Bachus “Net Worth” Bill Has 14 Original Co-Sponsors

CUNA
March 9, 2005

A bipartisan group of House members signed onto legislation introduced March 2 by Rep. Spencer Bachus (R-Ala.) to improve the calculation of a credit union's net worth. Bachus told CUNA Governmental Affairs Conference attendees on Tuesday that his bill would amend prompt corrective action (PCA) in the Federal Credit Union Act.

Original bipartisan co-sponsors are:

· Rep. Ginny Brown-Waite (R-Fla.)
· Rep. Tom Feeney (R-Fla.)
· Rep. Luis Gutierrez (D-Ill.)
· Rep. Darlene Hooley (D-Ore.)
· Rep. Paul Kanjorski (D-Pa.)
· Rep. Sue Kelly (R-N.Y.)
· Rep. Steven LaTourette (R-Ohio)
· Rep. Carolyn Maloney (D-N.Y.)
· Rep. Carolyn McCarthy (D-N.Y.)
· Rep. Bob Ney (R-Ohio)
· Rep. Rick Renzi (R-Ariz.)
· Rep. Ed Royce (R-Calif.)
· Rep. Bernie Sanders (I-Vt.)
· Rep. Brad Sherman (D-Calif.)

Credit Union National Association (CUNA) president/CEO Dan Mica commended the quick action and support of the bill to address an issue that must be resolved by the beginning of next year, when the Financial Accounting Standards Board's accounting rule takes effect.

"While other legislation currently under preparation will likely address this issue, Rep. Bachus' action makes it more likely that a resolution to this time-sensitive issue can be reached before the deadline," said Mica. "We have been honored to work with the subcommittee chairman in preparation for this bill's introduction, and look forward to working with him in moving it forward."

Bachus said the amendment addresses an unintended consequence that could raise concern about the accounting of credit union mergers when the Financial Accounting Standards Board (FASB) issues its new accounting rule regarding business combinations.

FASB proposed changing merger accounting from a "pooling" to a "purchase" method. Under the purchase method, the surviving credit union couldn't count the merged credit union's net worth toward its own, which could lower its net-worth classification under PCA.

National Credit Union Administration Chairman JoAnn Johnson said the agency "has strongly supported this amendment as it will address issues relevant to the accounting for mergers of credit unions when FASB lifts its exemption for cooperatives... Safe and sound, well-capitalized institutions should not be penalized during the merger process as a FASB rule potentially could evolve into an unintended consequence."

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