ALEXANDRIA, Va. – NCUA is wrestling with a number of major issues in devising a plan to dispose of as much as $40 billion of troubled assets held by the corporate credit union network, including who should benefit from the sale of the assets, according to sources familiar with the discussions.
Some credit union executives who were members of WesCorp FCU are urging NCUA to return any proceeds from the resolution of assets specifically to those credit unions victimized by the failure of WesCorp and not deposit those proceeds into a general fund for the benefit of all federally insured credit unions through the National CU Share Insurance Fund. Michael Valentine, president of Baxter CU, which held capital in both WesCorp and Members United FCU, suggested that any proceeds from the resolution of WesCorp or Members United assets be returned to members of those specific corporates on a pro rata basis. "We feel that booking the gains to the NCUSIF and indirectly allocating back to all [credit unions] would be unfair," Valentine said in a comment letter to NCUA on the corporate proposal.
Among other issues being reviewed by NCUA are: which assets would qualify for its plan, the accounting treatment for the assets, which assets would be sold and which would be managed for the medium term, who will manage the assets and how the program – which would be the biggest ever undertaken by NCUA – will be funded.
NCUA representatives, including Board Member Michael Fryzel, met with CUNA’s Corporate CU Task Force during last week’s Government Affairs Conference to brief the group on preliminary steps taken by the agency to deal with the huge question of the so-called legacy assets – the underwater mortgage securities held by U.S. Central FCU, WesCorp and several other corporates. Fryzel told the group NCUA officials are working with banking regulators to devise a plan for the assets, which amount to as much as $40 billion worth.
A broad consensus of credit union officials have made it clear they will not participate in a recreation of the corporate system without assurances that future investments will not be weighed down by the massive losses on the legacy assets.
NCUA Chairman Debbie Matz last week told Credit Union Journal the agency plans to make public its proposal for the legacy assets before finalizing its new corporate rules, which she hopes will occur sometime this summer.
