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Southeast Corporate Federal Credit Union released its 2008 annual audit Nov. 18, which revealed nothing new except the impairment adjustments other corporates have made, recording U.S. Central 2009 capital depletions as 2008 “type one subsequent events.”The only news revealed in the bulletin from Board Chairman Tim McMurray was the decision to eliminate the corporate’s Oct. 31 retained deficit of $20.3 million as of Nov. 30. The transaction will result in a 100% write-off of paid-in capital accounts and a less than 1% depletion of member capital shares.That decision reverses Southeast Corp’s earlier position stated in an Oct. 13 letter to NCUA Chairman Debbie Matz. In that letter, President/CEO William Birdwell argued against permanent depletion of capital based on loss projections “from a single firm at a single point in time.”Once capital is impaired based on estimates, any actual performance better than projected can’t be immediately recognized to earnings and capital, recaptured only over an extended time, he said.Birdwell told Matz that while he fully recognizes that actual losses exist among his securities, “we also now know firsthand the peril of relying on a limited number of experts and their modeling assumptions.”Southeast and other corporates, led by the Association of Corporate Credit Unions, pled their case to Matz during a special Nov. 5 meeting. However, Matz announced the following week she would not grant an exception to the NCUA’s previously released guidance requiring the deficit elimination in November.“We continue to work with the agency and hope to jointly develop a solution that will both protect the insurance fund as well as provide the opportunity for corporates and credit unions to share in future recoveries should current loss projections prove to be overstated,” said Rob Schleiter, executive vice president at Southeast Corporate.Credit union strategy consultant Marvin Umholtz said he agrees with the corporate effort to ensure those who lost capital have the opportunity to recover any gains.“Say you’re a credit union who was a WesCorp member, and you don’t plan to use the corporate network going forward,” he said. “Does that mean you’ll be cut off from future recoveries?”While Umholtz said he doesn’t think WesCorp’s front-loaded investments will recover better than estimated, he said if there are any recoveries at WesCorp, U.S. Central or other corporates, those who “took the hit” should get the gains.Southeast Corporate still has some U.S. Central exposure, with $6.7 million remaining in MCS. Other retail corporates, from the seized Western Corporate Federal Credit Union to the rogue Corporate America Credit Union, have written off all of their U.S. Central capital, saying they expect the institution to write off its remaining member capital accounts by year end.–[email protected]

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