The NCUA could face an uphill battle from those who hold the majority of credit union assets when it comes time to recapitalize the corporate credit union system.
Olympia, Wash.-based consultant Marvin Umholtz said of the credit union leaders who manage institutions with $500 million or more assets, not one he's spoken to plans on participating in the corporate network going forward.
Umholtz said large credit unions, who can shop payment systems and other corporate services, are especially concerned that even if they limit their capital investment exposure to corporate credit unions, they're still on the hook for corporate losses through the Central Liquidity Facility and the NCUSIF.
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Charles Bruen, president/CEO of the $820 million First Entertainment Credit Union, said he and his board have "zero intention" of re-capitalizing corporates, and will seek corporate services elsewhere should the NCUA make recapitalization of Western Corporate Federal Credit Union mandatory.
Bruen submitted an Aug. 31 position paper to the NCUA regarding the CLF's systemic risk to the credit union industry. In it, he wrote the CLF was not intended to be used as a bailout tool for corporate credit unions, and sourced the Treasury Department's criticism of CLF structure in its 1997 report on credit unions. He called for "phased shut down" of the emergency liquidity enterprise, and suggested a transfer of the existing credit line to the Temporary Corporate Credit Union Stabilization Fund.
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