The NCUA insists it intends to hold WesCorp's distressed securities to maturity, but the May 1 announcement that the seized $20 billion corporate reclassified part of its investment portfolio to available-for-sale could add some fuel to the PIMCO conflict-of-interest fire.The conflict of interest charge asserts the Newport Beach, Calif.-based bond management firm will profit from the purchase of corporate investments after helping the NCUA determine their value or lack thereof. News outlets, including Fox, Bloomberg and The Los Angeles Times, have reported that PIMCO, along with New York-based BlackRock and Los Angeles-based Colony Capital, have said they intend to participate in distressed asset purchase programs offered by the Treasury and Federal Reserve.Western Corporate FCU's decision to reclassify its securities available-for-sale is not a signal of a change in strategy but only an accounting recognition, said John McKechnie, NCUA's director of public and congressional affairs.McKechnie recalled comments by NCUA Chairman Michael Fryzel in the March 27 corporate update, in which he said the March 20 conservatorships of U.S. Central FCU and WesCorp will allow the regulator to "achieve a least-cost resolution."Fryzel's approach to "avoid incurring a larger market loss than the credit losses of holding the distressed assets to maturity" and to "preserve the ability to realize costs savings if credit losses are less than projected" remains unchanged, he said.However, McKechnie didn't rule out participation in the Treasury and Fed distressed asset purchase programs, but said the deal must include a share insurance fund guarantee that recognizes credit losses when incurred.The NCUA has also been consulting with industry leaders to develop voluntary funding options within the credit union system to isolate and finance distressed assets, allowing credit unions to recoup better-than-expected gains. Additionally, the regulator is contemplating a "good bank – bad bank" structure to isolate distressed assets.The reclassification will be made effective Dec. 31, 2008, because WesCorp said it had not yet issued 2008 financial statements at the date of the conservatorship.–[email protected]

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