Fed Documents Show Corp. Tapped Emergency Facility
WASHINGTON-Previously secret documents released by the Federal Reserve last week show that U.S. Central was a major beneficiary of the Central Bank's emergency Term Auction Facility beginning in August 2008, just as the corporate credit union giant was teetering.
The records show the one-time, $52-billion corporate tapped into the emergency liquidity facility, created by the Fed as the nation's financial system began to seize up, for a 28-day loan of $2.5-billion on August 28, 2008. The annual rate on the emergency loan, collateralized by asset-backed securities held by U.S. Central, was 2.38%.The troubled corporate continued to tap into the specially created Fed loan facility several more times, borrowing as much as $5-billion on Sept. 11, 2008 at 2.45%. The final short-term loan from the Fed's TAF was made on Sept. 25, 2008, just days before Congress authorized NCUA to make emergency loans to corporates through the Central Liquidity Facility.
The Fed borrowings were subsequently replaced by a $5-billion loan from the CLF at a far more advantageous rate, below 1%. At the time, growing losses at U.S. Central were making it increasingly expensive for the corporate giant to borrow in the public markets by selling short-term commercial paper, or at the Federal Home Loan Bank of Topeka, where it had a $7-billion line of credit. The $5 billion CLF loan was used by U.S. Central to ease its liquidity crunch until it was subsequently taken over by NCUA in March 2009. The congressional action also enabled NCUA to lend $5-billion to WesCorp FCU, as dwindling liquidity eventually contributed to the failure of the one-time $34- billion California-based corporate.
The Fed documents show the extraordinary lending conducted by the U.S. Central Bank during the unprecedented time of financial stress to not only American institutions, but to banks all over the world with nominal U.S. presences, from Germany, Japan, Canada, France and Israel, as well as to the central banks of other countries. The participation of U.S. Central in the Fed's short-term program was very unusual in that only two other credit unions, Service CU of New Hampshire and Marine CU of Wisconsin, are listed among the more than 10,000 loans provided under the program during the two-year period.
Minn., Dakota CUs Talk Corporates
ST. PAUL, Minn.-More than 120 CU reps last week attended a Corporate Credit Union Forum hosted by the Minnesota CU Network and the Mid-America CU Association, which represents the Dakotas. The discussion included six panelists, all of whom are either doing business with the Federal Reserve or with corporate CUs. "This session provided credit unions a forum to have an open and honest conversation about what is and isn't working in the corporate credit union system," said Mark D. Cummins, MnCUN President & CEO.
Bowl Game Teams Are Named
SAN DIEGO-The San Diego County CU Poinsettia Bowl has settled on the two teams that will face off against each other: The San Diego State Aztecs (8-4) vs. the Navy Midshipmen (803). It is the third time Navy will appear in the bowl, scheduled for Dec. 23 at 8 p.m. EST/5 p.m. PST. The match-up should be a fortunate one for sponsors of the game: a hometown team and a large Navy presence (including retirees) should guarantee a strong turnout.
NFCU Cuts Rates On Cards
VIENNA, Va.-Navy FCU last week cut rates on credit card balance transfers to just 2.99% to help members kick-start holiday spending. The low-rate offer is good for 12 months and comes with no balance transfer fees, when most card issuers charge a balance transfer fee between 3% and 7% of the outstanding balance. The offer is good for new or existing Navy Fed credit card accounts for balances transferred from another card issuer. After 12 months the rate will change to the member's standard APR.
Staffers Charged With $675k Theft
WASHINGTON-Two former employees of Clara Barton FCU were arrested after being indicted by a federal grand jury for issuing more than $675,000 in fraudulent loans from the CU and conducting unauthorized transactions on member accounts. Tracy Kemper, 35, a loan officer, and Tiffany Samuells, 34, a member service rep., were charged with making fraudulent loans and earning kickbacks on some of the loans before the $7-million credit union for Red Cross employees was merged into Pentagon FCU in November 2008.