TEXT OF STORY
Credit unions have joined the long line of bailout recipients.
The Wall Street Journal reports today federal regulators will make billion in loans available to what are called corporate credit unions.
Those are big financial institutions that pool money from retail credit unions where regular people do their banking, and then invest it for the long haul.
Marketplace’s Mitchell Hartman reports those investments aren’t looking so good right now.
The amount that’s needed, $41 billion, is chump change compared to the hundreds of billions flowing to banks and brokerages. And the money would be lent to credit unions to temporarily balance the books.
The books are unbalanced because corporate credit unions invested in securities that have plummeted in value, says Bill Hampel, chief economist with the Credit Union National Association.
Bill Hampel: There are some asset-backed securities, as in credit card loans and auto loans and student loans and those sorts of things. And some of them are also mortgage-backed securities.
Hampel’s quick to point out that corporate credit unions were more cautious than a Citibank or Lehman Brothers. The securities they hold are higher up the food chain, and started out with stellar credit ratings.
Hampel: They’re still paying on schedule and they’re behaving just fine. Except if the corporate credit union had to sell them today, they’d have to sell them for a lot less than they paid for them.
Which would hurt the retail credit unions, because its their deposits that the corporate credit unions invest.
The fact that credit unions are suffering doesn’t surprise Steve Kenney, a sales manager I met outside the Portland credit union where he banks.
Steve Kenney: This thing is so deep, it’s beyond I think what anybody really expected.
Jessica Marino is a credit union customer who just lost her job at a Harley Davidson dealership.
Jessica Marino: I try to stay out of the whole economy, it’s kind of depressing. But my money’s going to be OK.
Economist Bill Hampel answers emphatically yes — retail credit unions are still extremely sound.
I’m Mitchell Hartman for Marketplace.
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