In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, March 20, 2009

Credit Unions, Bank Failures, and More

by Calculated Risk on 3/20/2009 08:35:00 PM

Swirling Overhead...
Regulators swoop and seize,
None "too big to fail".

by Soylent Green Is People

  • First two large Corporate Credit Unions were seized today by the National Credit Union Administration (NCUA): U.S. Central and WesCorp. These two credit unions had a combined $57 billion in assets.

    A couple of key points: these "corporate credit unions" don't serve the general public, and all "natural person" credit union money held at these corporate credit unions was guaranteed earlier this year.

    From the WSJ: U.S. Seizes Key Cogs for Credit Unions
    The affected institutions don't serve the general public. They provide critical financing, check clearing and other tasks for the retail institutions. These wholesale credit unions, known in industry parlance as corporate credit unions, are owned by their retail credit-union members.
    And from the NCUA January letter to Credit Unions:
    Offering a temporary National Credit Union Share Insurance Fund (NCUSIF) guarantee of member shares in corporate credit unions. The guarantee will cover all shares, but does not include paid-in-capital and membership capital accounts, through December 31, 2010. This guarantee is the equivalent of full share insurance on member shares and will be extended beyond that date by the NCUA Board if necessary.
    So the natural person credit unions (the ones that serve the public) have had their money guaranteed.

    Still the losses will be huge:
    [Michael E. Fryzel, chairman of the National Credit Union Administration, the industry's federal regulator] said NCUA's latest estimate is that wholesale credit unions will eventually have to realize between $10 billion and $16 billion in losses on their holdings. The agency on Friday also raised its estimate for what these losses will cost its insurance fund, to $5.9 billion from the prior $4.7 billion estimate.
  • Three FDIC insured banks failed today. The FDIC estimates the combined cost to the Deposit Insurance Fund will be just over $200 million.

  • The WSJ reports that the Geithner toxic asset plan might be announced on Monday: U.S. Sets Plan for Toxic Assets
    The federal government will announce as soon as Monday a three-pronged plan to rid the financial system of toxic assets, betting that investors will be attracted to the combination of discount prices and government assistance.
  • reported that year-over-year hotel occupancy rates were off 15.7 percent. See: Hotel Occupancy Rate Off Sharply for data and a graph.