Two credit unions seized by the government
Credit unions are great alternatives to banks; however, they are not immune to the toxic mortgage-backed securities that are making life miserable these days.
On Mar. 21, The Washington Post released an article about the recent seizure of two large companies that provide critical banking services to the credit union industry and function as central banks for the credit union system. These two companies, U.S. Central Corporate Federal Credit Union, based in Lenexa, Kan., and Western Corporate Federal Credit Union, based in San Dimas, Calif., invested funds for thousands of small credit unions. A large portion of these investments were in mortgage-backed securities, which have since threatened the solvency of the two seized companies. Projected losses may exceed their available capital.
The National Credit Union Administration (NCUA), a government agency that regulates federal credit unions, stated that “Credit unions that serve consumers remain very strong.” Despite this reassurance, affected credit unions are more skeptical and will likely take moves to reduce lending because of higher operating costs caused by the NCUA’s efforts to recoup $5.9 billion used for the emergency intervention. As mentioned in The Washington Post article, “The Federal aid comes from assessments on the industry, not from taxpayers.”
Whatever the case, this is certainly not a good sign for the credit union industry. If recent history tells us anything, corroded confidence is just as bad as the toxic assets themselves. Moreover, this grim news confirms that even though credit unions are more cautious in lending practices, they can be imprudent with their investment portfolios, and therefore expose themselves and customers to increased risk.
In a recent interview, the executive vice president and chief operating officer of the largest credit union in Georgia stated, “We expect 2009 to be a very challenging year… We have noticed an uptick in our loan delinquencies…” This sounds like a warning to prepare for some forthcoming bad news. To what degree? That is the billion dollar question.
Is this the beginning of a credit union crunch? I certainly hope not.
Greetings! I’m Kevin D. Johnson, a business owner who has recently assumed the role of consumer advocate and internet activist. Atlanta, Georgia is my home.
Upon returning from my wonderful honeymoon in Jamaica in October 2008, I received what I thought was an ordinary American Express bill, but to my surprise it was a disappointing letter informing me that my credit line was reduced by about 65% for a highly suspicious and discriminatory reason. Considering my excellent credit score and pristine payment history, it just didn’t make sense. However, what does make sense are the unfair and insidious policies that I have uncovered when asking why. It is time to change them.
I created this web site to document and share my challenging journey to change what is wrong, unfair, and unjust in the credit card industry. The ultimate goal of this web site is to inform consumers of ways to stand up for themselves against treacherous business practices and to educate consumers about how to improve their credit. Finally, I hope to encourage a more open dialogue with credit card companies about their policies–good and bad.
I am proud to say that this blog's unyielding demand for change led to an important 
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