2 corporate credit unions taken over by government

WASHINGTON -- Federal regulators on Friday seized control of two large institutions that provide wholesale financing for U.S. 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, U.S. Central Federal Credit Union, based in Kansas, and Western Corporate Federal Credit Union, in California.

A conservatorship enables the government to operate a financial institution. Corporate credit unions provide financing and investment services to retail credit unions. Some of the 28 corporate credit unions in the U.S. have sustained steep losses on paper from the depressed value of the mortgage-linked securities they hold.

The financial services provided by the two corporate credit unions "will continue uninterrupted" and there will be no direct impact on the 90 million members of retail credit unions nationwide, the NCUA said in a news release.

It said retail credit unions, which are cooperatives owned by their members, remain financially strong — with net worth exceeding 10% of assets, and sustained growth in assets and membership despite the deep recession.

In January, the NCUA injected $1 billion of capital into U.S. Central, an institution with about $34 billion in assets. At the same time, the agency moved to guarantee tens of billions of dollars in uninsured deposits at corporate credit unions overall, the latest in a series of actions to shore them up in the face of financial stress.

Western Corporate Federal Credit Union, known as WesCorp, has an estimated $23 billion in assets.

The NCUA, which oversees some 8,100 federally insured credit unions, said it would automatically guarantee uninsured deposits at all corporate credit unions through February and then on a voluntary basis through Dec. 31, 2010.

In December, the agency made more than $40 billion available to support several corporate credit unions with a new borrowing from the Treasury Department and provided another $2 billion to help struggling homeowners.