NCUAs WesCorp Bridge Submerged In Red Ink
SAN DIMAS, Calif. – NCUA reported that Western Bridge Corporate FCU had a $2.1 million loss for May, its seventh straight monthly loss since the federal regulator transitioned the corporate failure to a bridge under its corporate resolution plan.
The losses are occurring because of the investment restrictions placed on bridge corporate investments by NCUA, “which are far more limiting than those a newly chartered corporate will operate under,” NCUA said in a monthly financial report issued to WesCorp’s 1,000 credit union members. The losses began in November and are expected to lead to monthly losses for the rest of WesCorp’s existence as a bridge, NCUA said.
NCUA has been running the one-time $34 billion WesCorp under conservatorship since March 2009 and projects a loss of as much as $7 billion after the resolution is completed.
Separately, NCUA told a federal court on Friday that its growing number of suits against Wall Street underwriters of securities sold to WesCorp does not undermine its own case against officers and directors of WesCorp, as the WesCorp figures argued last week.
“Nothing in the RBS Complaint undercuts or otherwise compromises the allegations of the [suit] in this case,” NCUA said Friday, referring to last week’s second suit against the unit of Royal Bank of Scotland that sold WesCorp more than $1 billion of mortgage-backed securities. “Rather, the Complaint vividly illustrates both the consequences of the Directors’ failure to impose meaningful sector and investment-type concentration limits and the blind eye WesCorp used in its pre-purchase analysis as it acquired heavy concentrations of the riskiest AAA-rated securities in order to meet the investment income targets mandated by Directors.”
The WesCorp figures told the court earlier last week that NCUA’s allegations against RBS and in a separate suit against JP Morgan Securities claiming the underwriters misrepresented the true nature of the securities sold to WesCorp undermines its own case that the failure of the corporate giant was caused by negligence on the part of the WesCorp officers and directors.
The NCUA suits, argue the WesCorp figures, “render implausible its allegations against [the officer and directors].”
WesCorp Bridge reported a $2.1 million loss for May, the same loss in as in April, which were driven by negative net interest income, NCUA reported. “Since WesCorp became a bridge corporate credit union in October 2010, the majority of the interest income included in its NII has come from notes receivable from NCUA, which is income generated by legacy assets from the old WesCorp term investment portfolio. As these assets are securitized in the [NCUA Guaranteed Note] program, the proceeds pay down the notes to Western Bridge with the result that NII declines significantly.”
NCUA said the monthly losses have been anticipated and figured into the cost of its corporate resolution plan. After the planned liquidation of the bridge and restructuring of the corporate as United Resources FCU in October, the losses will remain with the bridge and will not accrue to the newly chartered corporate.