ANNAPOLIS -- A private insurer of state-chartered credit unions is stronger than any of its federal counterparts and should be allowed to survive, credit union advocates told a House panel yesterday.
They were arguing their case before the House Economic Matters Committee on a bill to terminate the Credit Union Insurance Corp., which was created by the General Assembly in 1975.
The bill, which was passed by the Senate last month, would require the 12 remaining CUIC-insured credit unions to obtain federal insurance within four years, after which CUIC would cease to operate.
In two years, the CUIC board of directors and the state's banking commissioner would recommend to the legislature what to do with the roughly $2.5 million that would be left in CUIC's accounts, according to the bill. The money represents interest earned over the years on the 1 percent of deposits each member institution held with CUIC.
"It is one of the anomalies of the legislature, and particularly of this bill, that it seeks to put out of business an entity that not only works as it was supposed to, but better than expected," said Joseph A. Schwartz III, a lobbyist for CUIC.
He said CUIC, located in Towson, is much better able to serve its member institutions than the National Credit Union Share Insurance Fund, which the institutions would have to join should CUIC be abolished.
Further, NCUSIF's equity ratio, a measure of financial strength, is much lower than CUIC's, according to Mr. Schwartz.
But Bank Commissioner Margie Muller testified that while CUIC is strong, recent events in Maryland and around the country point to an inevitable end to private financial insurance.