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CU System
IBoston GlobeI CUs paying for others mistakes
BOSTON (2/20/09)--Credit unions nationwide are paying a price for poor decisions made by others, a Boston Globe columnist wrote Friday. “Why are credit unions suddenly on the hook for an investment meltdown that could easily cost the entire industry the kind of money it earns in a whole year or even more?” wrote columnist Steven Syre. “The answer isn’t about mistakes made by credit unions. Those small institutions are paying a price for decisions made somewhere else by someone else--calls that seemed reasonable at the time but worked out very badly.” Credit unions are being assessed special charges “to help bail out one large institution that serves their industry [U.S. Central] and bolster two dozen more [the other corporate credit unions in the U.S.] like it,” Syre wrote. The declining value of mortgage-backed securities are the main reason for the problem, Syre added. “Compared with the trillion-dollar rescue packages under negotiation in Washington, the new problems facing credit unions look like a rounding error,” Sayre continued. “And the vast majority of credit unions, which tend to maintain high capital cushions, will be able to eat the cost and move on if they must.” However, the corporate stabilization plan will still have repercussions for credit unions by making it harder for them to lend, said Michael Hanson, president of the Massachusetts Share Insurance Corp.--which insures credit union deposits in the state that exceed federal limits. “Recklessness by financial giants caused most of our problems. Your local credit union is paying a price just the same,” Syre concluded.
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