CU History Continued... Page 3

quickly to reduce the total losses resulting from the failure of these five wholesale corporate credit unions—U.S. Central Corporate, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate. Specifically, the agency worked with Congress and U.S. Treasury Department to establish the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund)

to protect the NCUSIF and the stability of U.S. credit unions, not taxpayers, will pay back the costs of the Stabilization Fund over time.

 

In responding to the corporate credit union crisis, NCUA also took the following actions:

 

  • After placing the five failed corporate credit unions into liquidation, NCUA re-securitized the problematic mortgage-backed securities that caused the failures and sold these notes in the marketplace with a government-backed guarantee.

 

  • NCUA established a temporary share guarantee for deposits at corporate credit unions.

 

  • NCUA established bridge corporate credit unions in conservatorship to ensure the services provided to consumer credit unions continued during the resolution and transition period.

 

  • NCUA worked with members of the bridge corporate credit unions to transition services to new entities where possible.

 

Even as NCUA managed the corporate credit union crisis, the agency dealt with the declining fortunes of a number of consumer-owned credit unions. While the U.S. credit union system remained strong overall during the financial crisis, consumer-owned credit unions in several regions weakened as a result of spikes in home foreclosures, business failures, and unemployment. A number of these credit unions failed.

To protect against the failure of more credit unions, NCUA implemented a “red flag” early warning system to detect problems in individual credit unions before they became insurmountable. As part ofthis strategy, NCUA adopted a 12-month examination cycle for federally insured credit unions. The NCUA also began to step up administrative actions wherever necessary to ensure prompt compliance. By year-end 2009, more than 96 percent of credit unions met the statutory definition of “well capitalized."

 

Today, the U.S. credit union system continues to overcome economic challenges, but the industry has also demonstrated its resilience. NCUA also continues to work, enhancing a credit union system that is safe, sound, secure and serving more Americans than ever before.