IRONDALE, Ala. – NCUA’s bailout of the corporate network appears to be creating a rift between the beneficiaries of the plan, U.S. Central FCU and seven large corporates, and the other 19 corporates, most of which only have negligible losses on their investments.
In a letter to other corporates last Friday, Thomas Bond, president of Corporate America CU, called the $5 billion NCUA bailout unnecessary and urged that the corporate network instead expend all of its $4 billion of accumulated capital before asking natural person credit unions to pay anything.
"At that time," wrote Bond, "we will all be insolvent. Those that can be recapitalized by their members will survive. Those that do not have the ability to convince their members that they have the expertise to add value to the system will fail."
The NCUA plan, to be funded by credit unions through a special assessment, will fund a $1 billion cash infusion into U.S. Central and a guarantee of all deposits in corporate credit unions, with an aim to dissuading credit unions from withdrawing their deposits.
Bond’s letter came two days after Jane Melchionda, the president of EasCorp FCU in Massachusetts, told U.S. Central representatives of her member credit unions were angry over the bailout and the $1.1 billion of losses wracked up by U.S. Central last year and insisted on a full accounting.
Melchionda called on U.S. Central to disclose the extent of future losses and to identify "what team was responsible for causing them, and what team will be managing U.S. Central through this crisis." She added that member credit unions are insisting "that a new team take over before engaging in meaningful new business with EasCorp (or any other corporate credit union) again."
Corporate America CU, which manages $1.6 billion in assets, had unrealized losses of just $7.6 million on its available-for-sale securities at year-end. EasCorp FCU, with $1.5 billion in assets, had $7.6 million in unrealized losses at November 30.
Several other smaller corporates are questioning the need of the NCUA plan, according to executives whose credit unions are members of those corporates.
Separately, U.S. Central posted a letter from its president Francis Lee yesterday apologizing for the need of a $1 billion capital infusion from NCUA. "We fully recognize and acknowledge the significant sacrifice credit unions have been asked to make to support the Corporate Network. We apologize that we have put you in that position," wrote Lee. "But please know that the support you provide to U.S. Central and the Corporate Network will help us continue our mission of offering the products and services on which many credit unions have come to rely."
