BREAKING: Top two coporate credit unions have been seized by National Credit Union Administration.

[originalpckelly]

US Central and Wescorp have seized by the NCUA after failing stress tests.

US Central is the USA's only wholesale credit union, and it is the largest in the country. It loans money out to things called corporate credit unions (Wescorp is a corporate credit union), which are credit unions that loan money out to local credit unions (where your money is, if you are a customer of credit unions.)

US Central's website doesn't have the disclaimer yet that usually appears after seizure:
http://www.uscentral.org/default.asp?content=about

Wescorp's website doesn't have the disclaimer either, saying that it's been taken over:
http://www.wescorp.org/

This is all coming from the WSJ.

These credit unions act as the credit union for local credit unions. So in other words, instead of doing business with the general public, they lend out money to local credit unions.

Short bit on Wiki about corporate credit unions:
http://en.wikipedia.org/wiki/Corporate_credit_union

Here is information about US Central:
http://en.wikipedia.org/wiki/U.S._Central_Credit_Union

The WSJ only has a breaking news banner on its site:
http://online.wsj.com/home-page

Statement from the National Credit Union Association:
http://www.ncua.gov/news/press_releases/2009/MR09-0320.htm

Don't freak if you have a credit union account, though we don't know who these two do business with, your accounts will be insured, and since this is the credit union's credit union, you've got some insulation from it.

Just shows you how all fractional reserve banks, even non-profits or member owned institutions, can and do fail.

[Beetwasher]

1. WTF???!!! Oh Shit!!

Very very bad news. CU's were supposedly one of the safe places to keep your money during turbulence.

[Mme. Defarge]

2. Do you have a link to the WSJ reference?

[originalpckelly]

3. I'll be back with it if possible, and I'll post it in the main post.

This is scary shit folks. Shit just took another leg down.

[originalpckelly]

6. Nope, they don't have an actual story about it yet, just a banner on the top of their home page.

[960]

4. It's breaking on CNBC & cnbc.com right now too.

[MrPerson]

5. They gotta lay off the fries. They'll kill you.

[malaise]

7. WTF??????

[slipslidingaway]

8. Article from February...

http://www.bizjournals.com/sacramento/othercities/boston/stories/2009/03/02/story9.html?b=1235970000%5E1785886

"Bay State credit unions face a possible $1.65 billion reduction in lending and the erasure of more than a year’s worth of combined profits in a capital call to rescue the nation’s only wholesale credit union, according to a Business Journal analysis of the bailout plan’s cost.

Until now, local credit unions largely have skirted the turmoil rocking the U.S. banking system. But troubled investments at U.S. Central Corporate Federal Credit Union — a credit union for corporate credit unions — changed that....


...U.S. Central Corporate is the nation’s only wholesale credit union and works with 26 corporate credit unions to provide funds and payment services to more than 8,000 community credit unions. The Lenexa, Kan.-based nonprofit recently warned it would lose $1.1 billion in the fourth quarter from impaired investments.

The National Credit Union Administration, the industry’s regulator, wants to impose what amounts to a levy on individual credit unions to underwrite the bailout of U.S. Central Corporate. The cost includes a $1 billion capital injection into U.S. Corporate Credit and an initial estimate of $3.7 billion to guarantee corporate credit union deposits..."

[originalpckelly]

14. As I'm understanding this, it looks like the Federal reserve of credit unions just went belly up.

Since these are the bankers banks, that's like the fed. This is a big deal.

[slipslidingaway]

18. It is definitely a big deal IMO....

one outcome is that there could be fewer credit unions...just like the banks and investment companies, money and power into fewer hands.

[originalpckelly]

19. Yep, down the line from US Central there are 8,000 credit unions...

that's about the same number of private for-profit banks in America.

[slipslidingaway]

22. Those who lost get bailed out by those who did not :( n/t

[Hugin]

9. Here's the announcement at the NCUA.

http://www.ncua.gov/news/press_releases/2009/MR09-0320.htm

[originalpckelly]

10. I'll include it in the OP.

[RB TexLa]

11. I wouldn't be suprised if Texans CU is taken over soon.

[originalpckelly]

12. kicking, as I just update the op with more useful information.

[slipslidingaway]

13. ...n/t

[originalpckelly]

15. ?

[slipslidingaway]

20. That was a kick without the...

:kick:


:)

[originalpckelly]

23. OIC!

Sorry. :)

[slipslidingaway]

24. Kick :)) n/t

[GoesTo11]

16. Can't be

I saw advice on DU to go with credit unions instead of banks because credit unions are wholesome and safe.

[originalpckelly]

17. Everyone's deposits are safe, all the credit unions that had accounts are safe...

but it should be noted that credit unions can fail sooner than normal banks, because they are not for profit institutions, so don't have the ability to lower their prices and cut those margins, to ensure their safety.

However, in the end analysis credit unions are fractional reserve institutions, and because of that are inherently susceptible to problems.

These failures are like the Federal Reserve having to be seized because it didn't have enough assets on hand.

[slipslidingaway]

21. And the article that I posted above from February was also

on DU.

:)