ALEXANDRIA, Va. – The credit union community was buzzing yesterday about the weekend takeovers of the nation’s two largest corporate credit unions, with several corporate credit union executives wondering whether any of the other troubled corporates will follow U.S. Central FCU and WesCorp FCU into conservatorship.
NCUA officials acknowledged yesterday that a newly completed independent review of all corporate investments showed losses spread widely throughout the corporate system, concentrated especially in eight corporates, including U.S. Central and WesCorp. The review, conducted by Pimco, shows the corporates realizing as much as $16 billion of losses on their distressed securities and as little as $7 billion. A more realistic figure may be as much as $10.8 billion, the NCUA officials conceded.
Douglas Wolf, president of Midwest Corporate FCU, in Bismarck, N.D., said yesterday the move to place U.S. Central FCU and WesCorp FCU under conservatorship raises concerns at Midwest, as well as through the rest of the corporate credit union community, about further conservatorships.
"I don’t know if I am overly concerned at his point, Wolf told The Credit Union Journal yesterday. "I don’t think we have any reason not to believe what NCUA is telling us and that their intent is to isolate the largest problems. But both of those corporates had agreements through their deposit guarantee program, and despite having signed those agreements, the conservatorship actions were taken anyway. So I think everyone is a little nervous."
Alan Bernstein, chief financial officer at EasCorp FCU, in Burlington, Mass., said the NCUA action suggests there could be some more thinning of corporate ranks. "Over the long run I think the corporates will be there, as they have been in past. There may be some winnowing that takes place, as it did on Friday," said the executive of EasCorp., one of four corporates to opt out of NCUA extended share guarantee program.
David Marquis, executive director of NCUA, said during a webcast for credit unions yesterday, he found the Pimco numbers "rather shocking," but is confident they will be able to segregate most of the losses in the two corporate giants. "We don’t disclose conservatorship issues with the public, or anyone else, for that matter," said Marquis. "We think the other issues here are pretty manageable, so far. (But) any additional activity in this area will not have the impact that those two do."
