NCUA Chairman Michael E. Fryzel told Credit Union Times that both credit unions will open Monday morning, and with the NCUA in control, it will get a more accurate financial picture of the two corporates.
Fryzel said the problems at the corporates will cost the NCUSIF $5.9 billion, compared with the initial estimate of $4.7 billion. He said there would be additional costs to natural person credit unions but they are not yet certain what the amount will be. Even before placing the two corporates into conservatorship, the NCUA had asked Congress to increase its borrowing authority from the Treasury Department from its current $100 million to $6 billion with the option of requesting an additional $30 billion emergency line of credit.
"By taking control of them, we'll be able to reorganize their structure and sell their securities when they should be sold and put additional cash into the corporates if necessary," Fryzel said.
The 28 corporates had shown paper losses of about $18 billion at the end of December, according to NCUA figures.
U.S. Central in Lenexa, Kan. has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp in San Dimas, Calif. has $23 billion in assets and approximately 1,100 retail credit union members. The member accounts of both credit unions are guaranteed under provisions of the previously announced NCUA Share Guarantee Program, through Dec. 31, 2010.
CUNA President/CEO Dan Mica said the NCUA's move "is the latest unfortunate chapter in what is becoming a prolonged saga for the credit union movement, which is overall safe, sound and well managed." He urged the agency to devise a mechanism to spread the cost of this conservatorship to credit unions over a number of years, rather than all at once.
NCUA is hosting a Webcast Monday, March 23 at 2 p.m. to provide the credit union community with an update on the corporate credit union stabilization program.