WESTERN BRIDGE CORPORATE
REPORTS $2.1M LOSS
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 so-called 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, according to NCUA.
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 that its growing number of suits against Wall Street underwriters of securities sold to WesCorp do not undermine its own case against officers and directors of WesCorp, as the WesCorp defendants argued before that same court.
"Nothing in the RBS Complaint undercuts or otherwise compromises the allegations of the (suit) in this case," NCUA said, referring to its 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 defendants 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 undermine 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 was 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.
WARREN HEADS HOME
WASHINGTON - Would-be consumer czar Elizabeth Warren left Washington last week, her dream to head the fledgling Consumer Financial Protection Bureau in shambles, the new bureau itself tied up in knots.
Warren's exit comes after Republican lawmakers forced the President to name someone else as director of the new consumer agency, while making it clear they want the agency to avoid any business until legislation is passed to have a five-person board run the agency instead of a single director. Bowing to reality, President Obama instead nominated former Ohio Attorney General Richard Cordray to be director of the new agency last week
Warren's defeat prompted Democratic Party activists in her home state of Massachusetts to press the case for the Harvard law professor to run for the Senate next year against Republican incumbent Scott Brown. Warren said she will make any decisions on a Senate after she leaves Washington and returns to Cambridge, where she is currently scheduled to teach a fall semester.
Instead, Warren, who developed the new consumer agency as an advisor to the Treasury Department, said last week she plans another kind of building in the short term. "I've been working 14 hours a day on this thing for more than a year to try to stand it up," Warren told CBS News Radio. "(Now) I'm going to take my grandchildren to Legoland. That's where I'm headed."
"When I go home, I'll do more thinking then. But I need to do that thinking not from Washington," she added.
Warren's exit comes after the Republican-controlled House passed a bill that would water down the powers of the new consumer agency and its director by expanding its leadership to a five-person board; and by increasing the veto power of its financial regulator oversight panel. GOP lawmakers also want the new agency-which opened for business last Thursday-to stop doing business altogether until the bill is passed.
The bill has little chance of passing because it has been rejected by the Democratic-controlled Senate and the White House and promised to veto it if it does get passed.
But it has the effect of slowing down business at the new agency without a permanent director and also signals continued Republican opposition to the agency, which passed Congress in 2010 with almost no Republican votes.