Government seizes two large credit union clearing houses, as bailout costs keep rising
The battle that financial firms have to fight due to losses of the value of mortgage-backed securities is not over. The government had to takeover two large credit union wholesale operation because they had underestimated their losses on toxic paper.
According to The Wall Street Journal (subscription required), "U.S. Central Corporate Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., which have a total $57 billion in assets, were taken into conservatorship by federal regulators ..."
The government regulator which oversees credit union activity is the National Credit Union Administration. It anticipates that it faces huge losses from other wholesale credit unions and will have to cover the falling value of a large portion of those assets. The Journal adds, "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."
Where will the money come from to cover those losses? From the Treasury, of course.
So, the size of the overall bailout of the financial industry moves up each day.
Douglas A. McIntyre is an edittor at 24/7 Wall St.