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News Now

Washington
NCUA starts stakeholder reports on corporate CUs
ALEXANDRIA, Va. (3/30/09)--The National Credit Union Administration (NCUA) Friday began what it said would be periodic reporting to stakeholders on the status of the corporate credit union system. In its inaugural communication, the agency said normal operations and transactions have continued uninterrupted and liquidity remains stable at f U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp), after being placed in conservatorships last Friday. The update recapped the agency’s recent actions, such as the release of the two corporates’ boards of directors, CEOs, and one senior staff member have been released. It also said cross analysis of the value of held securities continues and that the release of specific comparisons can be expected soon. NCUA Chairman Michael Fryzel defended his agency’s action to place U.S. Central and WesCorp under conservatorships, an action that has been questioned as unnecessary by some. “(T)he cost of the corporate credit union stabilization program would have increased even if NCUA had not placed U.S. Central and WesCorp into conservatorship. “Barring a deepening of the recession beyond what was incorporated into the loss projections, and economic uncertainties do remain, the $5.9 billion reserve should be sufficient to cover expected credit losses of holding the distressed assets to maturity,” Fryzel said in the release. Highlighting another point of controversy, Fryzel said that while analysis by Pacific Investment Management Company LLC (PIMCO) was one factor in arriving at this reserve, it served to refine and supplement NCUA’s own calculations. Fryzel stated that NCUA selected PIMCO partly because it had not sold any of the bonds being analyzed and was not engaged in providing any other services to corporate credit unions. Fryzel noted that any firm with expertise to evaluate the bonds is a potential purchaser. However, he said there is not conflict of interest in PIMCO’s involvement because the NCUA intend to hold the securities to maturity, an action the chairman said was recommended by PIMCO. The Credit Union National Association (CUNA) has urged the NCUA to make public more information on PIMCO and any analysis that lead to the agency's actions to conserve two corporate credit unions last week.


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