Bloomberg Report is Inaccurate, Says U.S. Central
LENEXA, Kan. -- A Bloomberg news report today claiming that U.S. Central Credit Union--the credit union for the nation's 8,400 credit unions--had fallen victim to the subprime losses that have spread through the country's credit markets like a plague is inaccurate said Executive Vice President Dave Dickens. "They've mixed up accounting methods," Dickens told Credit Union Times "I've contacted the reporters about it."
The mix up shows that there's a difference between a balance sheet and income statement, as Bloomberg reported that U.S. Central suffered a 2% loss on its total assets by taking a $760 million 4th-quarter write down, highlighting how credit unions are vulnerable to losses on home loans and related bonds.
But Dickens said, "Those are mark-to-market securities that we hold for sale that need to be shown on the balance sheet. They mixed them up with losses like Citicorp had on their income statement. While we may have unrealized losses, (we have unrealized gains and losses all the time) we don't have to sell them in this market. But as a liquidity provision we mark all our securities as mark-to-market (or for sale), because who know when you might have to sell them to raise cash."FASB 115 has three different accounting methods (held-to maturity, available for sale, or trading) Dickens explained. "If we had to sell our total mark-to-market $40 billion portfolio it's value would be $1.1 billion less than what we paid for it. While everyone is looking at the difficulties in fixed income securities today, unlike banks, we have ample liquidity."