WASHINGTON – Recriminations were flying yesterday over responsibility for the bailout of U.S. Central FCU and the corporate network, with executives calling for the ouster of key corporate management, the elimination of the corporate system, and even the removal of the NCUA Board for its role in the unfolding crisis.
"An NCUA examiner was on-site at U.S. Central for a year, so how did NCUA not know about what was going on there," said Curt Prins, a long-time director of Congressional FCU, which manages the money for hundreds of members of Congress, of the $1.2 billion loss U.S. Central reported for its fourth quarter.
Prins, well-known on Capitol Hill, called on lawmakers to investigate the corporate rescue and to remove the NCUA Board. "They’re damaged goods," he said. "Eight thousand credit unions expected NCUA to protect them, and they failed. It’s like a corrupt police department."
In a letter to the NCUA Board yesterday, Prins, a former staffer for the House Banking Committee, called on the members to resign. "In fairness to all credit unions and their millions of members, the entire board of NCUA should resign and give President Obama an opportunity to appoint a board that will actually protect the safety and soundness of the system," said Prins’ letter.
Congressional FCU is expected to take a $3.3 million hit as its share of the $5 billion corporate rescue plan, according to Prins.
Elsewhere, the chief executives at two of the nation’s largest credit union, Navy FCU and Pentagon FCU, were calling for the elimination of the corporate credit union network, which is currently holding as much as $18 billion of unrealized losses.
"This is an impossible contingency and is not something we can accept," said Frank Pollack, president of Pentagon FCU, who remembers his credit union losing $1.5 million in the 1995 failure of Capital Corporate FCU, known as CapCorp.
Pollack, whose $13 billion credit union’s share of the NCUA premium is an estimated $71 million, called for the dismissal of corporate executives as a condition of any NCUA assistance and the eventual elimination of the corporate system. "It is essential that the corporates are wound down, with the exception of their role in facilitating the payments system," Pollack told The Credit Union Journal yesterday.
Cutler Dawson, president of $36 billion Navy FCU, agreed with Pollack and called for NCUA to "take immediate control" of the corporates.
The CEO of the nation’s largest credit union lamented Navy Fed’s estimated $280 million share of the corporate rescue and its impact on his 3.1 million members. "We believe strongly that our resources are for our credit union, not a sump for NCUA to dip into to solve whatever problems they might see," said Dawson. "Our responsibility and credit union executives’ responsibility and all directors’ responsibility is to the members of my credit union and that trumps any other issue."
The two credit union execs said they are working with the CEOs of several other large credit unions to explore alternatives to NCUA’s $5 billion corporate rescue plan.
Separately, several corporate credit unions were calling on U.S. Central FCU to fire senior managers they believe are responsible for U.S. Central’s huge $1.2 billion fourth quarter and $1.1 billion fiscal year loss. Jane Melchionda, president of EasCorp FCU, sent a letter to U.S. Central threatening to cease doing business with the corporates’ corporate until individuals responsible for U.S. Central’s losses were dismissed
Late yesterday U.S. Central responded by firing David Dickens, the long-time director of asset/liability management who helped build up the corporate’s $33 billion investment portfolio that has $10 billion of unrealized losses.
Jim Blaine, president of $17 billion North Carolina State Employees CU, estimates his credit union’s share of the NCUA premium at $114 million. He called on NCUA to provide all documents being used to assess the financial condition of the corporates so that the credit union community as a whole can help develop an alternative to the $5 billion corporate rescue.
