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.
The unprecedented move came after an independent rveiew of the investment portfolios of both corporate giants by Pimco showed that increasing losses on the portfolios posed an unacceptable risk to the National CU Share Insurance Fund, said Fryzel.
"The important thing to note is that both corporates remain open and will continue to operate and the funds of their members are safe," said John McKechnie, chief spokesman for NCUA.
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 26 other corporates and manages $34 billion of credit union funds. The corporate released financials for February yesterday showing that unrealized losses on its investments surged in February to $10.5 billion, form $9.3 billion at the end of January, even after U.S. Central had taken a charge of $1.2 billion in December.
WesCorp, based in San Simas, Calif., manages $23 billion of funds for 1,100 natural person credit unions.
The two are among eight large corporates that have experienced increasing losses on their investments, mostly mortgage-backed securities. The eight have accrued total unrealized losses of almost $20 billion.
