DUBLIN, Ohio - As consumers clamor to ensure their deposits are safe, much has made about the National Credit Union Share Insurance Fund. But what of the nearly 200 credit unions that are privately insured?
They are getting the same phone calls as their federally insured brethren, only they have a little more explaining to do and reassuring to do, those CUs told Credit Union Journal.
"Based on my conversations with credit union members and managers, consumers are very comfortable with their credit unions; they understand this isn't a credit union problem, it's a banker or Wall Street problem," said Dennis Adams, CEO of American Share Insurace provider of private insurance for credit unions. "All in all, the credit union side of financial services has been a little bit immune to this. Liquidity has been stable."
Moreover, although privately insured credit unions have seen some bigger losses than in the past, ASI's private insurance fund has not suffered a single loss in 2008, Adams said.
And as consumer confidence in the financial system-and even the federal government's ability to fix it-private insurance may actually be a boon right now.
"I would never say this, because I think we have the best government in the world, but we have heard some credit union managers tell us their members are saying things like, 'We're glad you're not federally insured because they've screwed everything up,'" Adams related, emphasizing again that this is not his personal view.
But the members who have expressed that view are not alone.
"I think there's been a bit of a backlash against the whole federal system right now, we've definitely seen that," said Paul Simons, CEO of the privately insured Credit Union 1, Rantoul, Ill. "Just like other credit unions, we're getting the same calls from members wanting to be reassured that their funds are safe. Once we've explained their funds are insured and how it works, they usually understand and are reassured. We've had some members say, 'I'm glad you're not part of all that, I just don't see how the government can possibly cover all of this.'"
Still, some clearly are a little nervous when they hear their funds aren't federally insured. "We've had some people take their money out, but it's been very few," Simons related. "We've got some newer members who aren't acclimated to private insurance. But the vast majority can see it for what it is."
And what it is, is $250,000 worth of insurance per account. While federal insurance recently was temporarily upgraded to $250,000, as well, the two types of insurance work a little differently. If, for example, a member has a $100,000 CD, plus a checking account with $100,000 in it, and a savings account with $100,000 in it, with federal insurance, the member only has insurance on the first $250,000, meaning $50,000 of that money is exposed and not insured. Under ASI's primary program, however, all three of those separate accounts are each insured up $250,000, so the member in that scenario has no exposure at all.
"We haven't had anyone take their money out," reported Carol Frazier, marketing director the privately insured Buckeye State CU, Akron, Ohio. "We have had members call in to ask about their funds. We talk to them about private insurance and how it works. We're doing our best to reassure them."
In fact, the $70-million CU is running a newspaper ad that says there is no money crisis at Buckeye State CU.
As for whether private insurance is an advantage or disadvantage, Frazier said she thinks it's an advantage. "When I came to work here, I had a video of the then-chairman of the Federal Reserve, and he's explaining how if a number of the big banks fail, they will not be able to cover it all," she said. "Personally, I'm feeling good about being a credit union right now." The $500-million Credit Union 1 just got something of a member endorsement of private insurance, as well.
"We are in the middle of two small mergers, and we sent out our ballots just as all of this was hitting. If you look at the ballots on NCUA, you'll see it says in big, bold letters that by voting to approve this merger means you are moving to an institution that is not federally insured," Simons said. "And we got the biggest positive return in ballots we've ever had, about 90% in favor. Usually we get maybe 60% in the mail. When I went to the member meetings to discuss the merger, I didn't get one question about it; I had to bring it up myself."
It helps that Credit Union 1 can also boast that 99.6% of its mortgages are performing and its ROA is at 66 BPs, up from 62 BPs last year.(c) 2008 Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
