CHICAGO - Their asset sizes are at the opposite end of those troubled institutions that have led to the $700-billion bailout by the federal government, but community development credit unions (CDCUs) expressed general support the legislation.
And at least one credit union manager believes the whole mess could have been avoided if a lesson from elementary school had been followed.
"I hate to say it, but I think they should pass it," said Ed Jacob, manager of Northside Community FCU, prior to passage of the bill.
Jacob said many people can learn an important lesson from his son, when he passed along to him what his elementary school teacher taught him.
"The teacher's rule is that if you look at a page, and there are five words on that page you don't understand, it's too hard," he said. "So my advice is that if you can't understand something, don't sign it. I feel really bad for credit unions that were in a really bad market area-for good credit unions that just tried to make good loans."
Jacob is anticipating Northside Community would only be indirectly impacted by the bailout.
"If a member has an exotic loan from another lender, then an auto loan or a credit card with us, these dominos are going to fall," he said. "That's my concern."
As for the impact on Northside's members themselves, Jacob said, "My members are typically the last-hired, first-fired. They're impacted more than others. I don't think we're going to be through this in the next six months. There have been better times-that's for sure."
Hank Hubbard, president/CEO of Communicating Arts Credit Union, a CDCU in Detroit, said he's still unsure if the financial institution rescue package will be beneficial to the CU and its members.
Some Members Will Benefit
"Increasing the NCUA insurance will have a benefit for some our members, but I am not sure that it will have a significant effect on our membership as a whole," Hubbard observed. "We won't be pursuing selling any of our assets under this plan."
As for Communicating Arts' members, Hubbard said that it might be helpful to them.
"If the bill really does unfreeze the credit markets-which should be helped by the Fed's dropping of the interest rate-it may help our members' employers stay in business, therefore saving their jobs or saving them from temporary layoffs."
Hubbard noted that Michigan has been on the front of the recession. "And we've been in the tank for several years," he said. "We are desperately looking for relief, but I don't see any major improvement on its way this year."
William Bynum, CEO of Hope Community Credit Union, a CDCU in Jackson, Miss., said the bailout could present an opportunity.
"We are in a region where there is a higher rate of subprime mortgages than anywhere in the country," he said. "We have a very high rate of foreclosures and delinquencies.
For the past 15 years, Hope Community CU has been working on giving loans to those "who have proven they can manage credit," Bynum said. "What's frustrating about the bailout is that it hasn't said anything about the root cause of how this happened in the first place."
What Bynum said he would like to see are more steps by Congress to increase consumer confidence. "There needs to be action taken by the federal government, but more to protect homeowners, and also to put in place regulations to ensure we don't get into the same situation again in the future," he said.
'Pretty Good' Position
Because Hope Community CU did not write any subprime mortgage loans, Bynum said he feels "pretty good" about its financial position.
"We'll probably see opportunities to continue lending," he said.
The 9,000-member CU has also refinanced several exotic mortgages its members had from other lenders, he said.
Now that the bailout has been approved, Bynum expects the CU would see more requests for loans from people who can't go to a traditional lender, but are still good candidates for loans. "We wish we weren't in this crisis, but our members will need more help now," he said.
As for its members, Bynum doesn't expect the bailout to pose a direct impact. "They recognize we are a safe place to put funds," he said. "It will help us. Ninety-five percent of our loans go to people in low-income families. We do a lot of work on the Gulf Coast. These residents are getting hit with a double-whammy, since they are still recovering from Katrina."
For More Information
www.northsidecommunityfcu.org
www.hopecu.org
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