Wednesday, August 13, 2008

Why Your Money is Still Safer at a Credit Union

No sector of the economy is immune to the effects of the mortgage market woes--not even credit unions. The recent Wall Street Journal article Mortgage-Market Trouble Reaches Big Credit Unions Mortgage-Market Trouble Reaches Big Credit Unions highlights the paper losses of 5 corporate credit unions. Corporate credit unions do not serve the individuals they provide investments and financing to credit unions.

It's important to understand "paper losses". These are not actual losses, instead they represent investments that have lost value but are not expected to be sold. General belief is that these investments will eventually rebound and credit unions won't reach the point when they'll need to sell them off at a loss.

Brian Resch, CEO/President of Coors Credit Union had this to say, "I’d like to reiterate Mr. Buckham's comment (director of the office of corporate credit unions for the National Credit Union Administration) 'the possibility that a corporate credit union might fail now is "so remote" that "I can't even imagine that happening.'

The article also accurately points out that credit union corporates are the most conservative, risk-averse institutions in the country. That is a clear difference between the credit union sector vs. the likes of Indy Mac. How all of this with Freddi Mac and Fannie Mae plays out in the end should make for some interesting financial history. Meanwhile know that your assets deposited in credit unions are safe.

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