LAS VEGAS – The early reaction to NCUA’s decision to place U.S. Central and WesCorp into conservatorship was perhaps best summed up by Brad Beal: “Although I don’t have access to all the details, I suspect it was probably necessary, given the circumstances. I would hope, though, that NCUA will explore all options to cover these losses, including going to Congress, before placing the full burden on credit unions.”
Beal, the president and CEO of Nevada FCU and current NAFCU chair, told Credit Union Journal his CU is a member of WesCorp, but its potential losses should be limited as it only uses WesCorp for is a clearing account for indirect lending that is fully guaranteed. Of much greater concern to Beal is between the corporate stabilization plan announced in January, plus the tab for the two conservatorships, his CU will have to send a total of $6 million to the NCUSIF. “It will reduce our capital, but we are so well-capitalized it will take us down to a net worth ratio of 11.75%,” he said. “We feel very fortunate to be as strong as we are, but it is a shame that we have to send off $6 million of our members’ money to shore up the insurance fund.”
Kris Mecham, president and CEO of, Deseret First CU in Salt Lake City, said his credit union will have to write off its paid-in capital to WesCorp, which is more than $500,000. On top of that, Deseret First’s total tab to the NCUSIF will be $4.4 million. “That hurts,” he said succinctly.
Mecham also is the new CUNA chair. He said the trade group has been concerned about the corporates’ financial condition “for some time.” He said in December 2008 CUNA assigned a corporate task force to identify problems and potential solutions that would mitigate potential losses to credit unions, but before it completed its reporting NCUA took the step of placing the two corporates into conservatorship.
Mecham said from his own perspective, not CUNA’s, he believes the corporate system needed to be fixed. “Did it need to be fixed the way NCUA did it? I don’t think that was the only way to solve the problem,” he declared. “I wish NCUA had worked with the trade associations to identify other possibilities rather than springing this on the entire system.”
President and CEO Darren Williams said Wescom CU, in Pasadena, Calif., will have to eat a total expense of $20 million, including a write-down of 51% of its deposit in the NCUSIF. “It is an expense that obviously was not anticipated in our original business plan, but every federally insured credit union in the country is having to deal with that same issue,” he said.
Williams said he was told by NCUA that it approached Treasury for funding of the program but was not successful. “Therefore, the share insurance fund has to bear the cost,” he said. “I don’t think I am alone in my belief that the credit union industry could use intervention from the federal government, as the banks have, rather than 8,000 federally insured natural person credit unions bearing an expense that none of us can afford right now. What it means is we will be depleting our capital. Ultimately, members will pay because we will be less able to make loans.”
