resolves financial challenges of corporate credit unions without disrupting
September 24, 2010, - The National Credit Union
Administration today assumed control of three undercapitalized corporate credit
unions, announced a plan to isolate the impaired assets in the corporate credit
union system, and finalized a set of stronger regulations - key elements in its
efforts to resolve the financial challenges facing corporate credit unions
without disrupting consumer service.
Setting the plan into motion required conservatorship today of three
corporate credit unions that are not viable: Members
United Corporate Federal Credit Union (formerly Mid-States Corporate)
of Warrenville, Illinois; Southwest
Corporate Federal Credit Union of Plano, Texas; and Constitution
Corporate Federal Credit Union of Wallingford, Connecticut.
In 2009, two other corporate credit unions were placed into conservatorship: U.S.
Central Corporate Federal Credit Union of Lenexa, Kansas, and Western
Corporate Federal Credit Union of San Dimas, California.
In a conservatorship, NCUA replaces an institution's management and board,
operating it in a way that protects taxpayers' and members' interests during its
orderly transition and resolution.
NCUA will isolate and fund a total of almost $50 billion in troubled (legacy)
assets held by the five corporate credit unions. Isolating legacy assets
prevents the need to sell them at severely distressed prices. Securitizing and
giving them a U.S. government guarantee and then selling them to investors on
the open market (facilitated by Barclays Capital, New York, New York) will
provide financial resolution.
The proceeds raised by their sale will fund the legacy assets. This key
component of the resolution will help ensure NCUA resolves the situation at the
lowest possible cost, consistent with sound public policy.
NCUA is committed to ensuring no disruption in corporate payment system
processing. It will use "bridge corporates" to facilitate an orderly
transition of the operations of the five institutions. Overall the credit union
system remains strong. Credit unions, not taxpayers, will fund all costs
associated with the corporate credit union system solution.