Federal regulators on Friday seized control of two large institutions that provide wholesale financing for US credit unions, a move they say was needed to stabilize the credit union system.
The National Credit Union Administration said it has taken over and put into conservatorship the two corporate credit unions, US Central Federal Credit Union, based in Lenexa, Kansas, and Western Corporate Federal Credit Union, in San Dimas, California. US Central has about $34 billion in assets while Western Corporate, known as WesCorp, has an estimated $23 billion in assets.
A conservatorship enables the government to operate a financial institution. Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Some of the 28 corporate credit unions in the US have sustained steep losses on paper from the depressed value of the mortgage-linked securities they hold.
The NCUA, which oversees some 7,800 federally insured credit unions, said it "will continue to take any and all steps necessary to preserve a well-functioning system of corporate credit unions and to protect the assets of (retail credit unions) and their members during the ... financial market dislocation."