BURLINGTON, Mass. Eastern Corporate FCU (EasCorp) sent a letter to the board of U.S. Central last week saying the corporate's corporate has "failed the crdit union industry" and calling for "immediate changes" in U.S. Central's management.
The letter is in response to U.S. Central's recently reported losses and a multi-billion-dollar plan from NCUA to assess natural-person credit unions 62 basis points of their capital to provide additional capital to U.S. Central.
Sources indicated that the letter, obtained by Credit Union Journal, was similar in tone to others sent to U.S. Central by other corporate credit unions, but Credit Union Journal was unable to verify that at press time.
The letter from EasCorp CEO Jane C. Melchionda calls on U.S. Central to take "immediate action."
"U.S. Central Federal Credit Union has failed the credit union industry, especially in its duty to protect billions of dollars entrusted to it," Melchionda wrote. "The financial and public relations costs are now being understood by natural person credit union officials, and they are rightfully disappointed and angry. The industry's confidence in U.S. Central and corporate credit unions is perilously low."
Melchionda said member credit unions of EasCorp won't U.S. Central to disclose the extent of future losses and to identify "what team was responsible for causing them, and what team will be managing U.S. Central through this crisis." She added that member credit unions are insisting "that a new team take over before engaging in meaningful new business with EasCorp (or any other corporate credit union) again."
Melchionda letter states that EasCorp member CUs are "adamant that corporate credit union representatives to the U.S. Central Board of Directors have no similar investment issues at their respective corporate credit unions."
The U.S. Central board includes chairman Joseph Herbst, who is CEO of Members United, and Bob Siravo, CEO of WesCorp, both of which are reporting substantial unrealized losses. Also serving on the board are Charles Thomas of West Virginia Corporate CU, David Brehmer of First Carolina Corporate, Larry Eisenhauer of Kansas Corporate and Jim Hansen of VACORP. Those corporates have generally avoided the losses others are reporting.
Melchionda concluded by asking U.S. Central to inform EasCorp of its decision by Feb. 6.
Melchionda's Feb. 4 letter is not the first time EasCorp has been an independent voice related to corporates. In September 2008, Senior VP Alan Bernstein challenged the whole concept of a "corporate system," saying the corporate network is not comparable to the Federal Home Loan Banks, noting "every one of the banks backs up the others' debts. That is not the case with the corporates; we do not back up each other's debts. If ever a corporate is placed in conservatorship, it will be done on a case-by-case basis."
