NEW YORK (11/28/11)--An analysis of the number of failures by financial institution type conducted by The Motley Fool backs up credit unions' argument that credit unions fared better than commercial banks during the 2008 financial crisis and the sluggish economy since.
The Motley Fool looked at commercial banks insured by the Federal Deposit Insurance Corp. (FDIC) and at credit unions insured by the National Credit Union Administration. Its conclusion: "While negatively affected by the crisis, credit unions did not experience the sort of radical departure from their baseline rate that banks did," said the Fool (Nov. 22).
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It noted that a key narrative of the recent Bank Transfer Day events was "to pit normally sleepy credit unions against the big banking industry. Credit union skeptics are quick to point out the fact that credit unions hardly went unscathed during the 2008 financial crisis, yet credit union advocates argue that their institutions fared better than commercial banks."
The Fool asked if credit unions' claims were backed by numbers, and concluded they were. In 2008, the rate of commercial bank failures (0.60%) was almost triple that of credit unions (0.23%), said the publication. In 2010, banks' failure rate increased to 1.86%, nearly five times the credit union rate of 0.40%.
"While the sluggish economy seems to have also negatively affected credit unions, they experienced nowhere near the surge of failures seen in the commercial banking sector," said the Fool.
The publication noted a similar pattern for "problematic" institutions.