NATIONAL HARBOR, Md. – Credit union executives are doubtful the $6 billion tab they will be paying for the corporate bailout over the next seven years will be enough to resolve the corporate meltdown and most are expecting additional charges.
"Don’t kid yourself, we’re going to be contributing a lot more than 15 basis points over the next few years. I wouldn’t be surprised if the losses at U.S. Central and WesCorp are much larger," said Evan Clark, president of Washington-based (U.S.) Department of Commerce FCU, one of over 1,000 executives and directors gathered here last week for NAFCU’s annual convention.
"It’s going to be a lot more than that," Clark told The Credit Union Journal on Friday.
"I think we’re masking the problem" said David Wright, president of Services Center FCU, Yankton, S.D. "There are more losses to be absorbed. But my balance sheet doesn’t reflect that."
"My financial statement does not reflect the corporate charges. My capital has changed so many times in the last six months, I’m not sure what it is," said Wright, who predicted it will be 2011 or 2012 before credit union balance sheets are comparable because of all the different ways the corporate bailout if being account for.
Last month, NCUA has transferred $6 billion of projected losses for corporate credit unions from the National CU Share Insurance Fund to a newly created Corporate CU Stabilization Fund and capitalized the fund with a $6 billion loan from the Treasury’s Federal Financing Bank, to be paid back by credit unions over seven years.
But NCUA has estimated the losses at U.S. Central will be $2.6 billion and at WesCorp $5.6 billion, part of which will be absorbed by about $4 billion in capital at the two failed corporates. That means at least $4 billion of the $6 billion set aside by NCUA for the corporate bailout is spent.
That’s before additional charges U.S. Central is expected to announce any day to cover its losses, as well as expected losses at other corporates, the credit union executives pointed out last week.
"There may be more charges. A lot of it certainly is going to be determined by the economy," said Jim Huntley, president of Sierra Pacific FCU, who said the Reno, Nev., credit union has already charged off $191,000 of capital it had in WesCorp and expects additional charges for capital it holds in Southwest Corporate FCU, which has reported depleted capital.
Still, the credit union executives were overwhelmingly resigned to paying their share of the corporate bailout under the movement’s cooperative structure.
"Here we’ve been responsible in our management and we’re going to be paying this big charge," said Bruce Harvey, treasurer of the Sierra Pacific FCU board. "Still, I do realize that everyone has to be their share."
"This is a cooperative system, it works well even when things are bad," said Dallas Bergyl, president of Inova FCU, Elkart, Ind., "But, all credit unions are culpable."
