Comment Rescue: Credit Where Credit Is No More 2
Bill points out in the comments to this post that corporate credit unions are going under.
Bloomberg has more. These are the first “corporate credit unions” to fail since 1995, according to the story.
I’m having difficulty finding a clear definition (that means that I’ve googled for more than 10 seconds) of a “corporate credit union” as opposed to a run-of-the-mill credit union, but Bloomberg says that corporate credit unions “make loans and provide other services for the retail credit unions that cater to the public.” It could be that
credit union:corporate credit union::insurer:reinsurer
Anyway, here’s the citation from Bloomberg.
U.S. Central Corporate Federal Credit Union, in Lenexa, Kansas, and Western Corporate Federal Credit Union in San Dimas, California, were put into conservatorship, the regulator said in a statement. The credit unions failed so-called stress tests that found an “unacceptably high concentration of risk” from mortgage-backed securities, the agency said.
I find the sentence that the “credit unions failed so-called stress tests” interesting.
Does it imply that these seizures were preemptive, or, at least, more preemptive than most seizures?
The MarketWatch story is here.
March 21, 2009 at 7:45 am
I’m having difficulty finding a clear definition …of a “corporate credit union” as opposed to a run-of-the-mill credit union…
We do business with our local retail credit union and our local retail credit union does business with its corporate (or central) credit union. A corporate credit union is basically the credit union for the local “retail” credit unions. They are more or less a mini Federal Reserve depository bank for the retail credit unions they serve. They provide short and long term investment and processing services.
Most credit unions are small and lack the ability to perform many of the actual “banking functions” of larger banks. Corporate credit unions “clear” checks, process ATM transactions and provide the ATM networks for credit unions, and they handle electronic wire transfers and ACH services.
That is why I said that these “takeovers” were more important than just a couple of (more) bank seizures. For the credit union industry, it’s like having their local version of the Fed regional bank taken over. I also think, based on what I have read, that the “takeover” was more preemptive than some of the bank takeovers. I don’t think the corporate credit unions were not going to be able to do business come Monday morning. But their function is too important to have even the remotest possibility of that happening.
March 22, 2009 at 4:46 pm
Hi Frank; Faux news stricks again, they reported only 3 bank failures on FDIC friday, the credit union failures were not worthy of reporting, at least in the opinion of Fox news.