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Treasury gets 10B in NCUA corporate loan repayment
Alexandria, Va. (10/14/10)—Late yesterday, the National Credit Union Administration (NCUA) announced it has repaid $10 billion, plus interest, to the U.S. Department of Treasury. They repayment was made using proceeds from selling performing assets of two formerly conserved corporate credit unions. The NCUA said the repayment came, in part, from $9.5 billion raised by selling select assets from U.S. Central FC, of Lenexa, Kan., and Western Corporate (WesCorp.) FCU, of San Dimas, Calif. The sales included securities backed by performing residential and commercial mortgages, credit card receivables, student loans and auto loans. The proceeds from those sales allowed the NCUA to repay a $10 billion loan from the Treasury to the agency’s Central Liquidity Facility (CLF). In 2009, the CLF transferred the $10 billion to the National Credit Union Share Insurance Fund (NCUSIF) so the insurance fund could stabilize U.S. Central and WesCorp with a $5 billion loan to each. Future borrowings from the Treasury for corporate stabilization will be assigned to the Corporate Stabilization Fund. “Paying off the $10 billion in loans clears the balance sheets of both the CLF and the Share Insurance Fund,” said NCUA Chairman Debbie Matz. “This is a significant first step in NCUA’s orderly corporate resolution process.” The next step in the resolution, according to the NCUA, is to begin securitizing cash flows from “legacy assets,” which are mostly impaired mortgage-backed securities from five corporates that currently are either in conservatorship or have been converted to asset management estates. “While the legacy assets will be transferred to securitization trusts, new securities matched to their cash flows will be sold in financial markets with an unconditional guarantee backed by the full faith and credit of the United States,” the NCUA release said. Starting this week, these NCUA Guaranteed Notes will be offered under the ticker symbol NGN. The initial offering is one of a series of similar transactions that NCUA intends to conduct in order to affect the corporate resolution plan. “Since the NCUA Guaranteed Notes are backed by the federal government, similar to U.S. Treasury securities, these investments carry a zero risk weight and are permissible for credit unions,” said Chairman Matz.

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