WesCorp Will Not Emerge From Conservatorship as United Resources; Regulator Urges Member Credit Unions to Stay Put Until a Merger is Worked Out
The NCUA has announced that three corporate bridge credit unions did not meet recapitalization goals. WesCorp, US Central and SE Corporate will not emerge as new entities. A number of Northwest credit unions have already been stung by WesCorpâ€™s downfall.
September 1, 2011
The National Credit Union Administration (NCUA) informed hundreds of natural person credit unions Thursday that three corporates did not meet capitalization requirements for continued operation. The eventual shuttering of WesCorp, US Central and SE Corporate could leave members credit unions scrambling for investment and liquidity services.
A spokesman for the NCUA said the regulator would not close the ailing corporates “anytime soon,” however, and urged credit unions to maintain their corporate memberships while a contingency plan is worked out.
“We will look for a merger partner who will accept the members in one large package and move them over,” said David Small, Public Affairs Director for the NCUA. “We’re encouraging credit unions to do due diligence on their part and at least stick around till the package deal is done so they can consider that as one of their options.”
An estimated 50 to 60 Northwest credit unions are members of WesCorp and have already been stung by billions of dollars in stabilization assessments.
WesCorp was once an industry giant, posting $34 billion in assets. The corporate was one of many that collapsed during the Wall Street and mortgage meltdown. The NCUA conserved WesCorp and several other corporates during that period. Even before the monumental collapse, the NCUA had on-site examiners monitoring WesCorp’s investment policies. That is the significant point of contention in a heated lawsuit the NCUA filed against the executives, and in a countersuit brought by former CFO Todd Lane and other executives against the regulators.
The corporate bridges’ failure to recapitalize is the result of credit unions’ decisions not to reinvest in them. Small declined to speculate as to whether the credit unions’ lack of confidence in management or whether the new regulations limiting investments was the deciding factor for the members.
When asked why the NCUA is announcing the status of the failed corporates even though they will not be shut down immediately, Small stressed that the regulator is protecting the interests of thousands of credit unions.
“We are going through a similar process as we would for any merger,” he said. “Our interest is to make sure the member credit unions don’t see any interruption of services.”
Small believes the other corporate credit unions have the capacity to absorb the natural person credit union memberships, but he declined to comment on which corporates could be candidates to accept the merger proposal.
Questions or Concerns? Contact the Anthem Editor: Editor@nwcua.org.