I’m hearing stories from credit unions who stayed completely out of subprime lending but are seeing losses creep up.
People stop spending, interchange income goes down.
People lose jobs, voluntary repos go up.
The company goes on strike, delinquencies go up.
Gas prices go up. People stop buying cars. Loan volume goes down.
The ripple effect of a weak economy. It happens.
I don’t mean to sound callous, but this is a cycle, albeit a big bad ugly horrific cycle, but to abandon our values completely and look for taxpayers to bail us out will, in the short term help, but in the long-term cause irreparable harm. Here are just a few things that come to mind:
1. We will be taxed. You walk like a duck, quack like a duck, use bail-out money like a duck. You’re a duck. Tax the duck!
2. NCUSIF* will most likely be combined with FDIC into one big fat government agency that regulates everyone – all the ducks.
3. 100 years of reputation – of member-owned financial cooperatives screeches to a halt.
4. Credit unions as we know them today, will begin to disappear.
*NCUSIF was voluntarily capitalized by credit unions in 1985 and has never
received taxpayer dollars. If the government combines the agencies, what happens to our capitalization? Do we lose it?”
Speaking of capital – that’s what it’s there for – a rainy day. It’s pouring right now, so get out that credit union umbrella and use it.
SIDEBAR: Just a thought. If a credit union seriously needs taxpayer money to stay alive, and cannot find a merger partner, then they should consider converting to a Mutual Savings Bank first. That way the credit union brand remains in tact, not costing taxpayer’s money.
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November 11, 2008 at 11:26 am
shari storm
Denise – all good food for thought. I’m glad I don’t have to make the decision. I do have a question for you – do you know how many credit unions there were during the depression? I don’t know the answer and I’m just curious. I’ve heard people say, ‘we survived the depression, we can survive this’, but I know Verity ties SMCU for being the oldest CU in Washington State and we were charted in 1933.
Interesting times, indeed.
November 12, 2008 at 2:44 pm
Denise Wymore
Shari,
Great question so I looked it up. Here’s what I found out:
Between 1930 and 1933, some 9.000 banks went bankrupt.
In general, credit unions fared better during the Depression than banks. Some were liquidated – forced to close- due to their bank deposits. Others failed because they had made real estate loans and the value of the property had declined. But most survived because they primarily invested in people.
In 1933 Roosevelt took office and to stop the rush on banks declared a “bank holiday.”
In 1934 Roosevelt signed the Federal Credit Union Act.
Between 1936 and 1941, the number of active credit unions doubled to almost 10,000.
Of all financial institutions, only credit unions saw significant growth during the Depression.
The Public Opinion Online.com made a point of reminding us about our boom days…
“In the aftermath of the Great Depression, American consumers turned to credit unions to help meet their financial services needs. As the economy recovers from the current crisis, credit unions will continue to be there for our members.”
READ ENTIRE ARTICLE HERE: http://www.publicopiniononline.com/ci_10871564
Realty Times just published a comment about credit unions and the Great Depression. Here’s an excerpt:
“Credit unions didn’t need a bail out during the Great Depression, they didn’t need federal intervention during the Savings & Loan debacle and they don’t need government assistance now.
Instead of fearing the next Great Depression, member-owned credit unions are bracing for what could be their boom time in home loans and other financial services, now that banks and mortgage lenders are crashing and burning.”
That’s all I’m saying…..we survived and THRIVED in the aftermath of the Great Depression – was it easy? Oh HELL NO! But we helped people in times of crisis – they pooled their resources to help one another. Isn’t that what we’re all about?
November 18, 2008 at 8:17 pm
Ron Bensley
Denise: Your points are eloquently stated. I strongly oppose the TARP bailout scheme, as I think America’s taxpayers should not be involuntarily obligated to subsidize bad business decisions by our biggest corporations. Sadly, the deregulation which accelerated during the Clinton Administration (i.e. the 1995 Interstate Banking Act, the 1999 Gramm-Leach-Bliley Act) and which have continued into the Bush Administration have allowed the biggest financial institutions to merge, acquire, and grow into several Too Big To Fail abominable snow monsters!
Deregulation of financial services was not supposed to mean ANARCHY and LACK OF REGULATION. Regulators have been systematically stripped of their authority to enforce the laws still on the books, or to enforce laws such as Sarbanes-Oxley.
November 19, 2008 at 6:38 am
Denise Wymore
@Ron!
Welcome back! I’ve missed you and your wonderful comments. I’m driving cross-country right now so I’ve been downloading various podcasts that pertain to this economic crisis. One of the best I’ve heard so far is from NPR’s Ira Glass and This American Life. It interviews ex-Wall Street investment bankers, mortgage brokers, and on-the-verge-of-foreclosure homeowners. This is one tangled web of greed and deceit to be sure.
I don’t think NAFCU gets it – but CUNA does. We were NOT part of this problem – we need to be the SOLUTION.