Getaway day $30 billion bailout-US seizes 3 wholesale credit unions-citizens will have to 'bear' costs-WSJ

Local credit unions will have to "shoulder" the losses via "special assessments over the next decade," new $50 billion TARP fund created

• to "stabilize" the system....

9/25, "Credit Unions bailed out, US backs $30 billion in bonds, to stabilize key institutions, sub-prime legacy," Wall St. Journal, Maremont and McGrane

"Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by

• losses on subprime mortgages.

Regulators announced Friday a rescue and revamping of the nation's wholesale credit union system, underpinned by a

• federal guarantee valued at $30 billion or more.
  

Wholesale credit unions don't deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of

• retail credit unions are sound, but

they will have to shoulder the losses through special assessments over the next decade.

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.

Officials said the plan won't cost taxpayers any money. Still, 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....

• Members United Corporate Federal Credit Union in Warrenville, Ill., Southwest Corporate Federal Credit Union of Plano, Texas, and Constitution Corporate Federal Credit Union, Wallingford, Conn., which had a total of $19.67 billion in assets as of July, were taken into conservatorship by federal regulators.

Wholesale credit unions, also known as corporate credit unions, invest money for retail credit unions and provide them with check clearing and other services. Since the start of 2008, 66 retail unions have failed, compared with more than 290 banks or savings institutions. Credit unions are member-owned cooperatives that act much like banks.

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. Wiping out the capital of the failed institutions will cover a chunk of those losses.

But the remaining $7 billion to $9.2 billion eventually will be

• passed along to the nation's 7,445 federally insured credit unions
  

• in the form of future assessments.

The changes won't immediately affect customers of retail credit unions throughout the U.S. But it is possible that assessments on the industry could

• result in higher interest rates on loans
  

• and lower payouts on deposits, if credit unions can't otherwise cover their obligations.

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."...

As part of the plan, regulators will eventually wind down the operations of the five failed credit unions.

• Together they had about $50 billion in shaky mortgage-backed securities on their books, according to Larry Fazio, NCUA's deputy executive director.

Based on current market values, those securities are worth roughly half of their face value, representing

• a potential loss of $25 billion.

In an effort to minimize and spread out losses that must be absorbed by the credit-union industry, regulators said they will move all the battered securities into a good bank-bad bank structure. NCUA officials will manage the $50 billion portfolio, or "bad bank," of the failed wholesale institutions.

• Federal regulators will allow the remaining "good bank" operations at the credit unions to continue for about two years while retail credit unions wind down their relationships with the failed institutions.

Friday's moves could deepen tensions between regulators and retail credit unions that withstood the financial crisis and

• resent
  

• having to bear financial costs
  

• caused by the mistakes of wholesale institutions."

Mistakes? This is organized crime against sitting duck chump Americans. If anyone

• "has to bear"

anything from this it is the perpetrators, ie "regulators" politicians and everyone else involved including President Bush. This fraud deliberately wiped out a generation of work and sacrifice of innocent middle class Americans who never took out a risky mortgage. It ruined the country. This article was a powder puff treatment of organized crime. Since when is it assumed that ordinary innocent people have to"bear" the costs of massive government crime?
People that have no job and no income will obviously not be able to pay a mortgage. Enough with the 'tough economic times,' it's a crime.

• via Lucianne.com