Credit Unions: The Failure of Capital Corporate Federal Credit Union
(Testimony, 02/28/95, GAO/T-GGD-95-107).

Capital Corporate Federal Credit Union (Cap Corp), one of the largest of
the nation's 45 corporate credit unions, failed in January 1995 and was
placed into conservatorship by the National Credit Union Association
(NCUA).  As interest rates rose sharply in February 1994, many
collateralized mortgage obligations in Cap Corp's portfolio lengthened
in expected maturity and dropped in value.  Rather than liquidating
these investments at a loss to meet member withdrawals, Cap Corp
borrowed in excess of regulatory limits.  GAO traces Cap Corp's failure,
in part, to inadequate board oversight of an inappropriate investment
strategy.   As of February 1995, the projected total loss on Cap Corp's
portfolio was estimated at $60 million.  The Comptroller General's
testimony discusses the causes of Cap Corp's failure, the effectiveness
of NCUA's supervision of Cap Corp, who bears the cost of the failure,
and the extent of similar problems in the credit union industry.  The
Comptroller General also recommends steps that NCUA and Congress can
take to enhance the safety and the soundness of the credit union
industry.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-95-107
     TITLE:  Credit Unions: The Failure of Capital Corporate Federal 
             Credit Union
      DATE:  02/28/95
   SUBJECT:  Federal credit unions
             Regulatory agencies
             Financial institutions
             Financial management
             Operations analysis
             Risk management
             Interest rates
             Losses
             Bank failures
             Investments
IDENTIFIER:  NCUA Share Insurance Fund
             
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