Liquidating Western Bridge

NCUA is currently in the process of soliciting bids to acquire the assets and business lines of Western Bridge Corporate Federal Credit Union (San Dimas, CA). NCUA expects the selection process to be completed by the end of 2011.

I have heard from a reputable source that NCUA discouraged banks with large correspondent banking operations from bidding on Western Bridge. By doing so, NCUA has probably increased the cost to the Temporary Corporate Credit Union Stabilization Fund associated with Western Bridge's liquidation.

As of August, Western Bridge reported holding $10.5 billion in assets. No other corporate credit union is close to Western Bridge in size. Therefore, a corporate credit union acquiring all of Western Bridge would experience a substantial dilution of its net worth ratio. On top of that, NCUA's new corporate credit union regulations will make it more difficult for a corporate credit union to generate the returns needed so that this investment would exceed any hurdle rate.

As a result, it is unlikely that Western Bridge can be sold intact. If Western Bridge is broken up and sold off in pieces, NCUA will not fetch as high a value for the assets and operations of Western Bridge.

So, by excluding banks from the bidding process that could have acquired the entire corporate credit union, NCUA has potentially raised the cost on all credit unions associated with the liquidation of Western Bridge's failure.