NCUA Takes Over Three More Failed Corporates Under Legacy Assets Plan

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ALEXANDRIA, Va. — NCUA said it took under conservatorship three more troubled corporate credit unions this afternoon as part of is effort to shed the corporate system of toxic assets.

The three failed corporates, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate, will join U.S. Central FCU and WesCorp FCU, under conservatorship since March 2009, and have no chance of being revived, the agency said.

The troubled assets held by the five corporates, mostly underwater mortgage backed securities, amount to 98% of the $50 billion worth of troubled assets in the corporate system, NCUA said.

The corporates will undergo a good bank/bad bank plan, under which NCUA will strip the troubled assets from the failed corporates and market them to Wall Street investors and to natural person credit unions as so-called NCUA Guaranteed Notes, with the stock market ticker of NGM. The notes will be backed by NCUA and the full faith and credit of the federal government and be permissible investments for natural person credit unions.

NCUA has already sold $8.5 billion worth of the securities held by U.S. Central and WesCorp to investors. The sale of the securities is being managed by Barclays Capital.

The good assets of the failed corporates, including the payments system functions, will be separated out as good banks and will continue to serve their members.

The five failed corporates hold a total of 65% of all assets in the corporate system and serve more than 4,600 natural person credit unions.

The legacy assets plan includes an extension of the corporate bailout, scheduled to expire in 2016, until 2021, and an increase in the estimated cost from an initial $6 billion to as much as $10.5 billion, minus the $1.3 billion credit unions have already paid for the corporate assessments this year and last. The Treasury Department has approved the extension of the corporate bailout for the additional five years.

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