Another failed regulator -- Debbie Matz, chairman of the National Credit Union Administration, during a Senate Banking subcommittee hearing in October, 2009.
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The bailouts never end. And no one is going to jail. Federal regulations were broken with criminal intent -- to enrich the bankers making the illegal investments.
Last week it was at least $30 billion for struggling community banks who financed commercial real estate garbage. And quite conveniently, the feds chose Friday afternoon to release this new story. I've never even heard of the regulating agency -- the National Credit Union Administration.
The claim is that there will be no final cost to taxpayers (doubtful given the assets we're assuming), but congratulations, you (taxpayers) now control more than 70% of everything used to belong to this large sector of the credit union industry. Everything -- hotels, strip malls, sub-prime CDOs. It's all in there.
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Friday's moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.
It marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust. Bad bets on mortgage-backed securities have now killed five of the nation's 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments.
DB interruption. This should be a criminal offense! Yet no one is being prosecuted. William Black must be having a coronary.
- Under federal rules, wholesale credit unions were supposed to invest only in safe, liquid assets. But some chased higher returns by loading up on securities backed by subprime mortgages or other risky loans. Their portfolios were decimated by the mortgage meltdown.
Last year, regulators seized the two largest wholesale credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kansas, and Western Corporate Federal Credit Union, San Dimas, Calif., after finding their losses were much larger than previously reported.
Losses on the mortgage-backed securities held by the five seized credit unions are expected by regulators to total about $15 billion.
Bert Ely, a financial-industry consultant in Alexandria, Va., said regulators share some of the blame for the resulting mess, because wholesale credit unions were allowed to pursue a strategy that was "viable only because of what clearly has turned out to be excessive risk-taking."
Ms. Matz, the nation's top credit-union regulator, said the investment losses reflect "unprecedented economic times" and "bad decisions" by regulators, credit-union managers and board members "by heavily over-concentrating in mortgage-backed securities."
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