ALEXANDRIA, Va. – NCUA said last week it stripped lucrative severance agreements and bonuses scheduled for ousted executives at U.S. Central FCU and WesCorp FCU, after the nation’s two largest corporate credit unions were taken under conservatorship on March 20.
Among the actions: the CEOs, Francis Lee at U.S. Central and Robert Siravo at WesCorp, and one other senior executive at each corporate, have been fired; all senior management bonus plans have been suspended; and executive perks such as country club golf memberships have been cancelled.
"NCUA as conservator repudiates all of these contracts," said David Marquis, executive director of the credit union agency.
NCUA Chairman Michael Fryzel, who has been criticized by credit union executives angry over the $5.9 billion corporate bailout, insisted Friday the unprecedented federal takeovers were necessary and were the least costly option available to resolve the billions of dollars of losses on the two corporates’ books.
"These institutions posed the largest degree of risk," said Fryzel in a statement. "Moreover, in the case of WesCorp, it is clear that management’s estimates of projected credit losses on residential mortgage backed securities were dramatically lower than the estimates of both NCUA and WesCorp’s own external advisors."
"The conservatorships will also facilitate NCUA’s ability to achieve a least cost resolution. NCUA’s strategy remains unchanged: to avoid incurring a larger market loss than the credit losses of holding the distressed assets to maturity. Further, NCUA remains committed to pursuing resolution options that preserve the ability to realize costs savings if credit losses are less than projected," Fryzel said.
WesCorp, in fact, released financials Friday that showed unrealized losses on its investments surged in January from $2.7 billion to almost $4.7 billion. WesCorp has yet to quantify what losses it expects to realize on these unrealized losses. Among the issues to be resolved is what losses WesCorp will realize on $580 million of collateralized debt obligations, or CDOs, that have already been written down between 50% and 60%.
The January report also shows an unrealized loss of $781.8 million on fixed-rate commercial mortgage-backed securities derivatives and a $41.6 million loss on forecasted transactions.
