While the spotlight has been on the commercial banks and their smoke and mirror mortgage activities, it has been presumed that credit unions, those staid little non-profit kinda-banks, have been functioning with a bit more common sense and therefore credit union members were more protected from the financial meltdowns.
Apparently not, grasshopper.
It’s been reported that federal regulators have seized control of U.S. Central Federal Credit Union in Lenexa, Kansas and Western Corporate (WesCorp) Federal Credit Union of San Dimas, California, due to an “unacceptably high concentration of risk” found during a financial “stress test”, due to their carrying the bulk of mortgage-backed securities.
U.S. Central received an inside $1 billion bailout in January (part of a $7 billion industry-maintained insurance fund) but it is unclear if more will be needed.
U.S. Central has 26 corporate credit union members and says it provides settlement services to 100 percent of corporate credit unions and 93 percent of all U.S. credit unions, while WesCorp based in San Dimas, California, has approximately 1,100 retail credit union members.
Because these two organizations are effectively the “credit union for credit unions”, this will mean higher premiums levied on retail credit unions they service. And you can bet that will trickle down and translate into higher fees coming for credit union members.
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