Hard To Believe, But Big Issue Is All The Profits

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WEST PALM BEACH, Fla. - The top story affecting credit unions in 2002 is hard to believe today: what to do with all the deposits flowing into credit unions, and how to manage all the resulting profitability!

Following the bursting of the stock market bubble in 2001 consumers engaged in the cyclical "flight to safety," dumping funds into insured accounts at financial institutions, regardless of the rates being paid. Indeed, some $85 billion was expected to flow from Wall Street to Main Street. It was an update on the old observation, "I'm not as interested in the return on my money as I am in the return of my money."

A group of credit union chief financial officers, for instance, met in Williamsburg, Va., to discuss the bounty in a low-rate environment.

Deposits in money market accounts at credit unions of more than $50 million had grown 36.5% by midyear, according to Callahan and Associates. The inflow of those liquid funds had many credit unions discussing strategies to make those short-term deposits into long-term relationships.

The bursting of the stock market bubble has some credit union experts worried that the money then being used to underwrite a booming first and second mortgage market would itself create a bubble that would later burst, leaving credit unions with even bigger problems. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com

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