WASHINGTON - The drain on deposits in ailing Capital Corporate Federal Credit Union had slowed to a trickle by Friday, five days after the government lifted a freeze on withdrawals.
"We're pleased with the level of withdrawals," said Bob Loftus, director of public and congressional affairs at the National Credit Union Administration, noting that withdrawals had continued to decrease during the week.
"I do not think we have a run on our hands here," he said.
The slowdown in withdrawals is important because it puts less pressure on the NCUA to liquidate the Lanham, Md., corporate. Because the deposit run-off has been smaller than expected, Cap Corp stands a better chance of ultimately being returned to operation as an independent institution or of becoming an acquisition target.
Nonetheless, congressional interest has intensified in Cap Corp, which was seized by the government Jan. 31 after the $1.4 billion-asset institution had lost $100 million on mortgage derivatives.
Senate Banking Committee Chairman Alfonse M. D'Amato has called hearings for Feb. 28 on Cap Corp and NCUA's handling of it. Coincidentally, that's the day the New York Republican is scheduled to speak at a conference sponsored by the Credit Union National Association.
The House Banking Committee's financial institutions and consumer credit subcommittee also plans hearings this fall on corporate credit unions, and on the industry, according to a draft schedule of oversight hearings.
"The subcommittee will review the credit union industry generally, including corporate credit unions, its regulator, and the National Credit Union Share Insurance Fund," according to the document.
Industry lobbyists expect the subcommittee, chaired by Rep. Marge Roukema, R-N.J., will actually schedule the hearings much sooner.
"If I were Roukema, and D'Amato had hearings, I'd certainly hold hearings," said Charles O. Zuver, director of governmental affairs for the Credit Union National Association.
The Cap Corp affair has sparked interest on both sides of the aisle. Rep. Henry B. Gonzalez, D-Tex., who held hearings on the industry last year, has urged further inquiry. Although he praised NCUA as an "ideal regulator" last year, he took it to task in a recent press release.
"The NCUA was asleep at the switch while Cap Corp was spinning the wheel of fortune with derivatives," he said.
About one-fourth of Cap Corp's 483 credit union members pulled out $199 million last Monday after the NCUA opened access to accounts following a two-month freeze. Through Thursday, an additional $79 million had flowed out of the institution.
At the same time, NCUA said about $79 million had been deposited in the liquidity center by Thursday. Most of the money went into overnight accounts, which pay the fed funds rate, and transaction accounts to fund activities such as check processing.
The net deposit loss was nearly one-quarter of Cap Corp's $787 million in deposits at the start of business Feb. 6. Still, that was less than the NCUA had expected, agency officials said.
More than 90% of the money pulled out so far has been in overnight and transaction accounts, Mr. Loftus said. But 44 credit unions liquidated certificates of deposit and took a hit of more than $1 million in penalties.
Industry and agency sources said that some credit unions are waiting for CDs to mature before removing them from Cap Corp.
Besides the $787 million in deposits immediately available last Monday, credit unions had $37 million of deposits that are accounted for as capital and require a year's notification before withdrawal.
Of the 251 credit unions with such capital deposits, 35 had put the NCUA on notice by midday Thursday that they intend to withdraw amounts totaling $7.7 million.