NCUA Preps CUs for ShutdownChairwoman Matz Says Maintain Response 'Readiness' The National Credit Union Administration on April 8 issued a letter to credit unions, providing guidance about planning for a potential federal government shutdown. [Feds Face Infosec Challenges in Shutdown.] NCUA Chairwoman Debbie Matz urges credit unions to maintain a state of readiness and to work prudently and flexibly to address financial needs of federal workers and other individuals affected by the impasse on federal spending.
"Credit unions should proactively plan to help their members in the event Congress does not pass legislation to continue funding most federal agencies," Matz states in the letter. "All credit unions need to get ready to answer questions from their members." Credit unions serving federal workers need to take extra steps to prepare to address financial needs resulting from possible furloughs, reimbursement delays, the suspension of government programs and the closure of federal buildings with credit union branches, she says.
Some 800,000 federal employees could be furloughed, according to a White House estimate, if Congress fails to fund the government after midnight April 8. The government said many public-facing government websites would be shuttered if a shutdown occurs. And, many furloughed employees would be asked to surrender their government-issued BlackBerries and other devices.
Each cabinet department and agency has its own contingency plan on what personnel and systems to maintain and which employees to furlough and computer systems to suspend during a government shutdown.
President Obama, during an impromptu press conference, said the economy could not afford a shutdown. But Republicans' and Democrats' failure to agree on Obama's financial reform and healthcare laws is leaving few other options on the table.
The Federal Reserve won't be affected, though if other government departments to shut down, the Fed's work may increase. Additionally, the Federal Deposit Insurance Corp. and the U.S. Comptroller of the Currency will not be affected. In fact, any agency that does not rely on federal funds that must be authorized by Congress will continue to operate with the same number of employees at usual levels.
Taxpayers will still have to file with the IRS, although it has been recommended they file electronically. Social Security is not expected to be greatly impacted, either, if lawmakers remain at an impasse. The Small Business Administration, however, won't be able to approve loans, which "would have a significant impact on economic momentum." And the Federal Housing Administration, which represents 30 percent of the mortgage market, wouldn't be able to guarantee home loans, which could affect the fragile housing market, according to the administration.
The NCUA recommends that credit unions that participate in federal programs develop contingency plans, in the event of a shutdown, since, for example, some credit unions offer loans backed by the FHA.
Individual financial institutions need to decide whether to proceed with scheduled FHA loan closings, as well as whether to hold and guarantee new FHA loans until an impasse on federal spending ends.
The NCUA Insurance Fund will continue to protect individual deposits without interruption, Matz says.