Remember the Troubled Asset Relief Program (TARP)? That’s the $700 billion aimed at restoring liquidity to financial markets. More than $2.8 trillion has been distributed in the program. Just over $134 billion has gone directly to bank bailouts.
Credit unions across the country have had mixed emotions regarding TARP funding. Initially the language framing the package didn’t specifically include credit unions. And at first that was just fine for the credit union industry. Until some sectors of the industry started to limp. After much debate principle held strong.
In general credit unions didn’t and don’t want to be part of a tax-payer bailout. And the industry as a whole doesn’t need bailout money. Because credit unions are operated by volunteer boards that represent the interest of the entire membership and not a small group of investors, credit unions don’t enter into risky investments or lending practices. They can’t—it would jeopardize the investments of every account holder. So they tend to stick to standards such as lending money to people who are low risk and are likely to make their payments.
But that doesn’t make the credit union industry immune. The housing crash affected every sector of the economy. According to the NCUA (National Credit Union Administration) six federally insured credit unions failed through May 2009. (Meanwhile the banking industry counts 64 failed banks so far this year.)
The credit union industry did receive $58 billion under the bailouts “other initiatives”. This money did not go directly to credit unions that serve the public. It was given to two large corporate credit unions: WesCorp and U.S. Central. These corporate credit unions provide investment services to many of the credit unions used by consumers. Individual consumer credit unions are considered members of the larger investment credit union.
So instead of displaying signs like this one that I saw throughout Yellowstone NP during my trip last week. Credit unions are proudly and rightfully saying “NO TAXPAYER BAILOUT FUNDS HERE!” And they are also pleased to tell you, “YES! We do have money to lend,” and “NO! We have NOT changed our lending policies to be more stringent,” as well as “NO! We won’t decrease your credit line-of-credit.”