Regulators seize 3 corporate credit unions, to sell assets

WASHINGTON Fri Sep 24, 2010 7:03pm EDT

WASHINGTON (Reuters) - U.S. regulators seized three corporate credit unions on Friday and will repackage about $50 billion in troubled assets from these and previous seizures to sell on the open market.

The National Credit Union Administration said the three corporate credit unions, which provide clearing services to retail credit unions, were critically undercapitalized.

Barclays Capital will manage the securitization plan, the regulator said. A securitization trust will be created to issue about $35 billion in guaranteed notes backed by the government, a process that will likely start in October, the NCUA said.

"This approach is best for taxpayers, consumers and credit unions," NCUA Chairman Debbie Matz said.

Matz said the agency also put in place on Friday regulations requiring corporate credit unions to hold higher levels of capital and setting risk limits.

The institutions seized on Friday were Members United Corporate Federal Credit Union of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut. Matz said combined they had about $16 billion in assets.

The seizures come after the NCUA last year took over two other such institutions: U.S. Central Corporate Federal Credit Union of Kansas and Western Corporate Federal Credit Union of California.

Corporate credit unions are the retail credit union's credit union, providing services including lending, and check and payment clearance services.

The wholesale credit unions have experienced more troubles than their retail counterparts because they did not face the same restrictions on permitted investments, leading to big losses during the financial crisis.

The $50 billion in troubled assets comes from all five credit unions and is mostly in the form of mortgaged-backed securities.

Matz said 70 percent of all assets held by corporate credit unions are now under conservatorship.

The seizure of the five firms will ultimately cost the industry between $7 to $9 billion, she said, and NCUA will collect this amount from credit unions over the next 10 years. Taxpayers will not have to foot any of the bill, she added.

She also said credit union customers will not be affected. "This will be invisible to the consumer."

The NCUA insures credit union and consumer deposits up to $250,000 per account.

(Reporting by Dave Clarke and Karey Wutkowski; Editing by Tim Dobbyn)

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Comments (6)
McBob08 wrote:
It’s about time the government started taking control of those renegade financial companies. Countries that had a well-regulated financial market came through the 2008 crash a whole lot better than America did with its wild, uncontrolled, criminal cowboy financial sect.

Sep 25, 2010 4:38am EDT  --  Report as abuse
kaceltd wrote:
Indeed, the blame really lies with the Cowboys and Cowgirls in The US House of Representatives and the US Senate. See how they have watered down the new raft of banking regulations? That’s why AIG, GM, Washington Mutual should have been allowed to fail. The lobbyist are killing the rest of us. Big business says to taxpayers:- TARP really means to small homeowners and businesses – Thanks, And Rest in Peace……

Sep 25, 2010 6:27am EDT  --  Report as abuse
diddums wrote:
What a joke. According to compliant media the recession is over, and yet, banks still being closed down on a weekly basis. Alice in Wonderland, the mad hatter tea party, and toad of toad hall will keep us all in supension until the fat lady sings. Who is the fat lady?

Sep 25, 2010 7:18am EDT  --  Report as abuse
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