Credit Union Industry Split on Federal Insurance for Navy Federal Overseas Bank
Nussle of America’s Credit Unions said group tried to foster agreement
Deep divisions have emerged over a proposal by three House members to provide National Credit Union Administration insurance for accounts in the overseas military banks operated by Navy Federal Credit Union.
All efforts to develop an industry consensus on whether the overseas banks should get federal insurance have failed, America’s Credit Unions President/CEO Jim Nussle said last week.
At issue is the contract that the Defense Department awarded to Navy Federal to operate 60 military banking facilities and 272 ATMs as part of the Defense Department’s Overseas Military Banking Program. Customers are not members of Navy Federal, but are customers of a “community bank,” the term used by the Pentagon. Following the awarding of the contract to Navy Federal, the NCUA said it legally could not provide insurance to accounts in the overseas bank. Thus, Navy Federal arranged for private account insurance.
Last week, Reps. Pete Sessions, R-Texas; Gerald Connolly, D-Va.; and Young Kim, R-Calif., said they want to offer an amendment to the defense authorization bill that would extend federal insurance to cover the Navy Federal military bank accounts.
The Defense Credit Union Council and the Cornerstone Credit Union League contend that extending any federal insurance to Navy Federal’s overseas bank operations is a poor idea. Cornerstone represents about 600 credit unions in Arkansas, Kansas, Missouri, Oklahoma, and Texas. The Cornerstone league has endorsed a letter from Tinker Federal Credit Union, an Oklahoma financial institution, asking America’s Credit Unions to oppose an effort to provide federal insurance to the Navy Federal bank.
In the letter, Tinker officials said that by providing that insurance, credit unions would be abandoning their share insurance model. “Doing so only makes us more vulnerable to unwanted scrutiny, threats and attacks from our competitors, and may ultimately lead to our demise,” the credit union wrote.
Tinker officials continued, “We urge the leadership, as well as the legislative and advocacy staff at America’s Credit Unions to openly oppose any legislation that alters the Federal Credit Union Act to provide federal share insurance for accounts without regard to membership status, whether in support of an overseas or domestic program.” The defense league goes so far as to argue that such a plan could place the credit union tax exemption at risk.
America’s Credit Unions believes that extending deposit insurance to the Navy Federal military bank accounts would not place the tax exemption at risk. “This is factually incorrect,” Nussle wrote, in a letter to the House Rules Committee. “Allowing credit unions to help our government serve those who protect us does not place the credit union tax exemption in jeopardy.”
He said that the proposed amendment is attempting to “solve a problem created when big banks walked away from serving those in our armed forces and, once again, a credit union stepped in to fill the void left by banks leaving.” Bank of America previously operated the military bank program.
Late last week, Nussle said that the trade group does not support the House amendment, acknowledging that America’s Credit Unions officials have been unable to forge a compromise on the share insurance issue.
The House Rules Committee is scheduled to meet Tuesday to recommend how many of the 1,352 submitted amendments to the bill may be offered during the floor debate.