WASHINGTON - As the Senate sent yet another bailout bill to the House late last week, credit union executives were expressing doubts on a credit union role, even as they conceded the bailout will benefit them by the effects it will have on the overall mortgage markets-which make up half the credit union business these days.
Craig Israel, President, First South Credit Union, Memphis
"I disagree with the action by our trade associations to put as at the front of the line (for aid). I understand that some credit unions and corporates may need some help, but if credit unions are listed as one of the target entities that asked for assistance, I'm not sure that plays well with the laymen. Right now people don't associate us with this mess, and we're seeing an in-flow of deposits because people see us as a safehaven."
Bucky Sebastian, President, GTE Federal Credit Union, Tampa
"It's like dying from second-hand smoke. You never smoked a day in your life, but you end up with lung cancer from the second-and smoke. Well, we didn't do any of these things, but we are inhaling second-hand smoke.
This plan is being brought to you by the same people who brought you the war in Iraq...so we should all be very skeptical of any plan from this same group of people."
Larry Tobin, President, Fairwinds Credit Union, Orlando
"The alternatives of not doing the bailout plan are far worse than doing the plan. It allows us to move on. We already had plans to sell some mortgages and commercial loans, but the government coming will make more private firms willing to buy, plus we'll be able to turn to the [GSEs], as well."
Willaim DeMare, President, Bay Gulf Credit Union, Tampa
"I don't think the plan to spend $700 billion to buy those mortgage-backed securities that are no longer worth anything will impact any credit unions directly, but there will be a significant indirect benefit. By buying those securities, the federal government will be putting billions-if not trillions-of dollars back into the economy. The quicker we can see the increase in liquidity, the quicker the downturn will start to level off and turnaround. That liquidity will allow [lenders] to make mortgages and other loans, and when a homeowner gets that loan, he maybe turns around and hires someone to renovate the kitchen, and that means more people working."
Jose Lara, SVP-Member Development, SchoolsFirst FCU, Santa Ana, Calif.
"SchoolsFirst believes the relief package is necessary to get the banking system back on track. It is needed to make available credit for members and the banking system in general and the overall economy. For us, we don't have issues with money to loan, but we believe the fear instilled by the banking crisis is hurting borrowing. If there is a bill that relieves the consumer, it would be good for everybody."
Brad Beal, CEO, Nevada FCU, Las Vegas
"It is a necessary evil. I find it very distasteful that we have to buy out some of these folks who took inordinate risks, but at the same time there is a threat to our financial system that we cannot ignore. The consequences of not doing anything are compelling."
As for what the plan should-or shouldn't-include, Beal expressed concern about credit unions be deluged with unnecessary regulation.
"So much has been bandied around, it is difficult to get a fix on anything, but as a matter of principle I'd like to see some recognition that credit unions did not cause this problem. I'd like to see the flood of new regulations that we are going to see come out of this not be applied to the innocent. That's what I'd really like to see, but I know that is wishful thinking."
Like other CU CEOs, Beal said he doesn't expect to see any direct effect on his credit union but that the bailout would still indirectly be a good thing for credit unions and the nation as a whole. "There won't be any direct effect on Nevada Federal. We didn't engage in any of those subprime loans, so we don't need to be bailed out. Indirectly, restoring confidence in the financial system will help stabilize the market and will help all of us. If it helps stabilize the housing market it helps everyone, but I'm not sure if that will happen. If the insurance amount is raised, we might have to contribute more to the insurance fund, but that will be a very small impact on our earnings."(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
