deposit) insurance for credit unions. 
To protect the insurance fund, the NCUA has both general 
rulemaking authority and enforcement powers to address unsafe 
or unsound conditions and violations of laws or regulations. 
The NCUA's authority includes cease and desist powers, civil 
money penalty authority, removal and prohibition authority and 
the power to terminate federal insurance.

                        the need for legislation

    Earlier this year Capital Corporate Federal Credit Union of 
Lanham, Maryland (``Cap Corp'') failed--the largest credit 
union failure in United States history. Cap Corp had invested 
nearly 70 percent of its $1.5 billion in assets in a form of 
derivative instrument called a collateralized mortgage 
obligation (``CMO''). These highly interest rate sensitive 
instruments experienced significant losses in value as interest 
rates rose in 1994. The losses became so severe that the NCUA 
took over Cap Corp's operation by placing it into 
conservatorship on January 31, 1995 and ultimately placed it 
into liquidation.\13\
    \13\ Id.
---------------------------------------------------------------------------
    On April 13, 1995 the NCUA announced that the remaining 
assets, liabilities, and field of membership of Cap Corp had 
been acquired by Mid-Atlantic Corporate Federal Credit Union of 
Harrisburg, Pennsylvania. Before its acquisition, Cap Corp had 
experienced investment losses of $61 million, all of which were 
absorbed by Cap Corp's capital. As a result, the NCUSIF itself 
did not incur losses due to Cap Corp's failure.\14\
    \14\ Id.
---------------------------------------------------------------------------
    The failure of Cap Corp raised serious questions about the 
adequacy of the NCUA's regulation and supervision of corporate 
credit unions. A corporate credit union is a specialized form 
of credit union which accepts deposits only from other credit 
unions and credit union organizations rather than individuals. 
As of December 31, 1994, there were 45 corporate credit unions, 
including U.S. Central.\15\ Corporate credit unions were 
created in the 1970's principally to serve as a source of 
liquidity for their member credit unions during periods when 
deposits were low. Over the years, however, they also evolved 
into sources of investment and payment services for their 
member credit unions.
    \15\ Id.
    Due to increasing concern about the corporate credit union 
system, the NCUA Chairman, Norman E. D'Amours, appointed in 
early 1994 a Corporate Credit Union Study Committee, made up of 
five independent financial experts, to conduct a thorough 
review of the regulation of corporate credit unions. That 
committee's report, which was released on July 26, 1994, 
provided a careful and critical evaluation of the investment 
behavior and risk-taking of the corporate credit union 
system.\16\ The report made the following findings:
    \16\ Black, DePrince, Ford, Kudlinski, Schweitzer, ``Corporate 
Credit Union Network Investments: Risks and Risk Management,'' 1994.
---------------------------------------------------------------------------
           ``Corporate credit unions . . . are assuming 
        more risk in their investment practices and in their 
        portfolios than in the past.'' \17\
    \17\ Id., p. i.
---------------------------------------------------------------------------
           Corporate credit union ``investment 
        activities are becoming more complex and will continue 
        to become increasingly complex in the future.'' \18\
    \18\ Id.
---------------------------------------------------------------------------
           ``Primary capital levels [for corporate 
        credit unions] are, on average, inadequate.'' \19\
    \19\ Id., p. ii.
---------------------------------------------------------------------------
           ``Credit analysis procedures [utilized by 
        corporate credit unions] have not kept pace with the 
        increased volume of funds flowing into the system.'' 
        \20\
    \20\ Id., p. iii.
---------------------------------------------------------------------------
           Corporate credit unions ``use derivative 
        instruments to hedge interest rate risk and create 
        synthetic securities for other corporates and natural 
        person credit unions.'' \21\
    \21\ Id., p. iv.
---------------------------------------------------------------------------
    The GAO, in an extensive 1991 report on the credit union 
industry, also raised particular concerns about the condition 
of the corporate credit union system. The 1991 GAO report 
stated:

        Changes are needed to augment NCUA's currently 
        incomplete regulatory and supervisory authority over 
        all corporates and provide for more carefully defined 
        asset and liability powers and higher capital 
        requirements.\22\
    \22\ GAO Report, p. 139.

    Prompted by the failure of Cap Corp, the Committee held 
hearings on February 28 and March 8, 1995 to examine the 
condition of the corporate credit union system and the 
performance of the NCUA. In testimony presented to the 
Committee, both the NCUA Chairman, Norman E. D'Amours, and the 
Comptroller General of the GAO, Charles Bowsher, confirmed the 
findings of the reports issued by their agencies.
    Testimony at the Committee's hearings raised concerns that 
taxpayers could be forced to bail out credit unions that may be 
speculating in high risk derivative instruments. Like Cap Corp, 
many credit unions, both corporate and natural person, have 
substantial investments in CMOs and have experienced losses in 
the market value of these investments due to rising interest 
rates. Corporate credit unions have particularly high levels of 
CMO holdings and have incurred significant decreases in the 
value of these holdings. As of December 31, 1994, 25 of the 45 
corporate credit unions, with total assets of $54.6 billion, 
held CMOs valued at $9.5 billion.\23\ Almost 20% of corporate 
credit union assets were invested in CMOs. Of the 25 corporate 
credit unions holding CMOs, eight have 20% or more of their 
total assets invested in CMOs.\24\ As of February 22, 1995, 
those corporate credit unions had unrealized losses in their 
investment portfolios of $742 million, a figure equal to more 
than 63 percent of their primary capital.\25\ Natural person 
credit unions, which primarily serve individuals, also have 
invested in CMOs. As of December 31, 1994, 1,179 of the 11,991 
natural person credit unions, with total assets of $113.6 
billion, held CMOs valued at $6.7 billion, or 5.9% of 
assets.\26\ Of those credit unions, 15 have 30% or more of 
their assets invested in CMOs.\27\
    \23\ Data compiled by the NCUA from various sources, including call 
reports.
    \24\ Id.
    \25\ Id.
    \26\ Id.
    \27\ Id.
    The low capital levels of corporate credit unions have 
heightened concerns about the health of the corporate credit 
union system. As of December 31, 1994, only eight of the 45 
corporate credit unions had capital that was greater than four 
percent of their total assets, and, including Cap Corp, 11 
corporate credit unions had capital of less than 2.5%.\28\ As 
of that date, U.S. Central Credit Union, which provides 
services to other corporate credit unions, had a capital level 
of 1.1%. As of December 31, 1994, U.S. Central Credit Union had 
total assets of almost $19 billion and an unrecognized loss on 
investments equal to 33.7% of equity capital.\29\ U.S. Central 
Credit Union is the largest credit union in the United States 
and is federally insured.
    \28\ Knecht, ``New Credit Union Rules Planned,'' Wall Street 
Journal, June 20, 1995, p. C1.
    \29\ Id.
---------------------------------------------------------------------------
    The NCUA announced at the Committee's hearings that it was 
in the process of developing a new set of regulations that 
would raise capital requirements, tighten investment authority, 
and raise management standards for corporate credit unions. The 
stated objective was to return corporate credit unions to their 
original mission of serving as liquidity centers and safe 
havens for their members' funds. NCUA had previously 
established a new Office of Corporate Credit Unions, hired 
additional corporate examiner staff, and expanded training for 
corporate examiners.\30\ The NCUA issued its new corporate 
credit union regulations on April 13, 1995, and they were 
published in the Federal Register on April 26, 1995. The 
comment period ends on August 25, 1995. The NCUA had indicated, 
based on its review of the comments already received, that a 
second proposal will be issued in the fall of 1995.\31\
    \30\ Testimony of Norman E. D'Amours, Chairman, NCUA, before the 
Committee on Banking, Housing and Urban Affairs, United States Senate, 
September 22, 1994.
    \31\ NCUA Press Release, July 14, 1995.
---------------------------------------------------------------------------
    Although the new regulations address many of the problems 
relating to corporate credit unions that were identified by the 
NCUA and the GAO, there are a small number of matters that 
require legislative action. S. 883 would make those changes, 
some of which would apply to natural person credit unions as 
well as corporate credit unions.

                           purpose and scope

    S. 883 responds to several discrete weaknesses in the 
credit union system. S. 883 would address those weaknesses in 
the least intrusive manner consistent with its purpose of 
strengthening the safety and soundness of the credit union 
system and minimizing risk to the taxpayer-backed NCUSIF.

Insured Credit Union Investments in Other Credit Unions

    Federally insured credit unions invest a significant 
portion of their assets in corporate credit unions. As of 
December 31, 1994, federally insured credit unions had invested 
$24 billion in corporate credit unions, an amount equal to 
33.65% of total investments of $101.5 billion and over eight 
percent of total assets of $289.5 billion.\32\
    \32\ National Credit Union Administration, ``1994 Yearend 
Statistics for Federally Insured Credit Unions,'' p. 104.
---------------------------------------------------------------------------
    Five of the 43 corporate credit unions are state-chartered 
and uninsured and, therefore, outside the authority of the 
NCUA. The Federal Credit Union Act explicitly authorizes 
federally insured credit unions to invest in any corporate 
credit union, regardless of whether that corporate credit union 
has federal or private insurance. As a result, federally 
insured credit unions can and do invest in uninsured corporate 
credit unions.
    Investments in such uninsured credit unions pose a 
significant risk to the NCUSIF and the safety and soundness of 
the credit union system. Since uninsured credit unions are 
outside the full supervisory and regulatory authority of the 
NCUA, they can engage in broader and potentially riskier 
activities than federally insured corporate credit unions. 
Moreover, if an uninsured corporate credit union were to fail, 
the deposits of its member natural person credit unions would 
not be insured. The failure of one of these uninsured corporate 
credit unions, therefore, could result in significant losses 
being passed on to federally insured credit unions and a 
domino-like failure of these federally insured credit unions.
    The GAO's 1991 report on the credit union system raised 
serious concerns about the incomplete regulation and 
supervision of corporate credit unions:

        NCUA has incomplete regulatory and supervisory power 
        over some [corporate credit unions] because of their 
        charter and share insurance status. Because of (1) the 
        high concentration of credit union assets in their 
        respective corporates, (2) the low GAAP net worth of 
        the corporate network in relation to its assets, and 
        (3) the fact that more than 90 percent of the aggregate 
        credit union deposits in corporates are not federally 
        insured, the safety and soundness of the entire 
        industry clearly requires that special attention be 
        paid to the safe and sound operation of the corporates 
        and U.S. Central.\33\
    \33\ GAO Report, p. 138.

The GAO concluded that ``NCUA authority to regulate and 
supervise corporates is incomplete, and NCUA does not fully use 
what authority it does have.'' \34\ Based on its analysis, the 
GAO recommended that federally insured credit unions be 
prohibited from investing in non-federally insured credit 
unions.
    \34\ Id., pp. 162-163.
---------------------------------------------------------------------------
    S. 883 follows this recommendation. It would prohibit 
federally insured credit unions from investing in non-federally 
insured credit unions. It would force all corporate credit 
unions with federally insured credit union deposits to obtain 
federal insurance, and, therefore, would bring all investments 
in corporate credit unions under the jurisdiction of the NCUA. 
Thus, S. 883 would reduce the potential for inappropriately 
risky investing that could pose an enormous risk to the NCUSIF.
Activities of Insured State-Chartered Credit Unions

    The Committee is concerned that the existence of federal 
deposit insurance may, in some cases, give states an incentive 
to gamble at federal expense. The Federal Credit Union Act 
limits the asset powers of federally-chartered credit unions, 
but these limits do not apply to federally insured, state-
chartered credit unions.\35\ As a result, 39 states currently 
grant state-chartered credit unions broader and potentially 
riskier asset powers than those granted to federally chartered 
credit unions. None of these states, however, insure these 
riskier activities; they continue to rely primarily on the 
NCUSIF. One important lesson of the savings and loan debacle 
was that federally insured, state-chartered institutions can, 
with broad and potentially risky powers granted by state 
legislatures and regulators, present enormous risks to a 
federal insurance fund. S. 883 would limit the ability of 
federally insured, state-chartered credit unions to engage in 
certain high risk activities that are not permitted under 
federal law.
    \35\ While the NCUA can require a state credit union to reserve for 
its more risky investments, the GAO has noted that additional 
improvements are needed. GAO Report, p. 77.
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    The Federal Credit Union Act limits the asset powers of 
federally chartered credit unions. It authorizes federal credit 
unions to make investments in several general categories:
           Obligations of the United States, and 
        specified government-sponsored enterprises, any 
        instrument issued by or fully guaranteed by any agency 
        of the United States, or issued by a wholly owned 
        government corporation;
           Shares or deposits of any corporate credit 
        union authorized by the credit union's board;
           Investments in organizations providing 
        services associated with the routine operation of 
        credit unions; subject to a limit of one percent of 
        total paid-in and unimpaired capital;
           Shares of federally insured credit unions;
           Banks or institutions the accounts of which 
        are insured by the FDIC, or any national bank or 
        specified other entities operating in accordance with 
        the laws of the state in which the credit union does 
        business; and
           Obligations of or issued by any state or 
        political subdivision, subject to a limit of no more 
        than ten percent of total paid-in and unimpaired 
        capital and surplus with any one issuer (exclusive of 
        general obligations).\36\
    \36\ 12 U.S.C. 1757(7) and (8).
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    These limits do not apply to federally insured, state-
chartered credit unions, however, which comprise over a third 
(37%) of all federally insured credit unions. Data developed by 
the NCUA shows that 39 states currently grant state-chartered 
credit unions broader and potentially riskier investment powers 
than those granted to federally chartered credit unions The 
following are a few examples of investments permitted under 
state laws:
           Six states permit credit unions they charter 
        to invest in foreign country bonds.
           Eight states grant state credit unions the 
        authority to invest in corporate stocks and/or bonds.
           Two states allow their state credit unions 
        to make any investments legal for savings banks or for 
        trust funds in those states, and one state allows its 
        state credit unions to make any investment legal for 
        state banks.
           Five states allow credit unions to invest 
        without limit in their respective state and/or local 
        municipal bonds.
    An important lesson from the savings and loan debacle was 
that such broad state powers can present enormous risks to a 
federal insurance fund.\37\ In its 1993 report to Congress, 
entitled ``Origins and Causes of the S&L; Debacle: A Blueprint 
for Reform,'' the National Commission on Financial Institution 
Reform, Recovery and Enforcement found that: \38\
    \37\ The Committee has previously recognized the risk posed by such 
investments and the need for legislative action to address those risks:

        In the savings and loan crisis, risky State activities 
      created big losses for the Federal deposit insurance 
      system. States that gave their thrifts the most extensive 
      powers, California and Texas, experienced the highest and 
      most costly rates of thrift failure. Cleaning up failed 
      State thrifts in these two states alone cost the Federal 
      government fully 70 percent of its clean-up expenditures in 
      1987 and 1988. Congress addressed this problem in FIRREA by 
      generally limiting State-chartered thrifts to activities 
      permitted for federally chartered thrifts. The Committee 
      believes there is a need for similar limits on State-
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      chartered banks. . . .

Comprehensive Deposit Insurance Reform and Taxpayer Protection Act of 
1991, Report of the Committee on Banking, Housing, and Urban Affairs, 
United States Senate, October 1, 1991, p. 50. The Federal Deposit 
Insurance Corporation Improvement Act (``FIDICIA'') generally limited 
state-chartered banks to activities permitted federally-chartered 
banks. See, FIDICIA, Section 303, 105 Stat. 2349-2350 (1991) (codified 
as 12 U.S.C. 1831a). As noted, the Financial Institutions Reform, 
Recovery and Enforcement Act of 1989 (``FIRREA'') generally limited 
state-chartered thrifts to activities permitted for federally chartered 
thrifts. See, FIRREA, Section 222, 103 Stat. 269-270 (1989) (codified 
as 12 U.S.C. 1831e).
    \38\ The National Commission on Financial Institution Reform, 
Recovery and Enforcement was established by Subtitle F of Title XXV of 
the Comprehensive Crime Control Act of 1990, Public Law 101-647. The 
Commission was instructed to examine the causes of the problems in the 
savings and loan industry that led to the enactment of FIRREA. Members 
of the Commission were appointed by the President, the Speaker of the 
House of Representatives, and the President Pro Tempore of the United 
States Senate. In July 1993, the Commission submitted its report to the 
President and Congress of the United States.

        Losses were greatest in Texas, California, and Florida 
        where investment powers for state-chartered S&Ls; were 
        most generous, and supervision and examination most 
        lax. The situation was most out of control in Texas, 
        which became a breeding ground for imprudent and 
        abusive practices. The S&Ls; it chartered were allowed 
        to engage in high-risk activities virtually without 
        limit, and supervision and examination were essentially 
        nonexistent for several years. It was no accident that 
        over 40 percent of all taxpayer losses came from Texas 
        S&Ls.;\39\
    \39\ National Commission on Financial Institution Reform, Recovery 
and Enforcement, ``Origins and Causes of the S&L; Debacle: A Blueprint 
for Reform,'' July 1993, p. 4.

    The Commission concluded that the ``acquisition of 
substantial new asset powers'' by state-chartered institutions 
and the ``relaxation of regulatory and supervisory standards'' 
by state and federal regulators were ``factors precipitating 
the collapse'' of the savings and loan industry.\40\ Based on 
---------------------------------------------------------------------------
its analysis, the Commission made the following recommendation:

    \40\ Id., p. 7.
---------------------------------------------------------------------------
          Make all federally insured depository institutions 
        subject to federal rules, regulations, and examination. 
        These should supersede state rules, regulations and 
        examinations--upon a finding that the latter threaten 
        the safety and soundness of the insurance program.\41\
    \41\ Id., p. 13.

    The Commission also recommended that no full-faith-and-
credit guarantees should be given without legislation . . . 
designating a single federal authority as the accountable 
regulator.'' \42\
    \42\ Id., p. 10. In its 1991 report, the GAO also recommended that 
the ``NCUA should be authorized and required to compel a state credit 
union to follow the federal regulations in any area in which the powers 
go beyond those permitted federal credit unions and are considered to 
constitute a safety and soundness risk.'' GAO Report, p. 87.
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    S. 883 follows the Commission's recommendation, but is less 
restrictive. S. 883 would prohibit federally insured, state-
chartered credit unions from exercising new asset powers of a 
type, or in an amount, not permitted for federally chartered 
credit unions, unless the NCUA Board determines that ``the 
exercise of the asset power would pose no significant risk'' to 
the NCUSIF or unless the power was authorized pursuant to the 
laws of the chartering state and being utilized by at least one 
credit union on May 1, 1995. Thus, S. 883 would not prohibit 
any asset powers that were being utilized by a federally 
insured, state-chartered credit union on May 1, 1995. This 
broad ``grandfather'' clause was included in S. 883, because 
most federally insured, state-chartered credit unions currently 
are not utilizing asset powers that pose a significant risk to 
the NCUSIF. Thus, S. 883 would set up a tripwire against future 
high risk activities, allowing the NCUA to prevent losses from 
such activities--instead of reacting to those losses.
    The FDIC's authority over state-chartered savings 
associations and banks is significantly broader than the 
authority granted to the NCUA by S. 883. Federally insured, 
state-chartered savings associations and banks are prohibited 
from engaging in any type of activity that is not permissible 
for their federally chartered counterparts, unless (1) the FDIC 
``has determined that the activity would pose no significant 
risk to the appropriate deposit insurance fund,'' and (2) the 
state-chartered savings association or bank ``is, and continues 
to be, in compliance with applicable capital standards 
prescribed by the appropriate Federal banking agency.'' \43\ 
Under S. 883, however, federally insured, state-chartered 
credit unions would only be required to obtain prior NCUA 
approval for new asset powers first authorized or utilized 
after May 1, 1995.
    \43\ See, 12 U.S.C. 1831a and e.
Limits on Loan to a Single Obligor and Minimum Capital Requirements for 
        Corporate Credit Unions'

    There are no concentration limits and minimum capital 
requirements for corporate credit unions. The Federal Credit 
Union Act does not set either loan or investment concentration 
limits or minimum capital requirements for corporate credit 
unions. While the NCUA has the authority to set such standards 
by regulation, it only recently issued such rules for public 
comment. Such standards would strengthen the safety and 
soundness of the credit union system and minimize risk to the 
NCUSIF. S. 883 would require the NCUA to set and maintain such 
standards
    The 1991 GAO report raised concerns about the lack of such 
standards:

          We are concerned about the high and potentially high 
        concentrations of investments that may be made in 
        single obligors other than credit union organizations 
        and the U.S. government. The combination of the 
        relatively low capital of corporates and the large 
        investments they make can result in risk exposures to 
        single obligors that are many times the corporate's 
        GAAP net worth.\44\
    \44\ GAO Report, p. 153.

    The GAO recommended that ``Congress should require NCUA to 
establish a program to promptly increase the capital of 
corporates and establish minimum capital standards.''\45\
    \45\ Id., p. 164.
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    S. 883 is similar to this recommendation, but less 
intrusive. S. 883 would require the NCUA to establish limits on 
loans or investments to a single obligor and set minimum 
capital requirements, but it would allow the NCUA to determine 
what those standards should be. The NCUA has already taken 
steps to put such standards in place. On April 13, 1995, the 
NCUA Board approved for comment a proposed rule that would set 
limits on loans and investments by a corporate credit union to 
a single obligor and minimum capital standards for corporate 
credit unions.

NCUA Liquidation and Conservatorhip Authority for Federally Insured, 
        State-Chartered Credit Unions.

    Under current law, the FDIC has full authority to place 
federally insured, state-chartered banks, and savings 
associations into conservatorship and liquidation. Such powers 
are necessary to protect a federal insurance fund from losses. 
S. 883 would grant the NCUA comparable conservatorship and 
liquidation authority over federally insured, state-chartered 
credit unions. The authority granted to the NCUA, however, is 
less broad than the comparable authority already granted to the 
FDIC.
    The need for regulators to act quickly to seize control of 
failed financial institutions is well documented. During the 
savings and loan crisis, for example, institutions attempted to 
avoid insolvency and bankruptcy by making increasingly risky 
investments as losses from previous high-risk investments 
mounted. S. 883 would grant the NCUA the authority to close a 
federally insured, state-chartered credit union that is 
insolvent or bankrupt, after prior consultation with the state 
regulator. This amendment protects the taxpayer-backed NCUSIF, 
which would ultimately be responsible for any losses resulting 
from such a liquidation.
    Because the health of a federally insured depository 
institution can deteriorate rapidly, the federal insurance 
regulator must have the power to act quickly to limit losses to 
the federal insurance fund. Even briefs delays in the 
implementation of Cap Corp's conservatorship, for example, 
could have resulted in millions of dollars of additional 
losses. Under current federal law, however, the NCUA can be 
forced to wait up to 30 days before placing a federally 
insured, state-chartered credit union into conservatorship, if 
the state regulator opposes the conservatorship.\46\ S. 883 
would eliminate the 30-day waiting period and simply require 
the NCUA to carry out prior consultation with the state 
regulator. Thus, S. 883 would increase the NCUA's ability to 
institute a timely conservatorship.
    \46\ See, 12 U.S.C. 1786(h)(2)(B).
---------------------------------------------------------------------------
    It is important to note that S. 883 would grant the NCUA 
authority less broad than the authority already granted to the 
FDIC over federally, insured, state-chartered thrifts and 
banks. The FDIC, for example, has the authority to place a 
federally insured, state-chartered bank or savings association 
into liquidation even prior to insolvency, when its capital 
drops below two percent.\47\
    \47\ See, 12 U.S.C. 1831o(h)(3).
 Section-by-Section Analysis of S. 883, The ``Credit Union Reform and 
                           Enhancement Act''

Section 1. Short Title

    Section 1 provides that S. 883 may be cited as the ``Credit 
Union Reform and Enhancement Act.''

Section 2. Insured Credit Union Investments in Other Credit Unions

    Section 2(a) amends section 107(7) of the Federal Credit 
Union Act by eliminating subparagraph (G), which allows 
federally chartered credit unions to invest in uninsured 
corporate credit unions, and redesignating subparagraphs (H) 
through (K) as subparagraphs (G) through (J), respectively.
    Section 2(b) amends Section 205 of the Federal Credit Union 
Act by adding a new subsection (j), prohibiting federally 
insured credit unions from investing in non-federally insured 
credit unions. Under subsection (j), an insured credit union 
may invest in shares, deposits, notes, or other instruments of 
another credit union only if such other credit union is also 
insured pursuant to Title II of the Federal Credit Union Act.

Section 3. Activities of Insured State-Chartered Credit Unions

    Section 3 amends Section 205 of the Federal Credit Union 
Act by adding a new subsection (k). Subsection (k)(1) prohibits 
a federally insured, state-chartered credit union from 
exercising asset powers of a type, or in an amount, not 
authorized for federally chartered credit unions, unless the 
asset power was authorized pursuant to the laws of the state in 
which the credit union is chartered and being utilized by at 
least one credit union in that state on May 1, 1995 or unless 
the NCUA Board determines that the exercise of the asset power 
would pose no significant risk to the NCUSIF. Subsection (k)(2) 
notes that nothing in subsection (k)(1) shall restrict or limit 
the general rulemaking authority of the NCUA. Subsection (k)(3) 
defines ``asset powers'' as any item or activity properly 
reflected on the asset side of the financial statements of a 
credit union and gives the NCUA authority to more specifically 
define ``asset powers'' by regulation of the NCUA Board.

Section 4. Corporate Credit Unions

    Section 4(a)(1) amends Section 120(a) of the Federal Credit 
Union Act by removing an outdated reference to ``central credit 
union'', an institution that once performed functions similar 
to corporate credit unions, and replacing it with ``corporate 
credit union''. Section 4(a)(2) amends Section 120(a) by adding 
to the end a requirement that the NCUA Board pass regulations 
establishing limits on loans and investments by a corporate 
credit union to a single obligor and minimum capital 
requirements for corporate credit unions.
    Section 4(b) amends section 101 of the Federal Credit Union 
Act by adding a new paragraph defining the term ``corporate 
credit union'' as having the meaning given to that term under 
the rules or regulations of the NCUA Board.

Section 5. Authority of the NCUA Board to Place Federally Insured, 
        State-Chartered Credit Unions into Liquidation

    Section 5 amends Section 207(a)(1) of the Federal Credit 
Union Act by adding a new subparagraph (B). This new 
subparagraph (B) grants the NCUA Board the authority to appoint 
itself as liquidating agent for a federally insured, state-
chartered credit union that the NCUA Board determines is 
insolvent or bankrupt. The Board must consult with the 
appropriate state credit union supervisory authority prior to 
appointing itself as liquidating agent.

Section 6. Consultation for Conservatorships of Federally Insured, 
        State-Chartered Credit Unions

    Section 6 amends Section 206(h)(2) of the Federal Credit 
Union Act by eliminating the current requirement that the NCUA 
Board wait up to 30 days before placing a federally insured, 
state-chartered credit union into conservatorship. Under the 
new Section 206(h)(2) the NCUA would need only to carry out `` 
prior consultation'' with the appropriate state credit union 
supervisory authority.

                      Regulatory Impact Statement

    While the regulatory impact of the provisions of S. 883 
would depend upon future actions taken by individual states and 
the NCUA, it is anticipated that the regulatory impact would be 
minimal.
    Section 2(a) and (b) of S. 883 would prohibit federally 
insured credit unions from investing in non-federally insured 
credit unions. If non-federally insured credit unions want to 
receive investments from federally insured credit unions, such 
non-federally insured credit unions would need to apply and be 
approved for federal share insurance.
    Section 3 of S. 883 would prohibit federally insured, 
state-chartered credit unions from exercising new asset powers 
that the NCUA Board determines pose a significant risk to the 
NCUSIF. The NCUA currently has generally rulemaking authority 
to prohibit federally insured, state-chartered credit unions 
from exercising asset powers that pose a significant risk to 
the NCUSIF. Under S. 883, if a federally insured, state-
chartered credit union wants to exercise a new asset power of a 
type, or in an amount, not permitted for federally chartered 
credit unions, it would have to forward the relevant state law 
or regulation to the NCUA for its review and approval. While 
the regulatory impact of S. 883 would depend upon the number of 
new asset powers granted by the states to state-chartered 
credit unions, it is anticipated that the regulatory impact 
would be minimal, because state laws pertaining to asset powers 
are fairly settled and significant and frequent changes are not 
anticipated.
    Section 4 of S. 883 would require the NCUA to establish 
limits for corporate credit unions on loans and investments to 
a single obligor and minimum capital requirements for corporate 
credit unions. The NCUA already has issued for comment a 
proposed rule that should meet these requirements, so this 
section of S. 883 would have minimal regulatory impact on the 
NCUA. While a corporate credit union with high concentrations 
and low capital may face higher regulatory burdens than a 
corporate credit union with low concentrations and high 
capital, the nature and extent of any burden on corporate 
credit unions would depend upon the final standards established 
by the NCUA.
    Section 5 of S. 883 would grant the NCUA Board the 
authority to appoint itself liquidating agent for a federally 
insured, state-chartered credit union that the NCUA Board 
determines is insolvent or bankrupt, after prior consultation 
with the appropriate state credit union regulator. Because the 
NCUA normally works closely with the appropriate state credit 
union regulator on such matters, the regulatory impact would be 
minimal.
    Section 6 of S. 883 would eliminate the 30-day waiting 
period that can be imposed upon the NCUA prior to placing a 
federally insured, state-chartered credit union into 
conservatorship. No additional regulatory costs would accrue as 
a result of the implementation of the provision. Rather, the 
implementation of this section would result in savings to the 
insurance fund in those cases where the NCUA is able to 
implement a timely conservatorship and, thereby, prevent 
additional losses that would have accrued during a 30-day 
waiting period.
                        cost of the legislation

    The Committee has requested a cost estimate of this 
legislation under the provisions of section 403 of the 
Congressional Budget Act of 1974. The cost estimate of the 
Congressional Budget Office follows.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 10, 1995.
Hon. Alfonse M. D'Amato,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed S. 883, the Credit Union Reform and Enhancement Act, 
as ordered reported by the Senate Committee on Banking, 
Housing, and Urban Affairs on June 28, 1995. CBO estimates that 
enacting S. 883 could reduce spending for insurance losses in 
failed credit unions, but we expect such savings would be 
minimal. Because such spending is related to maintaining the 
deposit insurance commitment, which is exempt from pay-as-you-
go calculations under the Budget Enforcement Act of 1990, pay-
as-you-go procedures would not apply to the bill. Enacting S. 
883 would have no significant effect on the budgets of state or 
local governments.
    Section 2 would restrict the ability of federally insured 
credit unions to make investments in corporate credit unions 
that are not federally insured. All investments in corporate 
credit unions would be subject to the jurisdiction of the 
National Credit Union Administration (NCUA). The bill also 
would codify the existing authority of NCUA to limit loans that 
credit unions can make to a single borrower and to require 
minimum capital standards for credit unions. We expect that 
these changes would reduce risk to the National Credit Union 
Share Insurance Fund (NCUSIF), thereby helping to avoid future 
failures that would result in losses to the fund.
    Section 3 would limit the powers of state-chartered credit 
unions, particularly in the area of so-called non-conforming 
investments, to those allowable to federally chartered credit 
unions. The provision would authorize NCUA to limit investment 
activities unless it believes that the investments pose no 
significant risk to NCUSIF, or unless the power was authorized 
pursuant to the laws of the chartering state and used by at 
least one credit union. The effect of this provision would be 
to require a state credit union to follow federal regulations 
in any area in which its powers go beyond those permitted 
federal credit unions and are considered to pose a risk to 
safety and soundness.
    Section 5 would allow NCUA, after consulting with the state 
regulator, to liquidate a federally insured, state-chartered 
credit union, whereas now NCUA must wait until the state 
regulator closes the institution and appoints NCUA as the 
liquidator. Along with Section 6, which increases NCUA's 
ability to institute timely conservatorship, these provisions 
would allow NCUA to act quickly to limit losses to NCUSIF.
    CBO estimates that NCUSIF will spend less than $30 million 
annually over the next several years to resolve failed credit 
unions. Estimating the amount of savings attributable to 
enactment of S. 883 is very difficult. Nonetheless, we expect 
that any such savings would be only a small fraction of these 
losses. Based on information from NCUA, we do not expect any 
significant change in its workload as a result of enactment of 
the legislation.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mary 
Maginniss.
            Sincerely,
                                         June E. O'Neill, Director.

                        changes in existing law

    In the opinion of the Committee, it is necessary to 
dispense with the requirement of subsection 12 of rule XXVI of 
the Standing Rules of the Senate in order to expedite the 
business of the Senate.