The National Credit Union Administration (NCUA) seized control of the nation's two largest corporate credit unions on Friday due to growing losses on their private label MBS.

NCUA placed into conservatorship Western Corporate FCU, San Dimas, Calif. which provides services to 1,022 regular credit unions, and U.S. Central FCU, Lenexa, Kan., which serves as a banker to both WesCorp and 25 other corporate credit unions.

Friday's action came just hours after U.S. Central released financial figures for February showing that unrealized losses on its securities rose by $1.2 billion, to $10.5 billion, with almost all of the new losses accruing on private-label mortgage-backed securities.

The unprecedented government takeover came after NCUA received an independent review of the investments in U.S. Central, WesCorp. and the 25 other corporates conducted by Pimco Investors. Pimco found that the corporates' current holdings could result in losses of more than $16 billion, which would wipe out the capital of every corporate CU. The Pimco report runs 4,500 pages.

According to The Credit Union Journal, regulators are discussing a plan to combine the distressed corporate investments into a single "bad bank," while trying to rescue the remnants of the corporate credit union system, which provides critical investment and payment system services to the nation's 8,000 regular credit unions. U.S. Central holds $34 billion in credit union funds and WesCorp $24 billion.

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