Here and on the Buying & Selling Homes forums there have been periodic posts regarding credit unions & how they might fit into the broader financial meltdown. Last week, I expected to see a post here about breaking news on credit unions. Nothing. Don't know if nobody saw it or if it just didn't seem important? Anyway, here's what happened...
The nation's credit union system is tiered. We have several thousand retail credit unions in the country of all sizes & persuassions. Then, in the background, there are "wholesale" credit unions. These institutions operate behind the retail scene but are, nevertheless, important to the system. They supply banking services to the retails & are known as "corporate" credit unions within the industry.
US Central Corporate Credit Union had their own little meltdown, unexpectedly, in Q4 '08. As a result, the NCUA has infused $1B into US Central. They are also guaranteeing retail credit unions' deposits at all corporate CUs not just US Central.
In order to recover their costs, the NCUA, is increasing the fee charged to each retail credit union for participation in the deposit insurance program.
The bailout itself will not affect retail customers. But (there's always a "but")...this fee increase is quite substantial. It is likely going to be difficult for some (many?) credit unions to pay without deteriorating their financial statements. However, it is generally understood from the agreements that NCUA will not take down any retail credit union in the event this assessment deteriorates their capital position. Most credit unions have more than adequate liquidity but it could impact their capital/net worth position. Last week, the NCUA did request credit unions be included in TARP money. To my knowledge, there's no answer yet for that question.
Mostly, I just want to give a heads-up to forum members that credit unions are not immune to having their own mortgage-backed security problems. Remember, retail credit unions members' funds are guaranteed by NCUA up to $250K same as the FDIC. No need to close accounts. But don't be surprised to hear about mergers.
Here is a link that might be useful: US Central Credit Union