Is this financial crises only affecting banks? Not CUs?
Lisa R. asked 4 months ago
in
Banktastic
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Last night I was at a mixer and the other speaker discussed about how CU have an opportunity to capitalize on the bank failure downturn since CUs are not being affecting. My question was if that was really true or not? Thoughts?
Christopher M.
Absolutely Lisa. CUNA recently released some info for credit unions to reassure members that CUs are safe and sound:
http://cuna.org/download/CUs_Secure_Strong.pdf
Lisa R.
That PDF really spelled it out, so thanks for sharing it! I guess Brad and I were right suspecting that credit unions had better/safer lending practices. I wonder if people working in banks have any rebuttal.
Ben R.
Although, I agree with CUNA generally, they don’t mention three high-profile credit union failures—Cal State 9 (because of overly exuberant home-equity lending in the California Bay Area), Norlarco and Huron River (both for providing the back-end financing on a get-rich-quick Florida real estate shenanigan). All three failed for chasing yield as the housing market popped.
That said, credit unions have overwhelmingly come out of this downturn rosy for two main reasons:
1. They are, almost to a one (and occasionally to a fault), conservative institutions. CU boards and CEOs are not playing with investors’ money; they’re working with memberrs’ savings.
2. In the same vein, credit unions are not allowed to borrow money to make new investments/improvements/innovations. Without access to the same credit markets, they can neither grow as fast as banks in the good times nor fall as far in the bad times.