ALEXANDRIA, Va. – NCUA on Friday night took both U.S. Central FCU and WesCorp FCU under conservatorship, the biggest federal takeovers in credit union history.
The move comes as the two corporate credit union are reporting growing losses on their vast portfolios of mortgage securities. U.S. Central, which reported a loss of $1.1 billion for 2008, reported yesterday that unrealized losses on its securities continued to rise last month to $10.5 billion, even after it charged-off $1.2 billion of holdings in December.
WesCorp has wracked up more than $3 billion in unrealized losses on its investments.
NCUA Chairman Michael Fryzel told The Credit Union Journal Friday night they have removed the board and management of both corporate giants and are running them under conservatorship. "We no longer have confidence in the management and are now running them both," Fryzel said.
"It's important to note that credit unions will still have access to their funds and the two corporates will continue to operate," said John McKechnie, chief spokesman for NCUA.
The unprecedented conservatorships came after an independent study of all of the corporates' holdings showed the two held an unacceptably high concentration of risk. The portfolios of the two corporate giants have continued to deteriorate since the first of the year, NCUA said. All deposits in both corporates are guaranteed by NCUA under the agency's Share Guarantee Program, he added.
NCUA has already infused $1 billion into U.S. Central as part of a $5 billion corporate bailout.
U.S. Central, based in the Kansas City suburb of Lenexa, Kan., is the corporate credit union for 28 corporates and manages $34 billion of credit union funds.
WesCorp, based in San Dimas, Calif., manages $23 billion of funds for 1,100 natural person credit unions.
The two corporates are among eight large corporates that have accrued a total of almost $20 billion of unrealized losses on their investments, mostly mortgage-backed securities. The other six corporates are also being watched closely by NCUA.
