PASADENA, Calif. — For the $3.2-billion Wescom Credit Union, which has closed branches and taken other cost-cutting steps, the news that WesCorp, just 21 miles away, had been placed into conservatorship is an "expense none of us can afford right now."
"We are a WesCorp member and have been since its inception," said CEO Darren Williams. "The initial announcement of the corporate stabilization program in late January resulted in a $16.5-million expense to Wescom, including a write-down of 51% of our deposit in the NCUSIF. The new special premium assessment is an additional $4-million expense for a total of $20 million. 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.
"We have been assured by NCUA that it did indeed approach Treasury for funding of the program but were not successful," Williams continued. "Therefore, the share insurance fund has to bear the cost. 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."
Williams acknowledged there is some cautious optimism that market-to-market rules will be addressed at FASB's meeting on April 2, as the issue goes well beyond credit unions. "No one is buying securities so there is no price, so there are significant losses," he said. "When these securities all run their course, and they are backed by mortgage loans with 20-year or 30-year repayment periods, it is not out of the question that some or most of these assets will recoup their losses."
