First, the bad news: according to recently released audited 2008 financial statements, the $14 billion Western Corporate Federal Credit Union recorded a $7.6 billion OTTI. Of that, $6 billion are losses on Option ARM mortgage backed securities.
For a little bit of good news, like the seized U.S. Central Federal Credit Union, WesCorp has elected to early-adopt new FASB accounting rules as of January 1, 2009. The new rules allow for only expected credit losses to be counted as OTTI. WesCorp said its estimated credit loss was only about $5.6 billion.
Like U.S. Central, WesCorp will add back approximately $2 billion in non-credit losses to retained earnings during first quarter 2009. However, that still leaves the largest retail corporate with a $5 billion accumulated deficit. The corporate also recorded an additional $5 billion in unrealized losses as of December 31. All told, 2008′s losses resulted in a more than 50% asset reduction in just one calendar year.
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