NCUA EXPECTED TO DISSOLVE U.S. CENTRAL CORPORATE FCU
LENEXA, Kan.-NCUA is expected to sell the major non-financial assets of U.S. Central FCU, consisting of the payments systems services and the CU Investment Solutions Inc. broker-dealer, to two separate groups of corporate credit unions in a no-bid process, as part of the dissolution of the one-time $52-billion corporate credit union.
Two groups have submitted bids to buy the separate U.S. Central operation and continue to operate them, NCUA said. A price has yet to be determined. NCUA, in seeking a member-driven solution to dissolution of U.S. Central, said it has a "fiduciary responsibility to dispose of assets and liabilities in the best interest of federally insured credit unions, but this does not require an auction process," an agency official said. The sales are expected to be completed by October.
A group of 14 corporates has proposed buying the payments assets and continuing the operation as a national CUSO that would consist of U.S. Central's automated clearing and automated settlement.
NCUA has been liquidating the former corporate giant over the past nine months by selling of its investments. As of April, U.S. Central had assets of $7.3 billion, $5 billion off it cash holdings at the Federal Reserve Bank of Kansas and the majority of the remainder consisting of $1.9 billion of stock in the Central Liquidity Facility.
FINAL OFFERING OF NCUA GUARANTEED NOTES ON TAP
WALL STREET-NCUA hit the Street with its 13th and final offering of NCUA Guaranteed Notes. The latest offering is comprised of $2.21 billion of a mix of bonds supported by the remaining collateral held in portfolio from the failures of U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate, and makes a total of $29 billion of the bonds sold to the public. The bonds are securitized by the cash flows on toxic mortgage-backed securities once owned by the five corporate failures. So far 280 institutions, including 25 credit unions, have purchased the bonds, which are guaranteed by NCUA. The bonds are being offered through lead underwriter Barclays Capital.
LOBBYISTS URGE GREATER NCUA ROLE IN EXEC COMPENSATION
ALEXANDRIA, Va.-Numerous reform groups are urging NCUA to tighten proposals on executive compensation, posing new dangers of CUs being swept up in efforts to rein in pay practices on Wall Street.
Americans for Financial Reform, a coalition of dozens of groups including the American Association of Retired People, Consumer Federation of America and unions, called on NCUA to toughen reporting of executive compensation; mandate public reporting of executive pay and extend deferral of pay at the largest CUs. "Without these steps, it is doubtful whether the goal of eliminating inappropriate financial risk-taking due to excessive short-term compensation will be met," said the group in a comment letter.
And, taking a page out of the CUNA playbook, individuals have filed more than 800 form letters urging tighter restrictions on executive compensation. "One way to change the incentives so they don't collapse our economy again would be to delay the bonuses for several years, at least five or seven," wrote Alec Mento of Philadelphia. "That way, we'll know if the loans they made in year one remain good. In the bad days, bankers paid themselves on the volume of loans (mortgages) they generated, not on their quality."
The deluge of comments are in response to proposals by NCUA and the other regulators to implement provisions of last year's Wall Street reform bill requiring efforts to rein in runaway compensation practices that were cited by many experts as encouraging risky practices that brought down some of the nation's biggest financial institutions.
NCUA's proposal would ban credit unions from tying executive compensation to "inappropriate" risky practices that could expose credit unions to significant losses, would enable NCUA to monitor compensation for to CU executives, and require CUs over $10 billion to defer half of cash bonuses for as long as three years to see if an executive's practices have exposed the CU to big losses.
In arguing for an expansion of the executives that should be monitored, the American Federation of Labor and Congress of Industrial Organizations noted that compensation tied to risk-taking was not limited to top executives. "Rather, as the Financial Crisis Inquiry Commission says, 'This was the case up and down the line-from the corporate boardroom to the mortgage broker on the street,'" wrote Daniel Pedrotty, director of office of investment.
Gerald McEntee, international president of the American Federation of State County and Municipal Employees, told NCUA the nexus of federal deposit insurance gives the government the right and obligation to monitor executive pay. "Moral hazard," wrote the CU leader, "is created by the expectation that larger financial institutions are 'too big to fail' and that the government will step in to shield them from failure through capital injections, guarantees, liquidity programs and similar measures."
Americans for Financial Reform, suggested reporting of compensation be extended to offer public disclosure "Given the central significance of this issue to financial reform, AFR believes that this is not appropriate," they wrote in their NCUA comment letter.