MADISON, Wis. (9/28/10)--The credit union movement responded over the weekend to the National Credit Union Administration's (NCUA's) announcements about its final corporate rule, the conservatorship of three corporate credit unions, and its plan to isolate and securitize the corporates' "legacy assets." The news of the conservatorships brought the most reaction. The three corporates--Southwest Corporate FCU of Plano, Texas (9.5 billion assets); Members United Corporate FCU, Warrenville, Ill. ($7.4 billion assets); and Constitution Corporate FCU, Wallingford, Conn. ($1.2 billion assets)--will join U.S. Central FCU and Western Corporate FCU under conservatorship. "While this news is disheartening, it wasn't wholly unexpected," said Dick Ensweiler, president/CEO of the Texas Credit Union League, noting, "The lasting legacy of toxic assets reached far and wide and has impacted many, many seasoned investment professionals." "Fortunately the NCUA's action does not directly impact the day-to-day operations of natural person credit unions...NCUA will operate Southwest Corporate for the time being, to ensure no loss in services to credit unions and their credit union members," he said. Ensweiler's statement Friday noted members' deposits "continue to be fully insured to at least $250,000 and credit unions in Texas remain on the whole well-capitalized. Average delinquency and charge-off rates are falling as the economy has strengthened, and are still much better than those of banks. "The main thing for credit union members and consumers to know is their money is safe in their credit union and not affected," Ensweiler said. Credit Union League of Connecticut President/CEO Tony Emerson said Friday, "NCUA has made assurances that current ongoing operations at Constitution Corporate are not affected and will continue as usual." He noted the league "will be working with the NCUA and Constitution Corporate to ensure that member credit unions are not adversely affected by this conservatorship action, and to let them as well as their members know that their deposits are fully insured and safe." "At Southeast Corporate we are generally pleased with the changes to the new corporate rule, the legacy assets plan and the path that NCUA has laid out for ensuring the safety and soundness of the corporate system into the future," said Brad Miller, CEO of Southeast Corporate FCU, Tallahassee, Fla. NCUA referred to Southeast Corporate and other non-conserved corporates as "viable corporates," he said. "Thus we are further encouraged and will continue to move forward with our plans for a new business model that continues to provide value to our members." Although there is still significant work to be done in analyzing the details of the new rule, "the final rule appears more workable than the proposed rule," Miller said. The system must evolve, he said, adding, "this transformation process has started, and while we have difficult work still ahead of us, we are making steady progress thanks to the support of our members." Another corporate, Mid-Atlantic Corporate FCU, Middletown, Pa., issued a statement about NCUA's final corporate rule and reassured its members it is solid and safe. "While in some places the regulation may be more restrictive than beneficial, overall, we believe it creates a framework within which Mid-Atlantic Corporate can continue to successfully serve our member credit unions," said Mid-Atlantic Corporate President/CEO Jay Murray (Life is a Highway Sept. 27). "While some corporate credit unions are still suffering the lingering effects of the economic crisis, Mid-Atlantic Corporate is stable and fiscally sound," Murray added. "Thanks to our member credit unions' capital commitments and a great deal of planning, we are well-positioned for the future." Pennsylvania Credit Union Association agreed that "the final rule is what we anticipated," said Rick Wargo, association executive vice president/general counsel. "From an advocacy perspective, we're pleased to see that NCUA was receptive to phasing in the capital requirements. Though we did not have unanimous input from our GAC (governmental affairs committee) or ad hoc committees, the NCUA granted some leeway on asset-liability management, which should be a positive." He also noted that PCUA is studying the legacy assets plan. "Time will tell if a good bank/bad bank approach is going to work," he added. Earlier Credit Union National Association President/CEO Bill Cheney said the new corporate rule reflected many recommendations of CUNA's Corporate CU Task Force. "We believe it offers a solid model for corporate credit unions going forward," he said (News Now Sept. 24 and 27). "There are some positive aspects for credit unions in the actions that NCUA has taken, the biggest being that credit unions will only have to cover the actual, eventual credit losses--and nothing else, including market losses." CUNA advocated for that and is "gratified the agency listened to us." However, he added that the credit losses will be "substantial"--in the estimated $8 billion to $10 billion range. CUNA is culling through everything NCUA has done "in order to have a clear picture of its impact on credit unions," Cheney said. NCUA's actions "have the potential to move us past this chapter and better position the credit union system for the future--while being invisible to consumers who rely on credit unions for affordable financial services."