Feds Seize Wholesale Credit Unions

Regulators move to stabilize credit union industry as condition reaches critical
By Rob Quinn,  Newser Staff
Posted Mar 21, 2009 6:19 AM CDT
The National Credit Union Administration plans to replace top executives at the seized companies but will leave their operations intact.   (NCUA)
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(Newser) – Federal regulators have taken control of two major wholesale credit unions, which provide services to thousands of credit unions nationwide, to stabilize the industry, Bloomberg reports. The institutions, which have combined assets of $57 billion, failed the so-called stress test, showing an unacceptably high level of risk from mortgage-backed securities. Service at the US Central Corporate Federal Credit Union and the Western Corporate Federal Credit Union will continue uninterrupted.

“Most of the bad assets that we’ve seen in the corporate world reside at these two institutions,” a regulator tells Bloomberg. Together the two corporate credit unions—out of 28 nationwide— back retail credit unions used by 90 million customers. The insurance fund maintained by the industry is expected to cover the costs by asking Congress for $30 billion in emergency borrowing authority.
(Read more credit unions stories.)