ALEXANDRIA, Va. – The NCUA Board next month is expected to vote a corporate assessment of between eight basis points and 11 bps, or between $800 million and $1.05 billion, according to a top agency official.
This year’s assessment is being calculated using the updated loss assessments for each of the five failed corporates, minus recoveries coming from lawsuits and the sale of assets, said Larry Fazio, deputy director for NCUA.
If the charge is approved next month it will be assessed for the third quarter – as it has been the last two years, when federally insured credit unions paid a total of $3.3 billion to fund the corporate resolution.
NCUA said loss projections for the five failures are little changed since mid-year 2010, when the agency was preparing to take over the last three corporate failures. That is, the ultimate loss estimate for WesCorp FCU is still approximately $7 billion; for U.S. Central FCU, about $5 billion; Members United Corporate FCU, $1.4 billion; Southwest Corporate FCU, $1.2 billion; and, Constitution Corporate FCU, $200,000. Fazio said he expects an audited report for the Corporate Stabilization Fund will be completed in the coming weeks to show updated loss estimates.
The total losses for the five failures are projected at between $16.4 billion and $20.7 billion, with $5.6 billion of that the credit union-owned capital that was erased in the failures. That would leave between $5.2 billion and $9.5 billion to be funded by credit unions through corporate assessments.
NCUA is still negotiating with several Wall Street banks for their sale of mortgage-backed securities to the five corporates and pursuing settlements with monoline bond insurers over their coverage of failed bonds held by the corporates, said Fazio. Another suit against Wall Street banks is still being reviewed, he said.
To date, the only significant recoveries have been the payments of $145 million by Deutsche Bank, $20.5 million by Citigroup and $5.25 million from HSBC for their sale of MBS to the failed corporates. Proceeds from the sale of various corporate assets, such as U.S. Central’s payments system to CO-OP Financial, and buildings and technology were too small to make a difference in the final costs, according to Fazio.
Fazio said the details of civil settlements with three senior WesCorp executives will remain confidential and will not be shared with the public.