WASHINGTON - More than one-quarter of Capital Corporate Federal Credit Union's deposit base evaporated by midday Tuesday as 154 nervous members yanked funds.

The ailing corporate credit union - which was seized by the government Jan. 31 after suffering huge losses on mortgage derivatives - lost 28% of its deposits, shrinking to $576 million.

"There's a word in the language for that: The word is 'run,' " said Warren Heller, research director at Veribanc Inc., a bank-rating firm in Wakefield, Mass.

The 480 credit unions that deposit funds in the liquidity facility have been itching to withdraw their money since Cap Corp imposed a 60-day freeze on accounts Dec. 7.

When the National Credit Union Administration seized Cap Corp, the agency pledged to end the moratorium Feb. 6. To stem deposit outflow, the agency promised to guarantee all credit union deposits - except $37 million of capital deposits, which is money credit unions place in corporates that regulators treat as capital.

Some institutions were not persuaded by the government's assurances.

Monday, Pentagon Federal Credit Union withdrew the $20 million it had invested in Cap Corp.

"We decided we'd be smart to go ahead and pull it," said Pentagon president Ronald L. Snellings. "I know the agency said it would guarantee the money, but the agency seems to go up and down depending on how the wind's going."

U.S. Central Credit Union, the industry's primary liquidity source, is funding withdrawals from Cap Corp.

NCUA still has not decided what to do with the Lanham, Md., institution, but agency and industry sources said they expect the regulator to shut down Cap Corp. That outcome becomes more likely if withdrawals remain high.

But so far, agency officials are optimistic.

"It's better than what we had expected," said Bob Loftus, NCUA's director of public and congressional affairs. "But we're going to have to wait to see what happens with the rest of the week."

Right now, the agency is preparing to liquidate investments in Cap Corp's portfolio. Friday, it announced it had retained BlackRock Financial Management as an adviser.

If Cap Corp is liquidated, the NCUA plans to widen the membership base of Mid-Atlantic Corporate Federal Credit Union so that it can absorb some or all of Cap Corp's former clients, sources said.

Edward J. Fox, president of $1.2 billion-asset Mid-Atlantic, declined to comment. Based in Harrisburg, the corporate currently serves Pennsylvania credit unions.

The problems at Cap Corp may have ripple effects on other corporates. Sources said that, because capital deposits are at risk in Cap Corp, credit unions might be frightened into withdrawing such funds from other corporates.

For example, Pentagon Federal in Alexandria, Va., plans to pull $1.5 million of capital deposits from the Virginia League Corporate Credit Union in the next three years.

Pentagon Federal, which has $2 billion of assets, is writing off the $1.6 million of capital deposits it has in Cap Corp.

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