WASHINGTON – CUNA, which played a lead role in governing U.S. Central FCU, said it would seek congressional hearings, appeal to the Obama administration or even launch a legal challenge of last week’s conservatorships of U.S. Central and WesCorp FCU unless NCUA is forthcoming with the controversial consultant’s report that prompted the unprecedented regulatory actions.
In a letter to each of the three NCUA Board members made public yesterday, CUNA President Dan Mica insisted that the credit union regulator make public the report by Pimco, a 4,500-page analysis of every bond in the corporate credit union system, which was used as the basis for last Friday’s takeovers of the two corporate giants.
The takeovers of the two failed corporates are projected to cost all credit unions at least $2.2 billion, with another $3.7 billion cost set aside to guarantee all corporate deposits–a total of $5.9 billion for the corporate bailout.
CUNA had a significant role in the governance of U.S. Central, with two representatives on the seven-member board of the $34 billion corporate. One of the directors was CUNA’s chief operating officer, while the other was a representative of the CUNA-affiliated American Association of CU Leagues. Another CUNA affiliate, the Association of Corporate CUs, is also the chief lobbying arm of the corporates.
Over the last two days CUNA has flooded NCUA with form letters and emails it asked credit unions to send to the regulator, insisting that the agency make public the Pimco report. The messages have been so numerous they have succeeded in crashing the email system of one of the three NCUA Board members. CUNA directed its credit union members yesterday in an action alert to "Email each of the NCUA Board Members TODAY and urge them to approve a mechanism to spread out the costs and direct their staff to provide much more information to the credit union system from the Pimco report."
"Every single credit union in the nation that has had an opportunity to weigh in has expressed concern, outrage, anger, and frustration with the current situation," said Mica in his letter.
"I truly believe that we can address this issue quickly and successfully in a discussion with you and our staffs operating in good faith," said Mica to the federal regulators. "I do not think it would be in anyone’s best interest to do otherwise."
Mica insisted that NCUA respond by the close of business on Friday.
The NCUA Board has been reluctant to make the Pimco report public because of what it sees as proprietary information. NCUA did say yesterday the report cost the agency $4.5 million.
NCUA hired Pimco, one of the experts on bond valuation, after U.S. Central reported a huge $1.1 billion loss for 2008, necessitating a $1 billion cash infusion from NCUA. NCUA stepped in last week after the Pimco report indicated that billions of dollars more of losses are expected to accrue on the books of U.S. Central, as well as WesCorp. WesCorp was preparing year-end financials that would have shown a loss of $740 million, after it told its members last month that net income for 2008 was $57.8 million.
CUNA knows that any challenge of the NCUA conservatorships faces an uphill battle, having gone through similar circumstances after the 1995 NCUA takeover of Capital Corporate FCU, the Washington-area corporate known as CapCorp. Laws passed after the S&L crisis made it difficult to challenge federal conservatorships after S&L lobby groups had exercised significant influence in stalling the takeover of failed thrifts at the cost of billions of dollars extra in taxpayer bailout funds.
