The Ripple Effect….

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.